Ask HN: Why is the crypto booming again?

[haebom]

I have no experience in crypto investing, so I don't know how significant this is, but there has been talk of $60,000 in Bitcoin in various major media outlets recently. It seems like the crypto market has a habit of coming in and out of the limelight like this, so why is this boom coming back? Is it simply due to something like ETF approval? If there's a technical reason, let me know.

[photon_lines]

I'd say the biggest reasons recently are:

1) The approval of various ETFs (so demand is heightened). It's much easier to invest in it than in was in the past.

2) Traders expecting the supply to tighten (see bitcoin halving which is due very soon) and the demand there also heightening due to supply constraint expectation.

3) A lot of the uncertainty in terms of exchanges is gone. Coinbase looks like it can stand up to scrutiny and this furthermore boosts demand.

When you have huge demand vs. constrained supply, bubbles form. Of course, are all of the factors I mentioned enough to keep the bubble going for a very long time? Well, that I can't answer. No one knows how long this will last. I can tell you though that this to me looks like it is the next Tulip bubble. I see almost no reason to use bitcoin as a store of wealth. As a decentralized currency it has tremendous value, but treating it as gold I have reservations on since a lot of corrupt gangs and regimes are currently using it as a method of payment and laundering (including North Korea), as well as it being a huge drain on the world's energy supply due to mining energy needs...I don't really see what value it brings to the world at all, so treating it as 'virtual gold' (the way the world has been treating it) makes 0 sense to me, but in general, the world in the short-term sometimes makes very little sense. Over the long term, things tend to clear up. Hopefully that helps.

[haebom]

In fact, it seems that places like North Korea, where there are economic restrictions, are using crypto markets as a way of funding. As you said, they say that it will replace digital gold, or the dollar, but that sounds a bit tasteless to me.

On the other hand, when I keep seeing news about El Salvador getting out of a national financial crisis with bitcoin, or Sam Altman issuing a worldcoin, or what Optimism did with artificial intelligence, I wonder if it's really worthless.

Some say that various tokens will be in the spotlight at Ndivia's upcoming event, but what I'm most interested in is whether this crypto market really helps with AI distributed processing. In fact, when creating an LLM, the biggest concern is how to handle quantised data.

[lowkey]

Adding some detail to your points 1 and 2, the ETFs are currently buying up over 12,000 coins per day and growing. The miners are producing 900 coins per day which will fall to 450 coins per day in 40 days due to the halving.

Demand is outpacing supply by 12 to 1 at the current pace and all signs point to further tightening as demand continues to grow and supply remains programmatically fixed and soon to fall by half.

The world has never before experienced an asset with perfectly inelastic supply and exponentially growing demand.

It is the perfect storm.

[latchkey]

ETH is outperforming BTC.

ETH Merged from PoW to PoS in Sept 2022, and decimated the entire GPU mining industry, cutting obscene power usage down to just running some servers. Sure, there is a small amount of shitcoin PoW mining still, but overall it was a massive change across the board.

Combine that with the transactional burn introduced into EIP-1559, supply is going down because the network isn't having to pay as much for security.

Then, we have EigenLayer, which is taking staked ETH and restaking it to provide an additional layer of security to layer 2 networks. Now, you're just locking up even more ETH. 3m ($12b) are locked into that one alone. Vicious cycle.

ETH is about to have a network upgrade, the first since the Merge, that helps lay the groundwork for scaling.

These factors are all contributing to the growth as new money rolls back into DeFi.

https://ultrasound.money/

https://decrypt.co/119687/4-6-billion-ethereum-flames-since-...

[RestlessMind]

> but treating it as gold I have reservations on since a lot of corrupt gangs and regimes are currently using it as a method of payment and laundering (including North Korea), as well as it being a huge drain on the world's energy supply due to mining energy needs.

You do realize that being a great store of value is orthogonal to criminals using it or its energy consumption, right? Criminals also use USD bills, far more than they use bitcoin. Are you going to claim that USD is not a great store of value for poor countries then?

[muzani]

It always booms because of the Bitcoin halving. People buy Bitcoin because it's going to be rarer and less mineable. Prices go up.

Others buy because the prices are going up. Some genius draws lines on a graph that tells them prices are going to go up even more, and they buy more. Because the Bitcoin halving tends to be over a 4 year cycle, it's very convenient for the line drawers to predict patterns, and it becomes a self fulfilling prophecy.

[inhumantsar]

That's certainly part of it, but the introduction of Bitcoin ETFs has played a huge role in this run as well.

> On March 5, when Bitcoin reached a new all-time high, the BlackRock ETF (IBIT) saw a record inflow of $788.3 million in a single day. This meant that BlackRock had to buy over 11,000 Bitcoins, which likely brought Bitcoin to its new high.

https://finance.yahoo.com/news/blackrocks-bitcoin-etf-breaks...

[RestlessMind]

And then you add reputable entities like Blackrock or Fidelity offering Bitcoin ETFs and you further fuel the narrative of it being a great asset class.

[factorialboy]

Bitcoin ETF. 4 year halvening cycle. US Feds expected to print dollars this year.

[JumpCrisscross]

> Feds expected to print dollars this year

This is the answer. There is a spread of expectations around what the Fed will do. I’ve been hawkish, figuring since last year that rates will stay higher, for longer, than the median expectation. Silicon Valley has been dovish. (In my opinion, aspirationally.)

Crypto, for obvious reasons, appeals to those predisposed towards dovishness. (It sounds contradictory. But if you believe the Fed is fucked you’ll always predict imminently-lower rates.)

[gitfan86]

The same reason stanley cups got super popular for a bit. Herd mentality and lack of regulation.

This is kind of the main use case for crypto. Fear and Greed

[jimberlage]

Oddly enough (as someone who feels lukewarm about crypto) isn’t this a really strong case for it sticking around long-term?

