Bitcoin crash coming?

[brainz01]

Full disclosure:
1) I am an idot; a full-fledged maroon
2) If you don't own any cyrpto currencies, this isn't really relevant to you, unless you geek-out on financial technology
3) I currently own no bitcoin or bitcoin positions; I also know nothing about Tether
4) I know only enough about BTC to be dangerous and must admit that many things about digital currencies confuse the hell out of me
5) I'm no fan of the debasement of fiat currencies, but I'm skeptical of the current forms of digital currencies including BTC as a mainstream substitute
6) This is not financial advice, rather food for discussion

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

[GH85Carrera]

I have never personally seen a need for a product like a bitcoin. I understand it would be great to have a big ol pile of assets that the IRS or any government agency can't seize or even see if you are into any illicit activity or just slightly illicit activity. Enven tax evasion.

I do indeed avoid any and all taxes that are allowed by law, but I do not evade them.

So I will continue to watch the crypto currencies from the sidelines and like the OP, my opinion has zero authority.

[tabs]

Bite Coin has NO LEGS.

1. First exactly what is it? Most people do not have a CLUE. How long has it been around, it certainly has not been around long enough to have a proven and verifiable TRACK RECORD.

2. Human Nature dictates that in any kind of collapse of an economy and currency people will want to be able to touch it and feel it in their pockets. They will opt for hard assets like GOLD AND SILVER becase it has a 5000 year history of being used as MONEY. It has an accepted track record..something you can trust.

3. The modern amenities including science and tech let alone the economy itself which is dependent on multinational supply chains is FRAGILE. Those amenities etc require a lot of money to maintain and do R&D. Without a viable money/currency the ability to pay and keep those systems fall into disrepair, collapse and eventually civilization itself regresses..This is know as the Atlantis Paradigm.

http://forums.pelicanparts.com/off-topic-politics-religion/1069041-atlantis-paradigm.html

With this in mind Bitcoin is a novelty act.

[Skillet83]

Crash, do not think so. People used to say $10.00 was too high, $1000.00 too high, $10,000.00 too high, and on and on...Market Cap is only 600B or so currently, has long way to go. My last buy was in the low 20's and I will buy again around the 1st whatever the price is. I DCA every month. Institutional money is pouring in now. Very volatile, but will continue to make great gains.
I am not some crypto maniac, but think any investor not into some type of crypto is missing out. 2017 was an amazing ride for me. I invest in real estate, am in the market, about 10% in crypto, BTC, ETH & XLM currently. I have a blast playing with it, reading about it, trading it. There is some amazing tech coming out this as well. DeFi is the rage in crypto now, cross border payments, we are in the very early stages of this technology. There will be lots of losers, and some huge winners.
Imagine buying Amazon, Walmart, Microsoft or Apple in their infancy. I believe that is where crypto is at currently. Returns are out this world if you DCA and hold. This bull run, 500% across the board. Enjoy the ride.

EDIT: check out nexo.io. One of many new sites, pays between 5%-12% to hold your coins on their site, can leverage your holdings. 5%-12%!!!! paid daily. This is the way.

[dewolf]

Originally Posted by tabs

Bite Coin has NO LEGS.

1. First exactly what is it? Most people do not have a CLUE. How long has it been around, it certainly has not been around long enough to have a proven and verifiable TRACK RECORD.

2. Human Nature dictates that in any kind of collapse of an economy and currency people will want to be able to touch it and feel it in their pockets. They will opt for hard assets like GOLD AND SILVER becase it has a 5000 year history of being used as MONEY. It has an accepted track record..something you can trust.

3. The modern amenities including science and tech let alone the economy itself which is dependent on multinational supply chains is FRAGILE. Those amenities etc require a lot of money to maintain and do R&D. Without a viable money/currency the ability to pay and keep those systems fall into disrepair, collapse and eventually civilization itself regresses..This is know as the Atlantis Paradigm.

http://forums.pelicanparts.com/off-topic-politics-religion/1069041-atlantis-paradigm.html

With this in mind Bitcoin is a novelty act.

Wow..living in the 70's. Modern currency is a mobile phone app.

[uncle_scott]

In a week of down stocks, my Bitcoin and Ethereum positions are keeping me in the positive. I think it’s here to stay.

[McLovin]

The more important question is if a Bitcoin crash is coming, WHEN?

I bought at 17-19k around Thanksgiving. So I’m around doubled.

Will it hit 45k then crash? 50k? 100? 500k? $1 million?

That’s the real question.

