One point as a researcher working in a central bank and studying state-of-the art macroeconomic theory, is the absolute conviction that some crypto holders have that society is rotten to the core and that the financial industry (and for that matter the broader well established large cap economy) is a malfunctioning/rotten machine only benefiting the 1%.
I mean reading journals on monetary policy transmission, central banking, and finance in general, it is an extremely complex arena (understanding the global economy might be the most complex man made "game" to try to understand). And those researchers will readily admit faults and shortcomings of our current theories. I never ever see any statements from researchers that carries the same strength of conviction about any of the aforementioned topics compared to the crypto crowd, whatsoever.
1) This is a clickbait headline. TFA doesn't say there's a 50% chance of a collapse tonight. It says there's a 50% chance of collapse at some point in the next year.
2) TFA also says the reason Bitcoin futures are contango (6 month contract costs more than 3 month contract) on the Chicago Merc is because of counterparty risk with Bitcoin exchanges. But it also says there's zero counterparty risk with the Chicago Merc. So who cares about sketchy Bitcoin exchanges when you could just buy the CME 3-month, sell the CME 6-month, roll it every month and pocket the premium?
3) We should immediately discount stories about cryptoassets from any site that can't manage to set up a TLS cert.
I do think everyone saying "this can't go on forever" is correct, but lacks the imagination to describe the possible scenarios, and instead points to the speculation and energy/capital consumption as a given. But it's not a bubble in the usual sense - the miners and speculators are encouraging each other, giving pricing a rising base and profitable peaks over the course of multiple market cycles. That base will keep rising with spending on mining.
To me, the most probable outcome would be that as mining network consolidates and it gets harder to acquire more power, it becomes urgent to support the price by finding other sources of value to attach to the chain being mined, so we end up in a scenario where mining firms(which will increasingly mingle within the nation-state system) sponsor new coins and applications with additional social value.
I think their opinions were validated quite well. If I would listen to my crazy anarcho-capitalist friend, I would be millionaire today. Other side is represented by Trump...
As I watch the total crypto market cap shoot through the roof over the past year, one thing I've been wondering is what will stop a global "bank run" on the exchanges when/if something like this does happen?
I was reading thru Coinbase's own insurance wording, and it's clear they dance around it by saying:
To the extent these funds are held as USD in U.S. banks, they are maintained as pooled custodial accounts at one or more banks insured by the FDIC. These pooled custodial accounts have pass-through FDIC insurance up to the per-depositor coverage limit then in place [1]
Which basically means, only Coinbase's holding accounts are covered for $250k, not our personal accounts. I can't imagine the US Gov stepping in to rescue US crypto account holders when/if it does tank, but it might be necessary if it balloons enough.
Coinbase doesn't use Tether to store customer funds, they are straight USD or the BTC/ETH itself. I'm not sure how a "bank run", or heavy withdrawal of USD, would cause any more problems than processing delays.
Very likely in a serious run all the crypto exchanges will crash hard quickly and for an extended time (forever? ;-) essentially stopping trading except for personal direct transactions.
This analysis is flawed. People are paying a premium in the futures market to have exposure to BTC without having to acquire and hold physical bitcoins. There is a similar trend in other regulated exchange products like GBTC
https://ycharts.com/companies/GBTC/discount_or_premium_to_na...
> You can’t lose your Bitcoins – you just keep them on chain, and no exchange going bust will affect your position.
You absolutely can lose your Bitcoins if your private keys are compromised. Large institutions can and do get hacked or have money embezzled all the time.
> contango for financial products isn’t normal, is that you can arbitrage it very easily, as you don’t have storage costs
This is a bit hand wavy. Holding Bitcoin has real administrative and compliance costs for financial players in a position to sell Bitcoin futures. Particularly since, to do this properly, you’d need to be trading on the referenced cryptocurrency exchanges.
Also, I don’t think that default probability equation works for this case. (It’s also highly sensitive to the recovery assumption.)
The whole "hackernews desperately up-voting any post that cast's negative light on the investment opportunity that they missed" shtick is getting old. We get it, a lot of you knew about bitcoin in 2011 and did not buy in. Now, you are seeing it rise (and fall) over and over and are frustrated that you did not buy a couple hundred dollars worth of bitcoin 8 years ago.
