An important harbinger of trouble to come is that the Tether (USDT) coin, which is supposed to be pegged 1:1 to USD, is now trading substantially below $1:
Billions of Tethers were printed seemingly out of thin air and used to purchase Bitcoin. It's part of the foundation of the house of cards that keeps Bitcoin at its current price:
"Despite their modest total market value of about $2.4 billion, Tether’s coins play an outsized role on cryptocurrency exchanges. They were the second-most traded among all digital currencies after Bitcoin as of Oct. 15, according to data compiled by CoinMarketCap.com."https://www.bloomberg.com/news/articles/2018-10-14/why-crypt...
I saw a couple of comments today about the price of USDT so I think it's worth while explaining how it works just in case anyone is interested in knowing more.
USDT is a pegged-currency. It's often described as a stablecoin but that's not correct because it doesn't have an inbuilt stabilisation mechanism unlike Maker's DAI for instance.
The way it works is purely based on well known legal mechanisms that have no cryptoeconomic properties on its own. The issuer holds a USD balance at a bank, then commissions a receipt that proves their balance and issues an equal number of USDT. 1 USD = 1 USDT at issuance time and the trustworthiness of both the issuer, the auditor and banks involved.
The token itself is used to facilitate trading and many investors 'park' their gains in USDT while waiting for the market to reach a certain point or just in between trades, but that means that the token's FX value is set by the open market itself so if there are more buy orders than available USDT the price goes up and if there are more sell orders than demand the price goes down. Where this gets interesting is that some exchanges list assets based on the USDT fx and not USD which opens some arbitrage opportunities like we are seeing today.
> The token itself is used to facilitate trading and many investors 'park' their gains in USDT while waiting for the market to reach a certain point or just in between trades, but that means that the token's FX value is set by the open market itself so if there are more buy orders than available USDT the price goes up and if there are more sell orders than demand the price goes down.
If the USDT to USD ratio fluctuates so much, what is the point of 'parking' your money in USDT?
Do you know if any tethers have ever been destroyed? I have not seen it confirmed that this has occurred and if people were withdrawing to the dollar via USDT I would expect there to have been destructions.
Tether isn't what cryptocurrencies was/is supposed to be. It's as if you took Herbalife as a valuable/honest/model player in the dietary supplement market...
" It's as if you took Herbalife as a valuable/honest/model player in the dietary supplement market..."
Are they not? Shakes can be a decent way to lose weight. Seems to be that people are willing to pay a premium for the "community". But IMHO saying their stuff is overpriced is like saying beer in a bar is overpriced because you can buy a beer for one dollar in the supermarket. Yes, it is correct. In some way.
Thether's success is based on the large number of cryto to crypto exchanges that need to go light on regulation and avoid working with banks. I don't blame them honestly, I've seen many small exchanges close down or move to other countries because their bank account was closed. Nevertheless, tether is a cancer that needs to go, even if the market would crash because of it. Unfortunately some tether clones (like TrueUSD) already appeared, so it's interesting how things will play out.
Tether is something that traditional finance and speculation analysts feel comfortable with. They think that by looking at Tether (a very non-cryptocurrency "cryptocurrency") they have an understanding of cryptocurrencies as a whole. They don't.
>Billions of Tethers were printed seemingly out of thin air and used to purchase Bitcoin.
Do we know if it was BTC that was purchased?
I have half a mind to think that people who were smart enough to buy decentralized and scare BTC are different than the people who would buy a centralized fiat coin Tether.
The only people I know that use Tether are gamblers who are day trading alt coins.
It is become more and more apparent every day that Bitcoin is different than Alts.
In general, if you pick the all time high as a starting point for your "research" it's all the way down from there. Bitcoin's daily transaction volume is moving to second layer so the metric used is not very useful.
More importantly, and I can't stress this enough, the FX value of a cryptocurrency is not directly related to the project's status (developer activity or security track record, etc) but it is correlated to public perception of its value, which is why these sort of article pops up every now and again at regular intervals.
Agreed. This technology is really still in the infancy stage. As crypto takes first steps there will certainly be many falls before it is truly able to walk. In 2017 I think we saw an initial foray into general consumer visibility. As we know, general consumers are picky and have very short attention spans. The fact that crypto garnered so much attention for so long is a good indication that there is certainly something to this whole idea of a currency that defies the traditional financial systems. Now is not the time to give up. Crypto is just getting started.