Like, “crypto will go away as soon as humanity stops feeling fear or being greedy”?

TBH, if anyone really wants to take the air out of crypto, they need to make an easily accessible, divisible, provable deflationary asset, that doesn’t require a lot of work to find or store (so not real estate, gold, guns, rare LEGO sets, etc.)

[newswasboring]

What could regulation have done about stanley cups?

[spinchange]

It's regarded as an inflation hedge but it seems more accurate to describe it as a measure of liquidity and liquidity expectations in capital markets now. Like a "Risk-on" gauge.

[PeterStuer]

Dedollarization? A fiat currency is only worth sonething if people are willing to accept it for actual stuff. Maybe it is different over there, but looking around an average EU home or business, I do not see much stuff 'made in USA'. And with a credible threat of CBDC's on the horizon, diversifying even a small % of your portfolio in some gold or bitcoin might be an acceptable hedge.

[ygouzerh]

It was mostly due to the market being very low the last year and beginning of the year :

- Interest rates rise cut cash flow to many startups - NFT bubble burst - And mostly: the FTX drama, which froze even more investments in the market

Now it's starting to get back to "normal" (actually a bit more than normal with the Bitcoin spot ETF being approved)

[sfmz]

Try asking in a forum that doesn't hate crypto with the fury of 1000 suns, you may get a better answer.

[jf22]

I've always viewed this site as pro-crypto but with a realistic view of the pros and cons.

[Workaccount2]

HN is a website full of people who know what crypto is, and therefore know how insanely overvalued it is.

Crypto is like the startup that perpetually just burns cash, but keeps on luring in investors with its shiny tech, huge promises, and ever expanding user base. But people in the know are aware that that tech isn't especially useful.

That being said: I am riding this wave again, as I have ridden two of the past three and might as well harvest while the sun is shining.

[rvz]

The crypto critics told you it was going to zero remember?

Where are they now? Dead silent after Ripple won the SEC lawsuit, the ETFs being approved and now BTC reaching $70K

This time without interest rate cuts, FTX, etc. So I say again:

Like it or not, crypto is here to stay.

[RestlessMind]

"crypto" is not a very useful term. There are multiple classes within it, some good some bad.

Bitcoin is one and definitely going to stay around as a store of value (digital gold).

There are legit projects like ETH, USDC or Uniswap which have earned credibility in one way or the other (being open source, regulators allowing them to exist etc). Most of the alpha is going to be in this bucket, as it is still maturing.

And then there is a cesspool of scammers (SBF) and shitcoins. Stay away from those.

[Cloudef]

I got recently granted airdrops for few cryptos due to past contributions to some open source projects (no idea which). It reminded me why cryptocoins won't ever take off.

   1. The time to transfer from coin to coin took ages
   2. To finish the transfer I would've paid fee (gas) on the target wallet (eth), and the price is ridiculous (around $20)
   3. Presumably I would've had to do this again if I wanted to transfer to exchange
   4. The UX in general is still bad and you have to become cryptocoin expert to actually do basic things

I don't deny that for some countries and especially long travel transfers cryptocoins might be the only valid option, but I do not ever see them becoming a currency for daily trade. As for the price? Speculation, money laundering and well I guess collectively lots of people are basically in the game already and don't want out / can't get out. As long as there is money in the game anything can thrive, even if it makes little sense or is technically dumb.

[veg]

For your particular case, you're referring to some of the slower blockchians. There are much faster and essentially free blockchains (like Base or Solana) which solve 1-3 on your list. UX still an issue.

[ilikerashers]

Are gold and crypto correlated? Both seem to be rising on rate cut prospects but not sure how proven the theory is.

[latchkey]

No, they aren't. Bitcoin has outperformed gold.

[jjice]

My biased guess: both have inherently little actual value. Some crypto has transactional values, and gold has minor value in production, but those aren't valued in gold speculation prices. They mostly ride on speculation and the fear of a serious economic issue (despite not being a panacea to those situations).

You can say that stocks and bonds don't have value, but the value of publicly traded companies is much more tangible. I can look and see that Apple is generating a profit and at least paying a dividend, and US and municipal bonds are backed by notable entities in our every day lives.

If you think those have no value and we're doomed as a society in the near future, you should be putting your money into food, water, and ammunition instead of gold and crypto.

[wdpk]

a good case of pump and at some point a dump. The prices are pumped by insiders using pretty heavy leverage to make huge directional bets (just insane from a risk/reward perspective but hey, we're dealing with the most degenerate gamblers here) on the theory that a bunch of "muppets" (Goldman Sachs terminology here) are going to long term bring their savings through ETFs and provide much needed exit liquidity. Fascinating how humans are never changing or learning

[lr1970]

Financial sanctions against Russia force Russians into crypto-currency as an alternative. This drives crypto prices up.

[surrTurr]

Generative AI shitting all over the internet creates a need for "verified" people, information etc.

The Blockchain promises this verification, decentralized.

[repelsteeltje]

Can you explain how blockchain is saving us from AI shitting over the internet? I can think of ways how it might have, but I think that horse has long left the stable and while the crypto tools and infrastructure technically predate the LLM stuff they haven't been put to work in any meaningful way.

I think the current boom in bitcoin is rooted in plain greed, as it has been before. And outside of tokens no significant stuff is happening in cryptoland AFAIK.

[haebom]

I understand that blockchain and smart contracts have a role to play. But it's not connected to the token economy of crypto markets like Bitcoin, is it? Twitter, Reddit, etc. are also seeing things like meme-coin and AI distributed processing. Personally, I don't know if it really makes sense (I've been in the AI industry for 3 years now, but I've done enough research with the infrastructure and allocation provided by GCP or Azure, etc.).