Many are scratching their heads: "WTF? Bubble!? When will Bitcoin come crashing down?"
The thing is, individuals and institutions worldwide currently own around $300 trillion in financial assets.[a] If as a group they decide to hold, say, 2% of their financial wealth in Bitcoin, say, to diversify away from all nations on earth, then Bitcoin's market capitalization would go up 30x, from around $0.2 trillion to $6 trillion. The number of bitcoins is fixed, so the price would go up by the same multiple. In short, all it takes is for the world to want a tiny exposure to Bitcoin.
Note that before Bitcoin it was impossible to diversify away from all nation-specific risks.
So a currency that is hardly used to pay for things with and can handle a small number of transactions per second, with transaction fees, risk of being made illegal, competitor altcoins that are at least as good and the energy consumption of a small country will hold 2% of the value of the world's financial wealth?
Buying bridges from strangers looks completely sane in comparison.
"As long as the music is playing, you’ve got to get up and dance." -Charles Prince, Ex-Citibank CEO 2007
This is one of my favorite modern finance quotes on bubbles because it encapsulates so well why there is still momentum in this crypto bubble even after an even casual reading of the news will tell you that everyone and their grandparents believes it's a bubble.
My bet is that heavy regulation in a market where there is heavy trading (e.g. USA, Japan, Korea) will be the blow that bursts this, but as with everything in public markets, who knows?
I really hope that the lightning network (which had its first successful test a day ago) will end this speculation bubble (by enabling fast microtransactions). Currently BTC is not suitable for general trading, the transaction fees are too high. But I really would like to be able to pay for things using BTC, online or in stores.
In bitcoin's case it is a liquid global asset, this has never happened before, this allows it to be used as collateral globally which is what SALT enables. This is one innovation driven by speculation. Without speculation you wouldn't have the liquidity, and it would be a bad collateral system.
The SALT system allows people worldwide to lend to others. Even in sanctioned countries because they can just source lenders in those countries and the borrower has the universal collateral.
And thats just one utility, only possible because of the speculation driving liquidity.
From what I've seen I came to this conclusion (further input from HN readers gladly accepted, maybe I got something wrong):
It seems that yesterday at around 01:00 UTC, someone with a huge amount of cash on GDAX started a buying bot, which bought BTC in small increments every second or so at market price. Judging by the GDAX volume in comparison to normal volume and an estimated average price, I'd say this person bought about 50-60k BTC for around 800-900 million dollars. Shortly after this buying activity started, the Bitcoin network mempool got clogged by transactions - and it doesn't seem like spam, but more like legitimate transactions with fees attached that would normally go through in an acceptable timeframe. I'm pretty sure this is people realizing that GDAX is the place to sell right now, thus they're trying to move BTC from other exchanges and from cold storage onto that exchange. However, most of them likely didn't get there in time, but the buying bot apparently had no upper price limit and just continued buying its way through the order books, until finally arriving at 19,6k$, when someone apparently hit CTRL-C.
During that time, the price on GDAX and all other exchanges decoupled, as arbers probably gave up on arbing (guess they ran out of coins or cash respectively and weren't able to interchange the funds between the exchanges, just like all the sellers). Even the Koreans, which usually are paying a large premium with regard to Western exchanges, almost lost all of their premium over GDAX for a few minutes.
I have only one idea who could have caused this: a single person or entity trying to load up on huge amounts of coins, planning to use them with corresponding orders on the upcoming futures markets. They probably got surprised with the CBOE announcement of starting futures even a week earlier than CME and thus had to speed up the buying plans a little, regardless of the premium they'd have to pay this way. The tricky question that remains however is: are they going to use these coins as a hedge, or are they planning on dumping them to do the inverse of what they just did (artifically lowering the market price, so their shorts on the futures markets earn them way more than they lose on the BTC exchanges)?
And of course: is this over now? GDAX went down and up again, and the mysterious and frequent buys at ridiculously high prices have returned as well, although the blockchain had practically no time to re-stock GDAX with coins. This person definitely doesn't care at all about the price and just wants to load up on any coins it can get really, really quick.