Your comment brought me back to the year 2000, I’m sitting at my desk waiting for something and trolling f—ckedcompany.com, reading about how the future is CRM and pets.com.
I doubt it. There is nothing to implode. Most of the activity in the "industry" is shuffling around tokens between the various blockchains as their respective cheerleaders hype their chosen coin and spread FUD about competing ones. All of the "real" economic activity surrounding cryptocurrencies (e.g. darknet commerce) will continue regardless of the price since darknet prices are pegged against the value of government currency anyway. The cryptocurrency world will continue to churn with activity indefinitely because creating the appearance of activity is what the industry does
Well, it depends on your definition of crash. We know that large price fluctuations are not uncommon in cryptotoken land so it's important to be clear about exactly what we mean. Personally, I'd consider a definitive crash to be a sub 1k BTC/USD price. I don't see that happening any time soon because the "speculative value" is very cheap to maintain with lots of enthusiasts broadcasting hype across every popular tech platform and the various exchanges generating superficial traffic and trading activity with very little cost.
Bloomberg absolutely loves writing these "Anything not a central bank is on the brink of implosion" scare articles. They must generate a tons of views.
Unfortunately Bloomberg as a whole doesn't know anything about cryptocurrency beyond the speculation side which is similar to their existing competencies. But that's all they see.
We have a blind man feeling an elephant's ass and telling us it's shitty. While true, it only describes a tiny part of what cryptocurrencies are or do.
> Unfortunately Bloomberg as a whole doesn't know anything about cryptocurrency beyond the speculation side which is similar to their existing competencies. But that's all they see.
They don't know anything? Even though they partnered with Mike Novogratz to create an index?
I never said they don't know anything about finance or speculation markets. But if you (and they) think that's all cryptocurrency is then you're missing 90% of what's up.
Bloomberg keeps trying to predict crypto's behavior based entirely on the most traditional looking speculation markets. Speculation markets aren't really a part of cryptocurency at all (they aren't on the blockchain(s)) but they are the only part of the concept that traditional finance people can (or will try to) understand.
I agree Bloomberg knows a lot about it, but the financial industry as a whole would rather Bitcoin die because its a threat to their banking monopoly. Go read the Satoshi whitepaper. The recent buy-in from bloomberg and Goldman et al is just a "cant beat 'em, join 'em" strategy.
Thanks Bloomberg for this advertorial summary of a 1250$ research .pdf. Saves me some money to invest (in crypto or otherwise).
Would you believe that the author of this research was harping about blockchain adoption by large companies less than a year ago? A lot has changed in 11 months, such as a slow price drop from the 2017 December insanity.
Isn't it a bit rich to first make companies anxious to join in on the bandwagon, then to turn around and say they are investing into something that is on the very brink of destruction? Based on pretending that Bitcoin was invented at its height in December 2017?
Heck, I did not sell any of my market research, I gave it away for free (silly me). Sure, sure, I made a few million here and there, but nothing like charging 0.5 BTC to tell you the financial world is collapsing, because John McAffee is so irrationally bullish.
This time it is real though. I can feel it too. Bitcoin is over! I hope you made out like a bandit, because soon, the only way to make money is to sell research about the impending bounce-back of crypto.
Of course the early adopters of Bitcoin are critical about its demise. They have a vested financial interest in seeing it succeed. Unlike these researchers, who only stumbled upon Bitcoin when they realized that people are willing to pay for their objective expert opinion on something they themselves missed the boat on.
Bitcoin and similars are the biggest waste of computing power and energy in the history of the planet. It will be nice for the environment when this is all over.
The Department of Defense has a much larger purview than propping up the value of currency. Cryptocurrency doesn't fight terrorism (at best, it's agnostic to terrorism, at worst, it aids it). It won't fight back against the next Pearl Harbor or 9/11. And if your reasoning reduces everything about society to the economic output/currency value of that society, it might be time to get some fresh air.
Additionally, regardless of whether the DoD and all governments of all nations spend more energy or warm the planet faster than global cryptocurrency, cryptocurrency is superfluous—the global financial system was working without it, and could work without it again. Everything cryptocurrency "fixes" about the global financial system could be fixed more surgically, and without a system that exerts so much stress on the planet.
For anyone downvoting this I'll expand what he said so you can understand it before reflex downvoting.
Nationstate backed fiat currencies require enormous amounts of energy waste in the form of standing armies and other tools of power. Compared to the energy Bitcoin uses to protect itself from attack or fraud this energy is very large.
what an ignorant and short-sighted comment. The amount of economic good cryptocurrency can do will far outweigh any negative environmental costs incurred over the long term. Bitcoin is good for a world that is teetering on the edge economic enslavement from debt.
