This is horseshit analysis of an intriguing concept.
Markets create wealth out of thin air and can destroy wealth with nothing to show for it.
A lot of analysis of cryptocurrencies, stock markets and commodities wrongly assumes that if an asset's value increases $1 billion, then $1 billion more was purchased than sold.
But assets aren't bank accounts that store flows of money. Stuff is only worth what people will trade for it, so markets routinely create and destroy wealth independent of the money flows.
Irrespective of whether people agree to the analysis or not, it is interesting that most replies focus on wealth destruction. All the while not checking the actual heading, which is:
"for every $1 of Bitcoin converted into cash, up to $25,000 of paper wealth is destroyed"
So, the blog writer is aware of what wealth is lost and it might not be actual.
Sorry but how is the wealth destroyed exactly? That wealth isn't destroyed, it's transferred to the earlier adopters who sold the crypto-asset for legal tender/currency. It's true that it's removed from the crypto-assets ecosystem, the losses falling on those at the end of the Pyramid-Ponzi schemes.
Thanks for the 2 downvotes strangers - curious why and what vested interest you likely have in crypto-assets structured as Pyramid-Ponzi schemes. Would love to get a qualitative response instead of quantitative downvotes, the whole point of conversation..
Extrapolations upon extrapolations proves nothing.
Furthermore, the author selects moments in time to illustrate losses. But take a one year or larger view, and one could argue that an enormous amount of wealth was created overall.
Is there any actual proveable science or math behind this post, or did the author just pull these numbers out their arse? I’m leaning towards the latter, but I’m hoping someone more knowledgeable here can confirm.
This entire post reads as incorrect and misleading to me. Here are some examples that stood out:
>Based on the order book, instantly selling 100 Bitcoin ($1,000,000) on GDAX will cause the price to instantly fall about 1%.
This is very misleading. Although the price would be 1% lower for a brief moment, it would be brought back up by more orders from buyers and arbitrage bots. As sellers market sell into the order book, additional orders are placed, both on the buy and sell side. You cannot crash bitcoin that easily, but you can absolutely flash crash it and lose your money like an idiot as it goes back up instantly.
>GDAX is the biggest exchange by liquidity as measured by market order book depth.
This is very misleading. If you lower the price on one, the others need to follow, and arbitrage bots will assist in that. GDAX is nowhere near #1 on volume as you can see on https://coinmarketcap.com/exchanges/volume/24-hour/. The author mentions this later however seems to conclude that it will only result in the price going down, instead of up.
>The recent $400 million Bitcoin purchase was likely done off an exchange.
There's no evidence that this buy actually occurred. People just noticed a wallet had many bitcoins sent to it, and news outlets decided to report it as 'Anonymous Billionaire Stocks up on Bitcoin', because that's what news outlets do.
>Overall, to reiterate, no one is making money with crypto currency anymore
This is obviously false. For every buyer there is a seller. Plenty of traders have had large short positions for a large duration of the recent crashes and have profited substantially. As far as Bitcoin goes, it's up 100% from where it was just awhile ago, at the bottom of this most recent crash. I'm not defending it as a revolutionary investment in 2018, but a LOT of people are making money here and will continue to do so.
>Maybe I’m being too hard on him, but analysts need to be held accountable for being wrong.
How would you prefer to hold them accountable? No analyst can be correct all of the time, it's unreasonable to punish them for their opinion or prediction being incorrect. No one is forced to invest based off of their advice.
The price of cryptocurrencies can be manipulated but not this easily. It requires substantial amounts of money. The largest buys and sells are OTC which don't affect the orderbooks. Just today Bitcoin has had over 6 BILLION USD in volume (https://coinmarketcap.com/). Your 1 million USD does not matter and the market doesn't care about it. I understand the author has some negative sentiment towards Bitcoin either becuase he lost money on it or he's upset at others that made money on it or are otherwise too far on the hype train, but this post is still very misleading or otherwise just false.
Readit News
Markets create wealth out of thin air and can destroy wealth with nothing to show for it.
A lot of analysis of cryptocurrencies, stock markets and commodities wrongly assumes that if an asset's value increases $1 billion, then $1 billion more was purchased than sold.
But assets aren't bank accounts that store flows of money. Stuff is only worth what people will trade for it, so markets routinely create and destroy wealth independent of the money flows.
"for every $1 of Bitcoin converted into cash, up to $25,000 of paper wealth is destroyed"
So, the blog writer is aware of what wealth is lost and it might not be actual.
Furthermore, the author selects moments in time to illustrate losses. But take a one year or larger view, and one could argue that an enormous amount of wealth was created overall.
>Based on the order book, instantly selling 100 Bitcoin ($1,000,000) on GDAX will cause the price to instantly fall about 1%.
This is very misleading. Although the price would be 1% lower for a brief moment, it would be brought back up by more orders from buyers and arbitrage bots. As sellers market sell into the order book, additional orders are placed, both on the buy and sell side. You cannot crash bitcoin that easily, but you can absolutely flash crash it and lose your money like an idiot as it goes back up instantly.
>GDAX is the biggest exchange by liquidity as measured by market order book depth.
This is very misleading. If you lower the price on one, the others need to follow, and arbitrage bots will assist in that. GDAX is nowhere near #1 on volume as you can see on https://coinmarketcap.com/exchanges/volume/24-hour/. The author mentions this later however seems to conclude that it will only result in the price going down, instead of up.
>The recent $400 million Bitcoin purchase was likely done off an exchange.
There's no evidence that this buy actually occurred. People just noticed a wallet had many bitcoins sent to it, and news outlets decided to report it as 'Anonymous Billionaire Stocks up on Bitcoin', because that's what news outlets do.
>Overall, to reiterate, no one is making money with crypto currency anymore
This is obviously false. For every buyer there is a seller. Plenty of traders have had large short positions for a large duration of the recent crashes and have profited substantially. As far as Bitcoin goes, it's up 100% from where it was just awhile ago, at the bottom of this most recent crash. I'm not defending it as a revolutionary investment in 2018, but a LOT of people are making money here and will continue to do so.
>Maybe I’m being too hard on him, but analysts need to be held accountable for being wrong.
How would you prefer to hold them accountable? No analyst can be correct all of the time, it's unreasonable to punish them for their opinion or prediction being incorrect. No one is forced to invest based off of their advice.
The price of cryptocurrencies can be manipulated but not this easily. It requires substantial amounts of money. The largest buys and sells are OTC which don't affect the orderbooks. Just today Bitcoin has had over 6 BILLION USD in volume (https://coinmarketcap.com/). Your 1 million USD does not matter and the market doesn't care about it. I understand the author has some negative sentiment towards Bitcoin either becuase he lost money on it or he's upset at others that made money on it or are otherwise too far on the hype train, but this post is still very misleading or otherwise just false.