From my perspective, watching the markets since 2013, the 2017 boom was caused by Ethereum. Before Bitcoin shot up, Ethereum had shot up from $8 in December 2016 to nearly $50 a couple months later.
Now, Ethereum is a novel innovation on blockchain tech. The smart contract hype was very real at the time. (For the record, I still think smart contracts have tremendous potential) ETH had navigated a fork, secured corporate alliances, setup several foundations to promote work and was starting to generate a lot excitement around projects like Augur, Ox, etc. Then on top of that, the ICO boom happened when several projects raised tens of millions of dollars. That caused a run on ETH.
ETH boomed and then BTC followed, at least for the 2017 boom. And then the speculators danced between altcoins, Tether, Bitcoin and ETH, trying to maximize their returns while paying little attention to fundamental adoption.
I think we've seen certain technologies take over markets very quickly in the past couple decades, like desktops and wifi and mobile and then smart phones and social media...that we've gotten used to rapid disruption in tech. However, with financial tech like blockchain and crypto, it necessitates slow adoption. Why is this? Because it's real money on the line. It's cool to move fast and break things when it's an app or a fitness tracker, but when it's significant amounts of money on the line, maturity, trust, and security are tantamount.
I still think blockchain will win in the long run against legacy tech. But it will be a slow disruption.
Bitcoin has smart contracts, and has for many years now. Ethereum's marketing for the phrase is kind of misleading.
Why the downvoting? Apparently a number of people haven't heard of Bitcoin Script, or are upset I pointed out this very factual item about Bitcoin? Seems somewhat odd.
Ethereum's smart contracts are obviously more developer friendly and easier to implement. Ethereum smart contracts are the go-to for dapps, despite having a significantly smaller userbase and market cap than bitcoin.
To say Bitcoin smart contracts are equal to Ethereum smart contracts would be akin to comparing Myspace to Facebook.
Discreet-log contracts are a miracle, but in the same way that a dancing bear is a miracle. There's no way they can compete with smart contracts on a platform designed with smart contracts in mind, at least on a technical level. (Maybe we'll all end up using discrete-log contracts and their descendants due to network effects, but I doubt it. Or maybe some richer zero-knowledge contract-enforcement scheme can be devised on bitcoin... Maybe.)
Ethereum was responsible for the 2017 bubble, but not because it is useful or smart contracts are useful or blockchain is useful. It was ICOs/scams running on Ethereum. Everyone saw their friends getting rich from Bitcoin and wanted in on one of the supposedly Next Bitcoins.
Blockchain is just a database, a slow and expensive one at that. “Legacy” tech (like a RDBMS) is much more efficient, reliable, and cutting-edge than blockchain. The only benefit of a blockchain is censorship-resistance—not needing to rely on government or centralized third-parties because a swarm maintains consensus (the longest Merkle tree). Financial markets operate in broad daylight with real identities enforced by judges and men with guns. There is absolutely no use case for censorship-resistance in that space. It is a lose/lose. How is it even supposed to work? Bankers pay miners to secure a log of their transactions? Ok, say someone robs a bank. A banker calls in to report the loss; a block gets mined showing that money is lost. Why did you need a blockchain? Why not just trust the banker to update a RDBMS cluster since you're trusting the banker's word anyway? Blockchain only works for purely digital things...like Bitcoin.
Smart contracts also do not need censorship resistance. People get along fine with the current legal system at least for civil lawsuits.
You need a blockchain iff:
- The data you are representing are other data in the same tree, not entities outside the data structure (much less entities irl).
- You need censorship-resistance because you're Silk Road or Wikileaks or trying to overthrow your government.
- The data is publicly/www world accessible by parties who do not trust each other.
TL;DR A blockchain is a domain-specific data structure internal to the Bitcoin project circa 2009.
>Smart contracts also do not need censorship resistance. People get along fine with the current legal system at least for civil lawsuits.