When bitcoin inevitably hits 100,000 dollars, 1,000,000 dollars and so on (it's an algorithm, it will happen, you're just investing in an algorithm) people will use that money to buy Tesla's, start eco-friendly businesses, upgrade their outdated appliances and so on.
When will this horrible argument stop being thrown around? Tetris and minesweeper use a minuscule amount of power and typically provide many hours of entertainment. As technology has advanced, the power efficiency of these games increased exponentially.
On the other hand, blockchain mining responds to more efficient hardware by increasing difficulty in order to compensate for the impact of improved hardware on the hash rate, while still doing the same amount of work (i.e. processing the same amount of transactions).
The comparison is absurd and intellectually dishonest.
Those red lines on the graph are just awful: arbitrarily drawn to make things look worse. Fit an actual model and drawn on prediction intervals next time.
I have never owned crypto currency, I'm just easily triggered by bad graphs.
That's a very simplistic way to look at it. Before the latest huge price increase, bitcoin had very little real competition. Now it has proved that its artificially crippled capacity of 1MB is an enormous problem and that the limited throughput couldn't even come close to handling the last bubble smoothly.
My comment is intended to speak to cryptocurrency as a whole (the OP topic) rather than Bitcoin specifically relative to other cryptocurrencies. I welcome links to charts that show, e.g., total crypto market cap on a log scale.
Readit News
https://www.bloomberg.com/news/articles/2018-10-15/dollar-pe...
Billions of Tethers were printed seemingly out of thin air and used to purchase Bitcoin. It's part of the foundation of the house of cards that keeps Bitcoin at its current price:
"Despite their modest total market value of about $2.4 billion, Tether’s coins play an outsized role on cryptocurrency exchanges. They were the second-most traded among all digital currencies after Bitcoin as of Oct. 15, according to data compiled by CoinMarketCap.com."https://www.bloomberg.com/news/articles/2018-10-14/why-crypt...
USDT is a pegged-currency. It's often described as a stablecoin but that's not correct because it doesn't have an inbuilt stabilisation mechanism unlike Maker's DAI for instance.
The way it works is purely based on well known legal mechanisms that have no cryptoeconomic properties on its own. The issuer holds a USD balance at a bank, then commissions a receipt that proves their balance and issues an equal number of USDT. 1 USD = 1 USDT at issuance time and the trustworthiness of both the issuer, the auditor and banks involved.
The token itself is used to facilitate trading and many investors 'park' their gains in USDT while waiting for the market to reach a certain point or just in between trades, but that means that the token's FX value is set by the open market itself so if there are more buy orders than available USDT the price goes up and if there are more sell orders than demand the price goes down. Where this gets interesting is that some exchanges list assets based on the USDT fx and not USD which opens some arbitrage opportunities like we are seeing today.
For more info:
https://github.com/jpantunes/awesome-cryptoeconomics#stablec...
https://stablecoinindex.com/
the closest there has ever been is a letter from a law firm that was related to the owners and which clearly stated that it was not an audit.
The Maker DAI relies on users trading Etherium for another token DAI.
It’s essentially a mortgage backed security derivative, except instead of houses it’s a speculative database token swap.
Certainly not safe.
Why would this report be believable?
If the USDT to USD ratio fluctuates so much, what is the point of 'parking' your money in USDT?
I mentioned DAI today in comment and essentially got banned for doing it.
In comment I provided link to interview with Olaf on blog.ycombinator.com where MakerDAO was mentioned.
So I got banned as spammer in HN for providing link to blog on YC.
It tells a lot about the level of average HN reader.
Billions of Tether were printed, and then used to buy Bitcoin. That means Bitcoin's current price is supported (to some degree) by Tether.
Whether its catastrophic or not... well... time will tell. But its certainly a worry of some people.
Are they not? Shakes can be a decent way to lose weight. Seems to be that people are willing to pay a premium for the "community". But IMHO saying their stuff is overpriced is like saying beer in a bar is overpriced because you can buy a beer for one dollar in the supermarket. Yes, it is correct. In some way.
Removing it from the equation would be very welcome.
Deleted Comment
Do we know if it was BTC that was purchased?
I have half a mind to think that people who were smart enough to buy decentralized and scare BTC are different than the people who would buy a centralized fiat coin Tether.