It seems very cynical and kind of unlike this page as I got to know it over the past few years, but I struggle to come up with another reason as to why a blog post by someone named "Trolly McTrollface" would be upvoted to the front page.
A lot of comments here attacking this guy's name or things totally tangential to the meat of the post: simply plugging in some numbers into a financial formula to estimate the market's implied probability of these BTC exchanges going bust.
A lot of people here probably have BTC in their own wallets so don't care but the current btc exchanges (binance/coinbase etc) collapsing like mt. gox did would not be good for BTC in the short run at the very least.
A blog by a guy going by Trolly, that can't even properly set up HTTPS, and admits he makes things up in the headerline means absolutely nothing. Tether has been involved in shady dealings for a long time. Last bull run people like this guy were claiming it was all going to blow up and tether was worthless etc etc etc. That never happened. This hysteria is very common for nocoiners, why are they so worried about my worthless bitcorns?
Bitcoin in itself is quite useful, it’s something people will exchange for usd or things of value which the gov can’t censor or directly police.
Bitcoin’s price is determined by zero fundamentals, so it will swing wildly if you zoom
Out enough, forever. That’s why if you ask me it makes logical sense to have 1-10% Of the portfolio betting long or short, because it has a much better than 1 in 10 chances of going x10 or -90% in relatively short timeframe. I didn’t backtest it but looking at a chart it looks like there are those many-sigma shifts every 2 years.
To that extent, if you’re interested in betting on it, you might want to use option contracts and make sure your max loss is fixed at the premium and the upside is unlimited.
Exactly. Just because people are paying 50k a piece doesn’t mean people won’t suddenly wake up and realize that bitcoin is actually inferior to most of the other cryptocurrencies in terms of utility
Bitcoin is powered by a shared belief in its value. While it has been powered by scams as well, couch couch Tether, tt seems to be getting more adherents to believing that it is intrinsically valuable. The fact that it tends to go up so quickly also yields to FOMO.
Because Bitcoin is just shared belief, it is hard to dispel that belief via real-world events such as earnings releases and other things that affect more grounded investments.
Bitcoin is more of a movement and it is somewhat revolutionary in that it aims to replace our existing monetary system of central banks and interest rates, etc.
I think the main threats to Bitcoin could be governmental if it continues to grow. If it starts to be a reserve currency competitor to USD which could affect treasury sales, I could see it being banned by the US government and others... but I am not smart enough to work out all that would play out if Bitcoin became that important.
I wonder if Bitcoin will ever be forced to bend towards an inflationary monetary policy controlled by government like entities? It is code and code and always be changed. If it is so successful it becomes necessary to co-opt it into the existing system.... weird stuff.
The problem with belief is that the Bitcoin price only raises when you find new people who believe in it to put more money into it.
As soon as the BTC market reaches maximum penetration and no new buyers can be found, Bitcoin becomes price stable. And once price stability is reached, because the price isn't appreciating anymore, people will want to start spending their earnings. And as BTC in particular isn't actually that good as a currency, people need to turn their BTC into fiat in order to realise their value and spend them.
And then suddenly... there aren't any buyers and it crashes.
"Bitcoin is powered by a shared belief in its value."
The nuance in this is that its value also includes a financial incentive - the MLM structure inherent to Bitcoin, and that is truly what aligns everyone in Bitcoin - it's not for whatever other positives may exist as the primary glue, arguably 99%+ is the financial gain and potential that is the glue.
But yes, pro-Bitcoiners have been good at refining their narrative, the propaganda, conveniently ignoring the MLM structure whenever writing prose of how amazing Bitcoin is - while avoiding answering questions related to its pitfalls like with Bitcoin how do you implement policy and mechanisms like the Magnisky Act to block money of known bad actors as an economic punishment and attempt to sway their bad actions - before needing to perhaps (hopefully not) escalate actions into the physical, destruction-violence mechanism?
Bitcoin isn’t likely to be banned. Might as well ban World of Warcraft gold while you’re at it.
Clearly it has value as a speculative vehicle and as a systemic risk hedge (like Gold). Whether it can become a true currency is still debatable. Its infrastructure feels more like selling stock or bonds today.