Really? How can a financially censored person access financial services? If you aren't allowed a bank account then you are immediately cut off from services which smart contracts could substitute for.
A coinbase account can be closed but an exchange built out of smart contracts like UniSwap can't censor its users.
You may not be able to access credit without a bank but you can get a loan on a smart contract money market like compound. You can even use a smart contract to lend money to yourself (Maker).
You may not have a bank account but you can use a smart contract wallet to give yourself bank-like protections such as withdrawal limits.
Some great alternatives Tether and Bitfinex are MakerDAO and Uniswap. The first one offers a decentralised & transparent stable-coin called DAI. The second one is a decentralized exchange that is also 100% transparent.
These are transparent because they're running as programs on top of of a blockchain (Ethereum). Each and every state change is recorded and the systems can be audited in real-time.
The Maker DAI stablecoin currency is backed by collateral (Ether), and it's currently overcollateralized by about 350%. The system has been remarkably stable, even in the face of the bear market, which resulted on some crazy swings in the price of Ether.
DAI also has a few fiat on-ramps, including Coinbase and Kraken. You can also mint DAI yourself - there's a tutorial on Coinbase where they give you $20 DAI for free, https://www.coinbase.com/earn
What's more is that since these systems are essentially programs (they can be used and called by other programs as "library" ) which means that they can be used as lego bricks to build new things. Some examples are "Pool Together - https://www.pooltogether.us", which is a no-loss lottery system. It combines MakerDao's DAI coin and a decentralized lending system called "Compound".
Please be mindful that all the above projects are still considered experiments and cutting-edge stuff. It will probably still take a few years to mature - however, a lot of new opportunities seem to be opening up in this area.
Well the Tether transactions are run on a centralized blockchain, but the underlying value of Tether is based entirely on trust in Bitfinex backing it with actual dollars.
As for Maker, I really don't know how the SEC would begin to shut it down if it wanted to. It's entirely smart contract driven and it's live on the Ethereum blockchain, which is truly decentralized. Surely we need to update securities law for the 21st century as I'm not sure the Howey test had blockchain era in mind.
On a ski trip I took in 2017, I was in line to buy a lift ticket one cold December morning. I remember overhearing the winter bros (the ones that usually talk about gnar and their steezy tricks) talking about installing Coinbase and buying Bitcoin.
I wouldn't underestimate the amount of retail investors that speculated on Bitcoin during that time. It was on major news networks in America, but also on national networks outside the U.S. My uncles and aunts were calling me asking how to buy Bitcoin outside the USA. The FOMO was real back then. Did Tether play a part in the grand pump? I'm sure it did, but I imagine it was more of a catalyst, and not the primary driver as the original study suggested.
The day after our company Christmas party in 2017 I had to take an uber the next morning to go pick up my car. I was anxious mess like I had been for the last 3 weeks riding the insane wave up on a mish mosh of alt coins. Phone clasped hard in my hand I couldn't go 5 minutes without checking the market.
My uber driver, a middle aged black women cheering about her Christmas plans and whole family coming to visit, suddenly breaks off track and excitedly brings up bitcoin. Her and her husband got their account set up and were putting "all their money" into it. "I don't even know what the hell it is but people are making money left and right!" I told her that it was probably a terrible idea.
The next day I liquidated all my holdings.
I did miss the final run up, but I came out a lot better than most.
I remembered after breakfast I had some old stock options that were never worth much and some stock I had been buying via an employee stock plan.
I knew the company stock was doing well so I log in and find that day the stock had jumped a fair amount.
It occurred to me that "I'm never going to see a return like this any other time and I almost forgot this was even here"... so I sold it all.
The stock sold at a penny or two less than the all-time high that it would ever reach.
That was a few months before everything hit the fan with the mortgage crisis.
I like to tell that story about how calling a high or bottom in the market is pretty hard and the only time I ever did it it was because I took the day off on the right day.