The only people I know that use Tether are gamblers who are day trading alt coins.
It is become more and more apparent every day that Bitcoin is different than Alts.
Yes. You can monitor the price and volume charts of BTC after a wild tether appears. For example: http://www.tetherreport.com
More importantly, and I can't stress this enough, the FX value of a cryptocurrency is not directly related to the project's status (developer activity or security track record, etc) but it is correlated to public perception of its value, which is why these sort of article pops up every now and again at regular intervals.
https://www.reddit.com/r/Bitcoin/comments/9niw8x/lightning_n...
Check this visualisation for a current view of the size of the network: https://www.easyzoom.com/image/126770
No it hasn't.
sounds like woo to me
Your comment brought me back to the year 2000, I’m sitting at my desk waiting for something and trolling f—ckedcompany.com, reading about how the future is CRM and pets.com.
Unfortunately Bloomberg as a whole doesn't know anything about cryptocurrency beyond the speculation side which is similar to their existing competencies. But that's all they see.
We have a blind man feeling an elephant's ass and telling us it's shitty. While true, it only describes a tiny part of what cryptocurrencies are or do.
They don't know anything? Even though they partnered with Mike Novogratz to create an index?
https://www.bloomberg.com/professional/product/indices/bloom...
Bloomberg keeps trying to predict crypto's behavior based entirely on the most traditional looking speculation markets. Speculation markets aren't really a part of cryptocurency at all (they aren't on the blockchain(s)) but they are the only part of the concept that traditional finance people can (or will try to) understand.
Would you believe that the author of this research was harping about blockchain adoption by large companies less than a year ago? A lot has changed in 11 months, such as a slow price drop from the 2017 December insanity.
Isn't it a bit rich to first make companies anxious to join in on the bandwagon, then to turn around and say they are investing into something that is on the very brink of destruction? Based on pretending that Bitcoin was invented at its height in December 2017?
Heck, I did not sell any of my market research, I gave it away for free (silly me). Sure, sure, I made a few million here and there, but nothing like charging 0.5 BTC to tell you the financial world is collapsing, because John McAffee is so irrationally bullish.
This time it is real though. I can feel it too. Bitcoin is over! I hope you made out like a bandit, because soon, the only way to make money is to sell research about the impending bounce-back of crypto.
Of course the early adopters of Bitcoin are critical about its demise. They have a vested financial interest in seeing it succeed. Unlike these researchers, who only stumbled upon Bitcoin when they realized that people are willing to pay for their objective expert opinion on something they themselves missed the boat on.
Don't work for Bloomberg, eg?
Bloomberg News Pays Reporters More If Their Stories Move Markets: https://news.ycombinator.com/item?id=18162440
Obviously you haven't heard of the NSA or the US Military.
The Department of Defense has a much larger purview than propping up the value of currency. Cryptocurrency doesn't fight terrorism (at best, it's agnostic to terrorism, at worst, it aids it). It won't fight back against the next Pearl Harbor or 9/11. And if your reasoning reduces everything about society to the economic output/currency value of that society, it might be time to get some fresh air.
Additionally, regardless of whether the DoD and all governments of all nations spend more energy or warm the planet faster than global cryptocurrency, cryptocurrency is superfluous—the global financial system was working without it, and could work without it again. Everything cryptocurrency "fixes" about the global financial system could be fixed more surgically, and without a system that exerts so much stress on the planet.
Nationstate backed fiat currencies require enormous amounts of energy waste in the form of standing armies and other tools of power. Compared to the energy Bitcoin uses to protect itself from attack or fraud this energy is very large.
Deleted Comment
Deleted Comment
When bitcoin inevitably hits 100,000 dollars, 1,000,000 dollars and so on (it's an algorithm, it will happen, you're just investing in an algorithm) people will use that money to buy Tesla's, start eco-friendly businesses, upgrade their outdated appliances and so on.
Just wait and see.
If we except the tetris, or minesweeper...
On the other hand, blockchain mining responds to more efficient hardware by increasing difficulty in order to compensate for the impact of improved hardware on the hash rate, while still doing the same amount of work (i.e. processing the same amount of transactions).
The comparison is absurd and intellectually dishonest.
I have never owned crypto currency, I'm just easily triggered by bad graphs.
https://bitcoincharts.com/charts/bitstampUSD#tgSzm1g10zm2g25...
Bitcoin has had relative declines this big and lasting this long (late 2013 to mid 2015) only to bounce back later.