> I wonder if Bitcoin will ever be forced to bend towards an inflationary monetary policy controlled by government like entities? It is code and code and always be changed. If it is so successful it becomes necessary to co-opt it into the existing system.... weird stuff.
You can change the code, but it's up to the miners to actually run that code. Not saying it's impossible, but that's a big ask for a controversial change like that. Maybe someday if the mining is even more centralized than it currently is.
I have been watching some BTC related companies recently and one caught my attention - Canaan. A few days ago they announced purchase orders of 100,000 mining machines for 2021. Supposedly many were pre-paid.
Also of note was their claim that in late 2020 they shifted their client base from individual miners to mostly publicly traded companies.
I am not sure what to make of it. Maybe HN can chip in?
We're living in an era when it is easy to create new "currencies". Bitcoin is only the first, as some others have already been developed. The "value" of such currencies is a social construct. So, the price of BC will continue to grow as long as people have expectation that it will be valuable in the future.
The only problem I see in "investing" in BC is the counterpart risk, i.e., I don't trust any of the companies that do trading in BC. I think this problem is currently bigger than the "currency" itself.
Don't know if anyone else made this mistake but: author is not saying bitcoin will 50/50 collapse tonight just some night this year.
> So the next time someone tries to explain to you that “Bitcoin is a store of value”, when the chances of it getting utterly destroyed overnight before the year is over are around 50/50, try not to shoot coffee through your nose laughing.
EDIT: Not saying I agree with the prediction, it's just a far more timid prediction than I initially thought.
@dang, you should think about adding a disclaimer to every crypto-related submission, just regex the title with the typical key words to catch them, with something like:
Be aware that crypto-related submissions like this one might be intended to trigger or influence a wanted market behavior by OP.
A little superfluous. Couldn't we just assume that any blog post about any topic "might be intended to trigger or influence a wanted market behavior"? A news article critical of Amazon warehouse management could also be seen the exact same way.
> Systematically, the futures contracts for months that are further away, are more expensive than those with closer expiration, and also cheaper than spot
> This is usually due to the fact that there’s a risk premium on the uncertainty of the future, and it costs a little bit to be sure of the price that you’ll pay for something three months from now.
This is wrong. Being sure of the the price you'll pay in the three months from now does NOT cost this premium. It costs essentially nothing (other than the transaction fee, which is much smaller - of the order of 0.025% on most exchanges, plus the orderbook spread). Note in particular that this transaction cost doesn't depend on the time horizon, unlike the premium the author refers to.
Makes sense. Most of the folks who have been in Bitcoin 6+ years have observed multiple crashes, exchanges going bust, Bitcoins vanishing into the ether (no pun intended), and people being unable to recover their assets.
People hold Bitcoin as insurance against the dollar collapsing. It makes no sense to assume that both Bitcoin and dollars will be circulating currencies: currency is a winner-take-all market, the most widely-accepted one will win. The Bitcoin price is a superposition of those who believe that Bitcoin is going to infinity and the dollar will become worthless, and those who believe that Bitcoin is going to zero and the dollar will retain its position as the global reserve currency.
[+] [-] mvind|5 years ago|reply
I mean reading journals on monetary policy transmission, central banking, and finance in general, it is an extremely complex arena (understanding the global economy might be the most complex man made "game" to try to understand). And those researchers will readily admit faults and shortcomings of our current theories. I never ever see any statements from researchers that carries the same strength of conviction about any of the aforementioned topics compared to the crypto crowd, whatsoever.
Some perspective might lend itself useful.
[+] [-] panarky|5 years ago|reply
2) TFA also says the reason Bitcoin futures are contango (6 month contract costs more than 3 month contract) on the Chicago Merc is because of counterparty risk with Bitcoin exchanges. But it also says there's zero counterparty risk with the Chicago Merc. So who cares about sketchy Bitcoin exchanges when you could just buy the CME 3-month, sell the CME 6-month, roll it every month and pocket the premium?
3) We should immediately discount stories about cryptoassets from any site that can't manage to set up a TLS cert.
[+] [-] megameter|5 years ago|reply
To me, the most probable outcome would be that as mining network consolidates and it gets harder to acquire more power, it becomes urgent to support the price by finding other sources of value to attach to the chain being mined, so we end up in a scenario where mining firms(which will increasingly mingle within the nation-state system) sponsor new coins and applications with additional social value.
