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An $814M Mystery Near the Heart of the Biggest Bitcoin Exchange

bloomberg.com

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Re: An $814M Mystery Near the Heart of the Biggest Bitcoin Exchange

#121

Post by koolba »

azureel wrote: post #115

I'm not sure but, isn't this how the real banks operate, too? For example let's take a legal, legit, Bank named X in a country. If all the account owners wanted to retrieve their money, at the same time: can that bank serve that demand? Because normally for every 1 dollar deposited inside, bank can give away 5 dollars worth of credits to other people. (the ratio changes in every country probably). So accusing a virtu…

In the US banks have reserve requirements that are regularly audited by regulators. A localized run on a bank is possible (particularly for cash on hand), but reserves combined with FDIC insurance make it a non-issue.

Re: An $814M Mystery Near the Heart of the Biggest Bitcoin Exchange

#122

Post by coliveira »

azureel wrote: post #115

I'm not sure but, isn't this how the real banks operate, too? For example let's take a legal, legit, Bank named X in a country. If all the account owners wanted to retrieve their money, at the same time: can that bank serve that demand? Because normally for every 1 dollar deposited inside, bank can give away 5 dollars worth of credits to other people. (the ratio changes in every country probably). So accusing a virtu…

Banks are secured by the government. If you have deposits up to a limit (I think it is $250K), the government guarantees the money will be there no matter what happens to the bank.

Re: An $814M Mystery Near the Heart of the Biggest Bitcoin Exchange

#123

Post by darawk »

busterc wrote: post #117

I found this comment, by Richard Berger on SeekingAlpha, compelling: > STOP! and think about what this author has revealed. Even IF Tether is NOT running a fraud, the arbitrage positions that automatically exist between Bitcoin and any tether are real and do create incentive to create an arbitraged feedback loop whereby a pegged tether between Bitcoin - any_generic_tether - USD does exist and self feeds, driving up B…

There's no reason arbitrage should push up the price of Bitcoin. Tether exists to normalize arb opportunities between exchanges. That's what it was created for. There is indeed a real question as to whether or not Bitfinex has issued more Tether than it has in reserve, or whether or not they will actually pay people out for their Tether tokens. But there is no 'arbitrage feedback loop' driving the price rise.

Re: An $814M Mystery Near the Heart of the Biggest Bitcoin Exchange

#124

Post by [deleted] »

panarky wrote: post #112

When something doesn't make sense, usually it's because information is missing. Every market participant knows that Tether doesn't prove their reserves, and yet the market exchange rate to USD stays in a tight band between 0.98 and 1.02 across multiple exchanges. If the market doesn't trust Tether, then it should trade at a deep discount to USD, not at parity. Similarly, the conventional wisdom says cryptocurrencies…

[deleted]

Re: An $814M Mystery Near the Heart of the Biggest Bitcoin Exchange

#125

Post by unknown_apostle »

panarky wrote: post #112

When something doesn't make sense, usually it's because information is missing. Every market participant knows that Tether doesn't prove their reserves, and yet the market exchange rate to USD stays in a tight band between 0.98 and 1.02 across multiple exchanges. If the market doesn't trust Tether, then it should trade at a deep discount to USD, not at parity. Similarly, the conventional wisdom says cryptocurrencies…

Welcome to the real world. It's not "efficient".

Re: An $814M Mystery Near the Heart of the Biggest Bitcoin Exchange

#126

Post by rsynnott »

s17n wrote: post #113
wpietri wrote: post #101

Earlier quoted context omitted.

One of the other parallels that interests me is that there's very little incentive to be publicly skeptical of the nonsense. People were immensely critical of Warren Buffett during the dot-com bubble. He was frank that their valuations didn't make sense to him, and he took a pasting for it. He turned out to be right, but only after taking a lot of heat: http://news.bbc.co.uk/2/hi/business/1217716.stm There's little g…

Calling bitcoin a bubble seems like the wrong word. There are basically two possible outcomes: total market cap zero, or in the trillions. How much you think bitcoin is worth depends on your guess (and it really is just a guess, nobody has any idea what is going to happen) about the relative likelihood of each.

I would have thought the third was that it maintains some sort of marginal utility, but isn’t worth much. Though it’s becoming increasingly useless, really.

Re: An $814M Mystery Near the Heart of the Biggest Bitcoin Exchange

#127

Post by tlb »

Tether shows the problem with non-shortable securities. If even 1% of traders believe it's valuable and 99% don't, the 1% can happily trade amongst themselves at full value. If there were a short market, the majority non-believers would drive the price down.

I think you could find 1% of cryptocurrency traders that believe any theory you care to name.

Re: An $814M Mystery Near the Heart of the Biggest Bitcoin Exchange

#129

Post by empath75 »

python-guy-vt wrote: post #103
mancerayder wrote: post #84

Can anyone with a more studied background in economics help hypothesize the after-effects on Bitcoin and other altcoins if this 814M 'digital counterfeiting' for lack of a better term, is true? For example, 800M has been artificially pumped into the Bitcoin and general crypto ecosystem, like air in a bicycle tire. And this is a game theory sort of question, too: If this is true: now, what?

> For example, 800M has been artificially pumped into the Bitcoin. This is impossible with Bitcoin. Bitcoins can only be created via mining, Bitcoin mining is a proof-of-work crypto currency. Crypto's typically use proof-of-work or proof-of-stake in order to have value. Tether, on the other hand, seems to have no proof-of-work or proof-of-stake at all and just claims to have a 1:1 ratio of their currency to dollars.…

> Bitcoins can only be created via mining

Why do people think that it's impossible for exchanges to do fractional reserve with bitcoin?

Re: An $814M Mystery Near the Heart of the Biggest Bitcoin Exchange

#130

Post by aaavl2821 »

s17n wrote: post #113
wpietri wrote: post #101

Earlier quoted context omitted.

One of the other parallels that interests me is that there's very little incentive to be publicly skeptical of the nonsense. People were immensely critical of Warren Buffett during the dot-com bubble. He was frank that their valuations didn't make sense to him, and he took a pasting for it. He turned out to be right, but only after taking a lot of heat: http://news.bbc.co.uk/2/hi/business/1217716.stm There's little g…

Calling bitcoin a bubble seems like the wrong word. There are basically two possible outcomes: total market cap zero, or in the trillions. How much you think bitcoin is worth depends on your guess (and it really is just a guess, nobody has any idea what is going to happen) about the relative likelihood of each.

From Wikipedia:

"An economic bubble or asset bubble (sometimes also referred to as a speculative bubble, a market bubble, a price bubble, a financial bubble, a speculative mania, or a balloon) is trade in an asset at a price or price range that strongly exceeds the asset's intrinsic value."

Seems like a reasonable description of bitcoin to me

I have yet to see a well thought out, rational, specific description of the intrinsic value of bitcoin. If it is the case that people think it will either be zero or a trillion market cap, that suggests to me that people aren't thinking seriously about the real world end game for bitcoin and thus that there's is no solid bounding of the potential intrinsic value

Bubbles are formed by people who think they are being rational, but in fact are not. One sign that you aren't being rational is when you don't think critically, quantitiavely, specifically and probabalistically about possible future states

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