Similarly, in June 2018, I was chatting with my Uber driver and I told them I was interning as a software engineer and the driver started asking me about the AI/ML usage at my company (without me starting that discussion). Even before then, I thought AI/ML was overhyped. That interaction just confirmed it for me.
Having been through that bubble, I'm fairly confident FOMO had a huge effect. Every single person I know was asking how to buy some. You can even see it on Google Trends[1].
It's possible that the very first initial bump was manipulated (and crypto is definitely manipulated each and every day...), but the crazy increase afterwards probably wasn't due to a single entity.
Next FOMO bubble is going to be exciting: it's getting much easier to acquire Bitcoin, so the conditions seem ripe for the next bubble to be even wilder. Keep an eye out for next spring, when Bitcoin block reward halves again.
(don't invest more than you're willing to lose entirely it's very risky, but having skin in the game during a bubble is very fun in my experience and will quickly educate you in the emotionality of trading. Dollar cost averaging weekly seems like the best strategy: easy to feel dread at best entry points and greed at best sell points.)
The way I look at it, Bitcoin is a historical experiment happening during our lifetimes and mid-May (the time of halving) will be a very interesting milestone in that experiment.
It could go up or down, but either way, it will be interesting to watch.
Do you see what you've become? You're excited about people FOMO'ing into a risky investment (that you happen to hold). You have become the bad actor in this scenario, waiting for new people to hand over their money.
When/if the price goes over 20k again, that's when animal-mode FOMO adrenaline will re-emerge. Even Nouriel Roubini will be buying. At some point, people will genuinely fear they are missing out on the next world currency, even the skeptics. That will either be the best time in the world to sell or the best time to buy, who knows.
Yes, some of it was organic, but towards the end of the bubble, folks were looking at tether printing and using that as a signal to buy / sell. People even during the bull run called out tether for being the biggest risk to crypto markets and understood that without this well-timed injection of cash into the crypto markets, the price would fall flat.
Given Crypto markets' propensity to scam, I'd be shocked if finex & co didn't engage in manipulation. Maybe not to the extent that the paper's authors claim - China, S. Korea, India all banned / tried to ban crypto and I think Chinese volume drying up was a major cause for the bubble popping.
Agreed. During the 2017 run up, I had tons of non-technical folks asking me to buy Bitcoin for them. A doctor from Europe was ready to spend $100k, which is what he's making per year. A healthcare specialist from New York, with an annual salary about $40k, was ready to spend $10k. An athlete from Brazil was begging to spend his $300k on altcoins. Many people do not realize how strong FOMO can be.
Pretty much this. How could one whale pump so much money into the market?
It was a societal thing more so than an individual person. People were speculating like crazy to the point where you had grandmas giving investment advice on this new thing called 'bitcoin' for their grandkids to get rich from.
Tether's in the spotlight right now and journos will have a nice round of clickbait articles to keep the interest going. Reason will prevail!
It's the same as attributing the Sterling crash in '92 just to Soros. He had a large position and enough to move the market but he wasn't the only player, and probably small in comparison to all the retail investors who would have lost out late in the sell off panic.
Thank you for bringing some basic logic back to the table.
People love to imagine that odd phenomenon have simple solutions. This whole "tether was the sole cause of the bitcoin bubble" theory is completely ridiculous.
Go into a random bar in December of 2017 and you would hear people talking about btc and altcoins...
This is when everyone finally heard about Bitcoin after the runup. And continued it until the overexuberance ran out of steam. Not like it’s the first time that happened.
> Perhaps the takeaway is that when banks refuse to do business with crypto traders, or when a government bans trading altogether, it doesn’t stop traders from trading. It just forces them to find creative solutions. If it were easy for crypto exchanges to use the traditional banking system, there would be no need for Tether at all.
The reason it's not easy is because of anti-money laundering/know your customer legislation - which directly contradicts the few currency uses Bitcoin has at this point.