[+] [-] throw8932894|5 years ago|reply
[+] [-] kirse|5 years ago|reply
I was reading thru Coinbase's own insurance wording, and it's clear they dance around it by saying:
To the extent these funds are held as USD in U.S. banks, they are maintained as pooled custodial accounts at one or more banks insured by the FDIC. These pooled custodial accounts have pass-through FDIC insurance up to the per-depositor coverage limit then in place [1]
Which basically means, only Coinbase's holding accounts are covered for $250k, not our personal accounts. I can't imagine the US Gov stepping in to rescue US crypto account holders when/if it does tank, but it might be necessary if it balloons enough.
[1] https://help.coinbase.com/en/coinbase/other-topics/legal-pol...
[+] [-] dahdum|5 years ago|reply
[+] [-] sammyo|5 years ago|reply
[+] [-] Shorel|5 years ago|reply
A friend recently got his BTC stolen in one of these online wallets, which are not wallets at all.
I advise no one to keep their money in exchanges.
[+] [-] csulmone|5 years ago|reply
[+] [-] dcolkitt|5 years ago|reply
> You can’t lose your Bitcoins – you just keep them on chain, and no exchange going bust will affect your position.
You absolutely can lose your Bitcoins if your private keys are compromised. Large institutions can and do get hacked or have money embezzled all the time.
[+] [-] JackFr|5 years ago|reply
[+] [-] JumpCrisscross|5 years ago|reply
This is a bit hand wavy. Holding Bitcoin has real administrative and compliance costs for financial players in a position to sell Bitcoin futures. Particularly since, to do this properly, you’d need to be trading on the referenced cryptocurrency exchanges.
Also, I don’t think that default probability equation works for this case. (It’s also highly sensitive to the recovery assumption.)
[+] [-] hntrader|5 years ago|reply
[+] [-] xiphias2|5 years ago|reply
[+] [-] _fs|5 years ago|reply
[+] [-] tommit|5 years ago|reply
[+] [-] aminozuur|5 years ago|reply
[+] [-] fullshark|5 years ago|reply
A lot of people here probably have BTC in their own wallets so don't care but the current btc exchanges (binance/coinbase etc) collapsing like mt. gox did would not be good for BTC in the short run at the very least.
[+] [-] deft|5 years ago|reply
[+] [-] mef|5 years ago|reply
archive version though it seems slow https://archive.vn/UvZTZ
[+] [-] eaenki|5 years ago|reply
Bitcoin’s price is determined by zero fundamentals, so it will swing wildly if you zoom Out enough, forever. That’s why if you ask me it makes logical sense to have 1-10% Of the portfolio betting long or short, because it has a much better than 1 in 10 chances of going x10 or -90% in relatively short timeframe. I didn’t backtest it but looking at a chart it looks like there are those many-sigma shifts every 2 years.
To that extent, if you’re interested in betting on it, you might want to use option contracts and make sure your max loss is fixed at the premium and the upside is unlimited.
[+] [-] RIMR|5 years ago|reply
[+] [-] 1-6|5 years ago|reply
[+] [-] ashtonkem|5 years ago|reply
[+] [-] suifbwish|5 years ago|reply
[+] [-] bhouston|5 years ago|reply
Because Bitcoin is just shared belief, it is hard to dispel that belief via real-world events such as earnings releases and other things that affect more grounded investments.
Bitcoin is more of a movement and it is somewhat revolutionary in that it aims to replace our existing monetary system of central banks and interest rates, etc.
I think the main threats to Bitcoin could be governmental if it continues to grow. If it starts to be a reserve currency competitor to USD which could affect treasury sales, I could see it being banned by the US government and others... but I am not smart enough to work out all that would play out if Bitcoin became that important.
I wonder if Bitcoin will ever be forced to bend towards an inflationary monetary policy controlled by government like entities? It is code and code and always be changed. If it is so successful it becomes necessary to co-opt it into the existing system.... weird stuff.
[+] [-] Closi|5 years ago|reply
As soon as the BTC market reaches maximum penetration and no new buyers can be found, Bitcoin becomes price stable. And once price stability is reached, because the price isn't appreciating anymore, people will want to start spending their earnings. And as BTC in particular isn't actually that good as a currency, people need to turn their BTC into fiat in order to realise their value and spend them.
