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

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

#261

Post by s17n »

Nursie wrote: post #226
s17n wrote: post #113

Earlier quoted context omitted.

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.

Surely option 3 is "it finds a niche and hits some sort of equilibrium" ?

Of course this option exists, but given that it's less likely to happen, that the market cap in this scenario is unknowable, and that when averaged with the two scenarios I mentioned it doesn't move the needle, it's almost irrelevant to any kind of reasonable investment thesis.

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

#262

Post by mplewis »

tobltobs wrote: post #253
panarky wrote: post #235

Earlier quoted context omitted.

If traders lose faith in Tether, they would sell Tether and buy Bitcoin in a flight to safety. Bitcoin prices would rise as traders try to get out of Tether. Conceivably, a crisis with Tether could affect confidence in the entire cryptocurrency ecosystem, which would put downward pressure on the Bitcoin exchange rate. It's not clear which of these factors would dominate, so it's not clear what would happen to exchang…

> If traders lose faith in Tether, they would sell Tether and buy Bitcoin in a flight to safety. Bitcoin prices would rise as traders try to get out of Tether. That might be the outcome, however: - If there would be the slightest bit of panic btc transactions would be congested for days. - If people would loose money by Tether their btc margin positions would be getting closed. - Because they loose faith in one crypt…

If Tether is garbage, the only way to get your money out is by converting Tether to something worth real money.

We saw this in Mt. Gox. When USD withdrawals failed and people suspected Mt. Gox was insolvent, the only way to get money out was to buy BTC and withdraw that. The Mt. Gox exchange rate inflated because everyone knew dollar balances on Mt. Gox were worthless.

If Bitfinex is insolvent and Tether fails, we'll probably see panic selling across the market as people start fearing Bitcoin is a giant tulip scam.

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

#263

Post by SwellJoe »

dnautics wrote: post #155
pentae wrote: post #142

Earlier quoted context omitted.

I can't wrap my head around this. Who is silly enough to sell bitcoins for 'worthless' Tether?

Why not. Sell your coin to tether to weather short term price dips and transfer between exchanges.... If tether is unsustainable long term, who cares?

If the fire that this smoke points to is really there, someday soon a lot of people are going to be left holding a bag of worthless tethers. That'd be a pretty bad day, wouldn't it? Kinda like being stuck in Mt. Gox during the end days.

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

#264

Post by jpmattia »

bcoates wrote: post #174
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…

Tether is how you short bitcoin -- it's hard to move USD out of exchanges, people are worried about a bitcoin (or "all cryptocurrencies") drop, so they move into tether hoping to buy back in after bitcoin goes down without having to do the expensive/difficult bitcoin-usd move. This assumes that the price of bitcoin will go down but the rest of the system (exchanges, tether, mining, etc.) will stay intact. As long as…

> Tether is how you short bitcoin ... so they move into tether hoping to buy back in after bitcoin goes down without having to do the expensive/difficult bitcoin-usd move.

"Shorting" means borrowing bitcoin and then selling the borrowed bitcoin. What you've described is simply selling bitcoin for USDT, unless I'm missing something.

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

#265

Post by mannykannot »

darawk wrote: post #210
notthemessiah wrote: post #163

Earlier quoted context omitted.

> Tether exists to normalize arb opportunities between exchanges. That's what it was created for. What things are created for and how they actually behave often diverge.

Sure. Not claiming it can't have secondary effects. But there's no argument been presented that establishes that it does.

Does not the claim, that Tether is not actually backed by dollars, also double as an argument that it would be difficult for it to behave as intended? - i.e. to the extent that the former may be correct, the latter is likely?

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

#266

Post by s17n »

aaavl2821 wrote: post #130
s17n wrote: post #113

Earlier quoted context omitted.

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…

The optimistic scenario is that Bitcoin becomes a currency like cash or a store of value like gold, in which case it will be valued in the trillions. Somewhat conservatively let's say that the market cap in these scenarios is $2 trillion USD. At today's ~200B market cap, this implies the market is giving 10 to 1 odds that bitcoin is going to zero.

Not sure how any of this is on its face "irrational".

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

#267

Post by komali2 »

dnautics wrote: post #155
pentae wrote: post #142

Earlier quoted context omitted.

I can't wrap my head around this. Who is silly enough to sell bitcoins for 'worthless' Tether?

Why not. Sell your coin to tether to weather short term price dips and transfer between exchanges.... If tether is unsustainable long term, who cares?

If it's 1-1 to USD, why not just swap coin for USD?

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

#268

Post by komali2 »

FireBeyond wrote: post #243
ncallaway wrote: post #202

Earlier quoted context omitted.

At the very least, inform the public about which banking institutions they are currently using ever since Wells Fargo dropped out. Contracting a reputable firm to conduct an in-depth audit and publicly releasing the results would also be a useful step.

And not refuse to name banks without an NDA signed and in place...

Did I misread the article, or weren't the banks they refused to name the banks involved in shutting them out of the US?

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

#269

Post by hammock »

runeks wrote: post #256
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…

> 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 Bitcoin exactly as the author contends may be happening with the current Tether. This purported mechanism needs a more thor…

Tether price is 80cents. Person trades bitcoin for tether. Person redeems tether for $1, profiting 20cents. Tether issues more (fraudulent, not backed) currency. Repeat.

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

#270

Post by komali2 »

panarky wrote: post #176
rsynnott wrote: post #116

Earlier quoted context omitted.

Bear in mind that this is bitcoin. People continued pumping money into mtgox for _months_ after it was clear to anyone who’d been paying attention that it was dead. And currently bitcoin’s in an unusually large bubble, so there are lots of people buying into it who’ve never previously had experience of it. I see ads for, basically, “get rich quick with bitcoin” every day now. The people clicking those are not the wor…

> Bear in mind that this is bitcoin It's still a market, so market logic should apply. > get rich quick with bitcoin I see the same shit with real estate. > sufficient people buying tethers at face value It's a market. Smart money can sell tethers. When there's information that all market participants know, the market price should reflect that information.

Why are markets inherently "smart?" And why is a crash not the market being "wrong?"

What even is the market? If it's the people in it, and they're smart, why did they buy subprime loan investment instruments and nuke the housing market and lose all their money?

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