[Skillet83]

Quit watching daily prices, BTC is so volatile. It will dip, dump and pump. But, it will continue to grow. It is all about market cap, and it is growing. Buying at 35K will be getting in cheap down the road. The printing presses are about to go overtime, the dollar is shrinking. For me personally, 10% of investments in crypto is logical. A lot of legal clarification is coming soon in the space, when done whether good or bad, the flood gates open. McLovin, hold brother, buy a little every month, DCA. In 5 years you will be a happy man.

[McLovin]

Me, personally, I have no idea if Bitcoin will be the money of the future, or if it will even be around in 5-10 years.


I do believe the bubble will continue through at least 2021. Lots of institutions just now getting involved, and it’s being pumped and hyped like crazy. Plus, every single bubble has lasted longer than I’ve anticipated. Yes, they’ve all popped, but always go longer than I thought they would.

I believe Bitcoin will hit at least 100,000, probably this year. It’ll break 40 again soon, maybe this week. I think once it breaks 50k all hell will break loose, as FOMO takes over and people and institutions really flood in.

[McLovin]

Skillet, I’m not as confident long term as you. I have one big concern, it’s the same concern that I have with my main investments (real estate): The Government. The government can ruin investments by bad policies, which they have been doing in real estate, including by just outright taking your property rights (like by eviction moratoriums, which makes you an involuntary provider and funder of public housing).

People think Bitcoin is so great because it’s “out of the reach” of the govt. I disagree. Nothing is out of the reach of govt. And govt is in the money/currency business. And they don’t like competition.

[McLovin]

I wish motion were still here, I’d like to hear what he thinks.
Although my guess is he probably bought a ton at $2k or less and is sitting on millions of it now.

[brainz01]

Lots of good comments in here. I'll respond generally:

1) I don't think BTC is going away, but I don't see it going mainstream either. It's not likely to replace the USD any time soon. There's a lot to like about the technology. There's an equal amount to dislike about it as a currency (including how incredibly wasteful and inefficient it is).

2) I also don't think it's a replacement for other hard money, like gold/silver, but it's a useful substitute for those that want to i) trade the volatility/appreciation (particularly around currency debasement/inflationary pressures), ii) shift wealth away from a local/disadvantaged currency into something assumed to be more stable, and/or iii) skirt government regulation.

3) Note that prior to last year's explosion in BTC, the BTC to gold ratio seemed to settle in around 5 for a couple years. At current gold prices, that recent ratio implies a BTC price of around $10k. But as noted, the current size of the BTC market is still relatively small. If we look at the gold market (all mined ounces) and divide that by the number of maximum BTC, we get 120, so there could be massive inflation in BTC (to an implied $240k/coin) -- but that assumes that all the gold in the world is bullion for currency/store of wealth purposes. I'd guess the theoretical limit of BTC relative to gold parity would be less than half that amount.

4) Not sure how many read the article I posted, but my questioning a potential crash was based on:
i) a potentially fraudulent coin offering that's being used to buy BTC
ii) if such coin was indeed found to be fraudulent, the buying that's fueled BTC could be strongly reduced, which would put massive technical pressure on BTC price in the near term
iii) such a fraud/crash could attract additional government scrutiny/regulation that might make BTC less attractive to some

No one has addressed that.

5) Markets can stay irrational longer than you can remain solvent. Market timing is hard. And I have no dog in this hunt -- I have no material BTC positions. For the believers, I don't think a long-term DCA strategy is crazy. But I'd be hesitant to add to a position after the recent run-up and noise around Tether.

[jyl]

It’s perfectly possible for everyone to be right. BTC can be a fraud and a bubble, and still go up up up, and it can be the future of mankind, and still implode.

I prefer investments that I can analyze and value. Not my kind of hunt so I have no dog.

[rsrguy]

I love the concept of BC.. Love other hard assets for the same reasons. BTC has a couple of potential issues I'd like some opinions on though...
1. What possible negative moves could the fed make against it and how could one hedge against them?
2. China holds over 50% at this point, what effects (+or-) could this potentially pose to holders?

[brainz01]

Originally Posted by rsrguy

I love the concept of BC.. Love other hard assets for the same reasons. BTC has a couple of potential issues I'd like some opinions on though...
1. What possible negative moves could the fed make against it and how could one hedge against them?
2. China holds over 50% at this point, what effects (+or-) could this potentially pose to holders?

