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Found out today you can only take $10,000 a day out of Coinbase. I guess this could be good, because it’s essentially a “bail-in” that forces people to stay in the market and prevents a run, but still I had no idea of the lack of liquidity in bitcoin with the current system.
I think it'll be more of an old fashioned speculative bubble burst. The smart money will start taking profits by selling their coin, as the price goes down those that bought the high will lose their nerve and sell to stem their losses. Then the rest will start selling shortly after. Eventually there'll be nobody willing to buy at any price, it'll be worthless.
I think it'll be more of an old fashioned speculative bubble burst. The smart money will start taking profits by selling their coin, as the price goes down those that bought the high will lose their nerve and sell to stem their losses. Then the rest will start selling shortly after. Eventually there'll be nobody willing to buy at any price, it'll be worthless.
Earlier quoted context omitted.
Then we have cheap bitcoin and people hop right back on. It's not going to go to 0 ever, unless its replaced by another de facto crypto as the face of the entire industry. It's a deflationary, uncontrolled currency in a world that prints wealth, its easy to see why people want to hold some money here.
>in a world that prints wealth Where else, besides the crypto-currency market itself, is "wealth" being "printed"? Fiat currencies may be inflationary but they're only used to price wealth not actually hold it. Actual wealth, unlike crypto-curency "wealth", is held in stocks/bonds/land/etc which are actual assets backed by some kind of economic activity or physical scarcity. Comparing "Bitcoin as a store of value" wi…
Bitcoin is EXACTLY like land and stocks, except much, much, much more liquid and useful.
Found out today you can only take $10,000 a day out of Coinbase. I guess this could be good, because it’s essentially a “bail-in” that forces people to stay in the market and prevents a run, but still I had no idea of the lack of liquidity in bitcoin with the current system.
Also, that doesn't stop you from selling bitcoin into USD.
Earlier quoted context omitted.
here is a more specific scenario. By a confluence of events, a large number of bitcoin holders decides to liquidate at the same time. Price falls, triggering stops, at which point other people with significant bitcoin holdings panic and try to sell their holdings, triggering further stops, etc. Price rapidly falls by 75% or more within 1 or 2 days.
Then we have cheap bitcoin and people hop right back on. It's not going to go to 0 ever, unless its replaced by another de facto crypto as the face of the entire industry. It's a deflationary, uncontrolled currency in a world that prints wealth, its easy to see why people want to hold some money here.
This article appears to be written under the assumption that coinbase and other exchanges are counterparties to the price. They are not. They are market makers. It's impossible to have a run on dollar demand for BTC, because the price floats. If there are sufficient people selling, the price will simply fall, and has done so several times in the past, before recovering when equilibrium returned to the market. Exchang…
This happened to the London interbank lending market during the week of 15 September 2008, when LIBOR jumped to 8% and the banks simply stopped providing loans to each other. The reason? Because they weren't sure the assets their counterparties (other banks) were sitting on were worth anything (resi mortgages) and they didn't want to find themselves an unsecured creditor.
Mortgages during the subprime crisis didn't fall in price so much as they were impossible to price. This made the credit risk of bank borrowers impossible to price. So funding headed for the doors.
Change up the parties a bit and the banks --> offramps, mortgages ---> Bitcoin, and liquidity --> fiat, as in 2008.
There is simply no way that, as Bitcoin goes parabolic, the on/offramps are prepared to handle a change in the weather which results in a huge influx of withdrawals unless their own bank balances rise significantly. My informed supposition is that most such entities should have high-cost liquidity facilities with commercial banks that can step in and address some of that withdrawal demand.
As then, a liquidity shock (availability of dollars) could break the system without needing a precipitous drop in the market price of Bitcoin.
I think it'll be more of an old fashioned speculative bubble burst. The smart money will start taking profits by selling their coin, as the price goes down those that bought the high will lose their nerve and sell to stem their losses. Then the rest will start selling shortly after. Eventually there'll be nobody willing to buy at any price, it'll be worthless.
As long as there is value in maintaining public blockchains, their tokens (BTC, BCH, ETH, etc) will hold monetary value.
Earlier quoted context omitted.
Sure, I am not saying it will be worth zero ever. I am saying it can become worth a lot less than today in a matter of days. Part of the problem that I have is I have no idea how to value bitcoin. I can sort of understand how to roughly value a company. But bitcoin I have no idea.
There's something of a practical floor on price at the cost of the electricity to mine a coin times the lowest rate of electricity available at the moment. (Somewhere in the realm of $500 AFAIK) Now, since the difficulty changes over time I could imagine that not being as high as people think (e.g. if mining companies abandon bitcoin for other currencies), but there is a real world equivalent to book value.
This article appears to be written under the assumption that coinbase and other exchanges are counterparties to the price. They are not. They are market makers. It's impossible to have a run on dollar demand for BTC, because the price floats. If there are sufficient people selling, the price will simply fall, and has done so several times in the past, before recovering when equilibrium returned to the market. Exchang…
What about all of the exchanges offering significant margin trading? Where does all that credit come from? How can they guarantee that'll all be covered in a significant price drop if the buy side of the book is cleared?
Derivative markets like Bitmex use a form of socialized loss to remove the risk.