In all seriousness, I wouldn't be surprised if a group of high-net-worth individuals go short (exactly how you described) in order to shake out all the inexperienced traders/investors in the space for a nice profit.
Also, could it not just be CME preparing the underlyings?
I frequent several Korean websites (that used to have nothing to do with cryptocurrencies) and the number of bitcoin-related posts in the past few days has reached an insane level.
Half of them are saying it's a bubble. The other half say they're getting rich. Nobody's talking about blockchains, fiat currency, built-in deflation, monetary policies of nations, or any of that stuff, because nobody's interested in these topics. To these people, it's a get-rich-quick scheme, pure and simple. The only difference in viewpoint is whether they're in the scheme or not.
I don't know how far it will go, but a new economic order it is not. The players themselves (who are pumping up the price) don't give a damn about economic orders.
I live in Korea (and run a small cryptocurrency related service) and I couldn't agree with you more. Koreans are looking at BTC as a pure get rich quick scheme. Even those chasing out altcoins, they are not hooked by, you know, PoS or more privacy or any other features that the coins evangelists are talking about. They are just looking for "the next Bitcoin" haha.
Even when you try to go to these "Blockchain meetups": most of them are discussing nothing but the latest price of bitcoin.
Biosphere failure forensic report by agent 359348349 in outer galactic sector 17:
"The third planet began its ascent to technological singularity but became terminally fixated upon the repeated calculation of an obscure cryptographic mathematical function. Nearly all geologically sequestered carbon was rapidly oxidized to provide energy for the computation of this function, triggering a runaway greenhouse effect and transforming the planet's climate to one resembling that of the second planet in this solar system."
"And as was the case with the second planet in the solar system, before its runaway greenhouse gas death, we expect to see the process repeat itself on the 4th as probes sent from the 3rd again contained micro-organisms which have managed to adapt to climate there and have begun replicating. This time the period should be considerably shorter then the previous 2 billion years as cells with a nucleus have successfully adapted to the 4th, whereas from the 2nd's probes to the 3rd only non-nucleus possessing cells managed to initiate a replication cascade until this terminating event."
i don't have anything of real value to add here, and have never owned bitcoin (and probably never will), but this is an incredibly fascinating phenomenon to watch as a disintereted, underinformed party. i laughed out loud in amazement (not sarcastically or scornfully, just in amazement) when i saw it passed $16K
it is unlike anything most people in the world have probably ever seen
Wonder if they'll be a consulting market for IT engineers from the stock market exchanges for the cryptocurrency exchanges since they have experience handling a large volume of transactions etc.. All the current crypto exchanges seize when high volume, stop losses etc.. are triggered at the moment.
Most stock markets stop trading when prices change too much. If this was the case with bitcoin, we'd be limit up each day after a minute or so. The exchanges implementing it would lose out vs. others. So not sure they want to implement that now.
Lets all just thank the big central banks for pumping so much liquidity into the markets that people and companies are mostly clueless on what to do with the money.
And now everything seems like a good investment, you see average companies maling little to no profit acquired for billions, the housing market growing year-on-year, the US stock market up ~20% YTD. What’s the surprise?
Remains to be seen how much of the trading activity is new money vs people buying with other crypto, people buying with tethers they cannot redeem for USD or just plain old self-trading where one can move cash from wallet A into wallet B at arbitrary prices.
Bitcoin exchanges are not exactly offering a high degree of transparency on their cash inflows.
not an expert by any means, but from reading the article it looks like people are buying in anticipation of price increases after BTC futures launch on major exchanges (supposed to be 12/10 launch for the first one, tho i think thats coming into doubt now)
I am very genuinely curious how people bought bitcoin before coinbase? There was that vending machine. Or you could mine it. But how did regular folks do it?
I wonder to whatr extent BTC could be seen as an investment in a corporatist future where nationstates are less influential than the fictitious entities they have spawned.
is it possible to buy and sell bc, as quickly as one buy and sell stocks (aka speculating)? last time I checked there were ways but it would take some user verification process to buy, and selling seemed to be very well hidden.