Here's my thoughts, which are often wrong:

1. The Fed is controlling the legal/easy ways to convert large sums of USD into BTC. Coinbase is the best known "legal" exchange. There are other exchanges, but most of them are unregulated and often lacking transparency. I would seem trivial for the Feds to create a "honeypot" exchange or multiple exchanges. This would allow them to track the IP addresses and figure out who was transacting. In theory, I think that would also unravel anonymity. And of course one could use a VPN, but there's a trust issue there too. Anyway, seems like BTC has potential weaknesses around anonymity. I suppose with enough layering, someone money laundering could avoid getting caught as happens in the traditional system, but I'm not convinced BTC is immune from monitoring so the usual rules/penalties would apply.

I think the open structure of BTC makes #2 less an issue. And I personally have a hard time seeing BTC go mainstream - - it's pretty clunky as a currency, so who cares if the Chinese have half. That said, the Chinese are a weird part of the BTC value chain. It seemed ironic/suspicious to me when I was mining BTC that I was buying high priced bespoke computer gear (ie, the mine) that was only available from the Chinese. That's probably just a reflection of electronics supply chain realities, but still. Felt like I was spending my scrip at the Company store...

[Wayne 962]

Originally Posted by brainz01

4) Not sure how many read the article I posted

I read the article that was sent to me via another source, and thought, "hmm, I wonder what the Pelican OT people think of this." Looking at the comments posted here, it would appear that pretty much no one read the article.

I did read the article, and it is an explanation of a recent manipulation of the price of Bitcoin. But there is one thing I don't understand though, is that how Tether could be actually used to buy Bitcoin - there must be a whole bunch of people willing to trade their Bitcoin for Tether. I guess that's the whole point of moving it to the exchange - if they move it to the exchange, then Tether LTD is getting their Bitcoin and giving them fake-o Tether. But since the volume of Bitcoin that can be moved to the exchange and traded for Tether is limited by the volume of "Bob's initial purchase", I don't quite understand how the price gets levered - because we're still only dealing with a finite amount of "real money" ($100).

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

Please read the article mentioned in the first post before replying to this thread. Here is the link again:
https://crypto-anonymous-2021.medium.com/the-bit-short-inside-cryptos-doomsday-machine-f8dcf78a64d3

-Wayne

[Wayne 962]

Here's an interesting quote on the Mt. Gox failure that seems a lot like this current one:

We’ve seen this before in cryptocurrencies many, many times. Take Mt. Gox. Karpelès bought an exchange which was insolvent the day he bought it, due to a prior hack. To paper over the insolvency, he bought bitcoin with imaginary money while paying out very real money to sellers. This buying pressure increased the price of bitcoin, which deepened the dollar-denominated hole the fraud was in. The increased price of bitcoin both brought new dollars to the market and necessitated that he buy bitcoin faster to stay in place. This distracted him from key other responsibilities of running a fraudulent Bitcoin exchange, like counting your bitcoin periodically to ensure they aren’t going to the hackers who already hacked you insolvent. (Again, see the Wizsec presentation.)

It's kind of interesting. I'm a computer guy. I started programming when I was 12 and had published video games when I was 15. My portfolio of software is what got me into MIT. From there I started Pelican and wrote all the code that ran our systems and turned it into a very successful company (sold it three years ago to Private Equity). I'm in the 99.99% of qualified people to learn and understand these cryptocurrencies. People often ask me my opinions because I'm the "computer whiz" they know. My point? This stuff is so confusing and convoluted that I think one in ten thousand people actually know what's going on. Maybe less. And that would probably include at least 99% of people who are "investors" (gamblers) in this stuff.

Dunno - it's difficult to get a clear read on the hyperbole versus the real nuts and bolts.

-Wayne

[herr_oberst]

Originally Posted by brainz01

4) Not sure how many read the article I posted,

I read the article but it's pretty far above my pay grade. It made sense the way the author spelled out the broad strokes, but I'm not savvy enough nor do I have the financial background to understand the processes that talent (or coinbase for that matter) are using to purchase Bitcoin, let alone to know if those methods are shady or above board...It's fascinating to watch, but from the sidelines for me.

I'm glad he got out and with the principle and profit securely wired to his bank account; sounds like he did alright for himself.

[McLovin]

Originally Posted by McLovin

Skillet, I’m not as confident long term as you. I have one big concern, it’s the same concern that I have with my main investments (real estate): The Government.

People think Bitcoin is so great because it’s “out of the reach” of the govt. I disagree. Nothing is out of the reach of govt. And govt is in the money/currency business. And they don’t like competition.

Well that didn’t take long.

https://markets.businessinsider.com/currencies/news/bitcoin-price-cryptocurrency-should-be-curtailed-terrorism-concerns-yellen-2021-1-1029985692

[Alan A]

So the side that wants to control everything wants to control the uncontrollable.
Color me astonished.