Readit News
Now, Ethereum is a novel innovation on blockchain tech. The smart contract hype was very real at the time. (For the record, I still think smart contracts have tremendous potential) ETH had navigated a fork, secured corporate alliances, setup several foundations to promote work and was starting to generate a lot excitement around projects like Augur, Ox, etc. Then on top of that, the ICO boom happened when several projects raised tens of millions of dollars. That caused a run on ETH.
ETH boomed and then BTC followed, at least for the 2017 boom. And then the speculators danced between altcoins, Tether, Bitcoin and ETH, trying to maximize their returns while paying little attention to fundamental adoption.
I think we've seen certain technologies take over markets very quickly in the past couple decades, like desktops and wifi and mobile and then smart phones and social media...that we've gotten used to rapid disruption in tech. However, with financial tech like blockchain and crypto, it necessitates slow adoption. Why is this? Because it's real money on the line. It's cool to move fast and break things when it's an app or a fitness tracker, but when it's significant amounts of money on the line, maturity, trust, and security are tantamount.
I still think blockchain will win in the long run against legacy tech. But it will be a slow disruption.
Why the downvoting? Apparently a number of people haven't heard of Bitcoin Script, or are upset I pointed out this very factual item about Bitcoin? Seems somewhat odd.
To say Bitcoin smart contracts are equal to Ethereum smart contracts would be akin to comparing Myspace to Facebook.
Blockchain is just a database, a slow and expensive one at that. “Legacy” tech (like a RDBMS) is much more efficient, reliable, and cutting-edge than blockchain. The only benefit of a blockchain is censorship-resistance—not needing to rely on government or centralized third-parties because a swarm maintains consensus (the longest Merkle tree). Financial markets operate in broad daylight with real identities enforced by judges and men with guns. There is absolutely no use case for censorship-resistance in that space. It is a lose/lose. How is it even supposed to work? Bankers pay miners to secure a log of their transactions? Ok, say someone robs a bank. A banker calls in to report the loss; a block gets mined showing that money is lost. Why did you need a blockchain? Why not just trust the banker to update a RDBMS cluster since you're trusting the banker's word anyway? Blockchain only works for purely digital things...like Bitcoin.
Smart contracts also do not need censorship resistance. People get along fine with the current legal system at least for civil lawsuits.
You need a blockchain iff:
- The data you are representing are other data in the same tree, not entities outside the data structure (much less entities irl).
- You need censorship-resistance because you're Silk Road or Wikileaks or trying to overthrow your government.
- The data is publicly/www world accessible by parties who do not trust each other.
TL;DR A blockchain is a domain-specific data structure internal to the Bitcoin project circa 2009.
Really? How can a financially censored person access financial services? If you aren't allowed a bank account then you are immediately cut off from services which smart contracts could substitute for.
A coinbase account can be closed but an exchange built out of smart contracts like UniSwap can't censor its users.
You may not be able to access credit without a bank but you can get a loan on a smart contract money market like compound. You can even use a smart contract to lend money to yourself (Maker).
You may not have a bank account but you can use a smart contract wallet to give yourself bank-like protections such as withdrawal limits.
And so on.
You're too focused on the trees, you can't see the forest.
https://thedefiant.substack.com/p/ether-is-the-best-model-fo...
These are transparent because they're running as programs on top of of a blockchain (Ethereum). Each and every state change is recorded and the systems can be audited in real-time.
The Maker DAI stablecoin currency is backed by collateral (Ether), and it's currently overcollateralized by about 350%. The system has been remarkably stable, even in the face of the bear market, which resulted on some crazy swings in the price of Ether.
DAI also has a few fiat on-ramps, including Coinbase and Kraken. You can also mint DAI yourself - there's a tutorial on Coinbase where they give you $20 DAI for free, https://www.coinbase.com/earn
What's more is that since these systems are essentially programs (they can be used and called by other programs as "library" ) which means that they can be used as lego bricks to build new things. Some examples are "Pool Together - https://www.pooltogether.us", which is a no-loss lottery system. It combines MakerDao's DAI coin and a decentralized lending system called "Compound".