Sure, most exchanges have an API you can use to automate your trading. The verification is a one-time thing, once you're past that you can trade as quickly as you want.
You can on e.g. gdax, but Bitcoin isn't intended as a high volume trading platform; it handles about 15 transactions per second, and right now there's a backlog of over 200.000 unconfirmed transactions. I'm fairly sure coinbase / gdax has like its own transaction log, guaranteeing that you will get X btc for Y price at the moment you make the transaction, even if the transfer to your own (offline) wallet could take a while.
Blocks take approximately 10 minutes, assuming your transaction is on the first block. In a way that might put some brakes on high speed trading, though it could still be automated.
[+] [-] cs702|8 years ago|reply
The thing is, individuals and institutions worldwide currently own around $300 trillion in financial assets.[a] If as a group they decide to hold, say, 2% of their financial wealth in Bitcoin, say, to diversify away from all nations on earth, then Bitcoin's market capitalization would go up 30x, from around $0.2 trillion to $6 trillion. The number of bitcoins is fixed, so the price would go up by the same multiple. In short, all it takes is for the world to want a tiny exposure to Bitcoin.
Note that before Bitcoin it was impossible to diversify away from all nation-specific risks.
[a] http://money.visualcapitalist.com/worlds-money-markets-one-v...
[+] [-] Scarblac|8 years ago|reply
Buying bridges from strangers looks completely sane in comparison.
[+] [-] jjxw|8 years ago|reply
This is one of my favorite modern finance quotes on bubbles because it encapsulates so well why there is still momentum in this crypto bubble even after an even casual reading of the news will tell you that everyone and their grandparents believes it's a bubble.
My bet is that heavy regulation in a market where there is heavy trading (e.g. USA, Japan, Korea) will be the blow that bursts this, but as with everything in public markets, who knows?
[+] [-] lawlessone|8 years ago|reply
[+] [-] wereHamster|8 years ago|reply
[+] [-] ThomPete|8 years ago|reply
This is the first time a truly global, decentralized and truly always on digital store of value has been accomplished.
This is a big thing and the current price is nothing compared to the future prospect of this.
[+] [-] ihsw2|8 years ago|reply
[+] [-] ringaroundthetx|8 years ago|reply
The SALT system allows people worldwide to lend to others. Even in sanctioned countries because they can just source lenders in those countries and the borrower has the universal collateral.
And thats just one utility, only possible because of the speculation driving liquidity.
[+] [-] Slartie|8 years ago|reply
It seems that yesterday at around 01:00 UTC, someone with a huge amount of cash on GDAX started a buying bot, which bought BTC in small increments every second or so at market price. Judging by the GDAX volume in comparison to normal volume and an estimated average price, I'd say this person bought about 50-60k BTC for around 800-900 million dollars. Shortly after this buying activity started, the Bitcoin network mempool got clogged by transactions - and it doesn't seem like spam, but more like legitimate transactions with fees attached that would normally go through in an acceptable timeframe. I'm pretty sure this is people realizing that GDAX is the place to sell right now, thus they're trying to move BTC from other exchanges and from cold storage onto that exchange. However, most of them likely didn't get there in time, but the buying bot apparently had no upper price limit and just continued buying its way through the order books, until finally arriving at 19,6k$, when someone apparently hit CTRL-C.
During that time, the price on GDAX and all other exchanges decoupled, as arbers probably gave up on arbing (guess they ran out of coins or cash respectively and weren't able to interchange the funds between the exchanges, just like all the sellers). Even the Koreans, which usually are paying a large premium with regard to Western exchanges, almost lost all of their premium over GDAX for a few minutes.
I have only one idea who could have caused this: a single person or entity trying to load up on huge amounts of coins, planning to use them with corresponding orders on the upcoming futures markets. They probably got surprised with the CBOE announcement of starting futures even a week earlier than CME and thus had to speed up the buying plans a little, regardless of the premium they'd have to pay this way. The tricky question that remains however is: are they going to use these coins as a hedge, or are they planning on dumping them to do the inverse of what they just did (artifically lowering the market price, so their shorts on the futures markets earn them way more than they lose on the BTC exchanges)?