And then suddenly... there aren't any buyers and it crashes.
[+] [-] loceng|5 years ago|reply
The nuance in this is that its value also includes a financial incentive - the MLM structure inherent to Bitcoin, and that is truly what aligns everyone in Bitcoin - it's not for whatever other positives may exist as the primary glue, arguably 99%+ is the financial gain and potential that is the glue.
But yes, pro-Bitcoiners have been good at refining their narrative, the propaganda, conveniently ignoring the MLM structure whenever writing prose of how amazing Bitcoin is - while avoiding answering questions related to its pitfalls like with Bitcoin how do you implement policy and mechanisms like the Magnisky Act to block money of known bad actors as an economic punishment and attempt to sway their bad actions - before needing to perhaps (hopefully not) escalate actions into the physical, destruction-violence mechanism?
[+] [-] unknown|5 years ago|reply
[deleted]
[+] [-] anm89|5 years ago|reply
[+] [-] HarryHirsch|5 years ago|reply
How? As an intrinsically valuable means of speculation because sound investment opportunities are absent?
[+] [-] parasubvert|5 years ago|reply
Clearly it has value as a speculative vehicle and as a systemic risk hedge (like Gold). Whether it can become a true currency is still debatable. Its infrastructure feels more like selling stock or bonds today.
[+] [-] ragnese|5 years ago|reply
You can change the code, but it's up to the miners to actually run that code. Not saying it's impossible, but that's a big ask for a controversial change like that. Maybe someday if the mining is even more centralized than it currently is.
[+] [-] jMyles|5 years ago|reply
It's difficult to imagine this causing the price to go any direction other than up.
[+] [-] Hitton|5 years ago|reply
So is US dollar.
[+] [-] ffggvv|5 years ago|reply
[+] [-] pthreads|5 years ago|reply
Also of note was their claim that in late 2020 they shifted their client base from individual miners to mostly publicly traded companies.
I am not sure what to make of it. Maybe HN can chip in?
[+] [-] dmichulke|5 years ago|reply
https://cointelegraph.com/news/btc-miners-pocket-4m-in-60-mi...
[+] [-] coliveira|5 years ago|reply
The only problem I see in "investing" in BC is the counterpart risk, i.e., I don't trust any of the companies that do trading in BC. I think this problem is currently bigger than the "currency" itself.
[+] [-] marricks|5 years ago|reply
> So the next time someone tries to explain to you that “Bitcoin is a store of value”, when the chances of it getting utterly destroyed overnight before the year is over are around 50/50, try not to shoot coffee through your nose laughing.
EDIT: Not saying I agree with the prediction, it's just a far more timid prediction than I initially thought.
[+] [-] desmap|5 years ago|reply
Be aware that crypto-related submissions like this one might be intended to trigger or influence a wanted market behavior by OP.
[+] [-] hbosch|5 years ago|reply
[+] [-] throwaway3699|5 years ago|reply
[+] [-] dang|5 years ago|reply
[+] [-] diegoperini|5 years ago|reply
[+] [-] junippor|5 years ago|reply
> This is usually due to the fact that there’s a risk premium on the uncertainty of the future, and it costs a little bit to be sure of the price that you’ll pay for something three months from now.
This is wrong. Being sure of the the price you'll pay in the three months from now does NOT cost this premium. It costs essentially nothing (other than the transaction fee, which is much smaller - of the order of 0.025% on most exchanges, plus the orderbook spread). Note in particular that this transaction cost doesn't depend on the time horizon, unlike the premium the author refers to.
[+] [-] nostrademons|5 years ago|reply
People hold Bitcoin as insurance against the dollar collapsing. It makes no sense to assume that both Bitcoin and dollars will be circulating currencies: currency is a winner-take-all market, the most widely-accepted one will win. The Bitcoin price is a superposition of those who believe that Bitcoin is going to infinity and the dollar will become worthless, and those who believe that Bitcoin is going to zero and the dollar will retain its position as the global reserve currency.
[+] [-] anm89|5 years ago|reply
You are aware of other currencies,let's say the Euro, right?
[+] [-] bravoetch|5 years ago|reply