Please be mindful that all the above projects are still considered experiments and cutting-edge stuff. It will probably still take a few years to mature - however, a lot of new opportunities seem to be opening up in this area.
The SEC crypto tsar recently had quite negative comments about MakerDAO at SWSX, as in they may be in breach of securities law. Something to note.
The decentralized nature still makes it far less riskier to the end consumer.
As for Maker, I really don't know how the SEC would begin to shut it down if it wanted to. It's entirely smart contract driven and it's live on the Ethereum blockchain, which is truly decentralized. Surely we need to update securities law for the 21st century as I'm not sure the Howey test had blockchain era in mind.
I wouldn't underestimate the amount of retail investors that speculated on Bitcoin during that time. It was on major news networks in America, but also on national networks outside the U.S. My uncles and aunts were calling me asking how to buy Bitcoin outside the USA. The FOMO was real back then. Did Tether play a part in the grand pump? I'm sure it did, but I imagine it was more of a catalyst, and not the primary driver as the original study suggested.
My uber driver, a middle aged black women cheering about her Christmas plans and whole family coming to visit, suddenly breaks off track and excitedly brings up bitcoin. Her and her husband got their account set up and were putting "all their money" into it. "I don't even know what the hell it is but people are making money left and right!" I told her that it was probably a terrible idea.
The next day I liquidated all my holdings.
I did miss the final run up, but I came out a lot better than most.
I remembered after breakfast I had some old stock options that were never worth much and some stock I had been buying via an employee stock plan.
I knew the company stock was doing well so I log in and find that day the stock had jumped a fair amount.
It occurred to me that "I'm never going to see a return like this any other time and I almost forgot this was even here"... so I sold it all.
The stock sold at a penny or two less than the all-time high that it would ever reach.
That was a few months before everything hit the fan with the mortgage crisis.
I like to tell that story about how calling a high or bottom in the market is pretty hard and the only time I ever did it it was because I took the day off on the right day.
Wish I had had the presence of mind to realize it was time to get out.
I can also remember it going to $700 thinkin it was nuts.
Now it's over $9000.
So when was there really a reason to get out?
Dead Comment
Xrp, centralized money. Just as unreliable as government money.
To this day, alt coins seem utterly useless. (Save privacy coins)
It's possible that the very first initial bump was manipulated (and crypto is definitely manipulated each and every day...), but the crazy increase afterwards probably wasn't due to a single entity.
1: https://trends.google.com/trends/explore?date=today%205-y&q=...
(don't invest more than you're willing to lose entirely it's very risky, but having skin in the game during a bubble is very fun in my experience and will quickly educate you in the emotionality of trading. Dollar cost averaging weekly seems like the best strategy: easy to feel dread at best entry points and greed at best sell points.)
It could go up or down, but either way, it will be interesting to watch.
Deleted Comment
Given Crypto markets' propensity to scam, I'd be shocked if finex & co didn't engage in manipulation. Maybe not to the extent that the paper's authors claim - China, S. Korea, India all banned / tried to ban crypto and I think Chinese volume drying up was a major cause for the bubble popping.
It was a societal thing more so than an individual person. People were speculating like crazy to the point where you had grandmas giving investment advice on this new thing called 'bitcoin' for their grandkids to get rich from.
Tether's in the spotlight right now and journos will have a nice round of clickbait articles to keep the interest going. Reason will prevail!
Well, the allegation is, because they were printing it.
People love to imagine that odd phenomenon have simple solutions. This whole "tether was the sole cause of the bitcoin bubble" theory is completely ridiculous.
Go into a random bar in December of 2017 and you would hear people talking about btc and altcoins...
This is when everyone finally heard about Bitcoin after the runup. And continued it until the overexuberance ran out of steam. Not like it’s the first time that happened.
This is a point not many seem to understand.
Deleted Comment