And of course: is this over now? GDAX went down and up again, and the mysterious and frequent buys at ridiculously high prices have returned as well, although the blockchain had practically no time to re-stock GDAX with coins. This person definitely doesn't care at all about the price and just wants to load up on any coins it can get really, really quick.
[+] [-] desuvader|8 years ago|reply
In all seriousness, I wouldn't be surprised if a group of high-net-worth individuals go short (exactly how you described) in order to shake out all the inexperienced traders/investors in the space for a nice profit.
Also, could it not just be CME preparing the underlyings?
[+] [-] yongjik|8 years ago|reply
Half of them are saying it's a bubble. The other half say they're getting rich. Nobody's talking about blockchains, fiat currency, built-in deflation, monetary policies of nations, or any of that stuff, because nobody's interested in these topics. To these people, it's a get-rich-quick scheme, pure and simple. The only difference in viewpoint is whether they're in the scheme or not.
I don't know how far it will go, but a new economic order it is not. The players themselves (who are pumping up the price) don't give a damn about economic orders.
[+] [-] niyikiza|8 years ago|reply
[+] [-] api|8 years ago|reply
"The third planet began its ascent to technological singularity but became terminally fixated upon the repeated calculation of an obscure cryptographic mathematical function. Nearly all geologically sequestered carbon was rapidly oxidized to provide energy for the computation of this function, triggering a runaway greenhouse effect and transforming the planet's climate to one resembling that of the second planet in this solar system."
[+] [-] benjaminjackman|8 years ago|reply
[+] [-] unknown|8 years ago|reply
[deleted]
[+] [-] unknown|8 years ago|reply
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[+] [-] lawlessone|8 years ago|reply
[+] [-] mccoyspace|8 years ago|reply
[+] [-] aaavl2821|8 years ago|reply
it is unlike anything most people in the world have probably ever seen
[+] [-] elsewhen|8 years ago|reply
[+] [-] joshbaptiste|8 years ago|reply
[+] [-] dx034|8 years ago|reply
[+] [-] mccoyspace|8 years ago|reply
[+] [-] singularity2001|8 years ago|reply
Transactions now taking several hours might then take several days.
Already getting Error 520 on Kraken
[+] [-] SilasX|8 years ago|reply
[+] [-] hnarn|8 years ago|reply
[+] [-] samsonradu|8 years ago|reply
And now everything seems like a good investment, you see average companies maling little to no profit acquired for billions, the housing market growing year-on-year, the US stock market up ~20% YTD. What’s the surprise?
[+] [-] prostoalex|8 years ago|reply
Bitcoin exchanges are not exactly offering a high degree of transparency on their cash inflows.
[+] [-] singularity2001|8 years ago|reply
That is the equivalent of Banks closing because of market panic.
[+] [-] yodsanklai|8 years ago|reply
I've also been wondering what would happen if this crashes. Could it have any impact on the real economy?
[+] [-] aaavl2821|8 years ago|reply
[+] [-] nmeofthestate|8 years ago|reply
[+] [-] tostitos1979|8 years ago|reply
[+] [-] VVayneTracker|8 years ago|reply
[+] [-] dewiz|8 years ago|reply
[+] [-] wereHamster|8 years ago|reply
[+] [-] Cthulhu_|8 years ago|reply
[+] [-] grandmczeb|8 years ago|reply
[+] [-] lawlessone|8 years ago|reply
[+] [-] sidcool|8 years ago|reply
[+] [-] adrr|8 years ago|reply
[+] [-] unknown|8 years ago|reply
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[+] [-] LeonM|8 years ago|reply
[+] [-] thisisit|8 years ago|reply
https://news.ycombinator.com/item?id=15869803
If some listened they might have made some profit. /s
That said, another fluff piece upvoted. Can we get another section like SHow/Ask HN just for these?
[+] [-] npgatech|8 years ago|reply
“If some listened they might have made some profit” - I think you’re giving yourself too much credit here.
[+] [-] WillyOnWheels|8 years ago|reply