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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

#271

Post by nerfhammer »

Cyberdog wrote: post #244
empath75 wrote: post #180

Earlier quoted context omitted.

Markets are wrong all the time . See the dotcom crash, the 2008 crash, etc.

So a crash is a market being wrong?

A crash is a market realizing it had been wrong about something, yes.

Or, a "crash" as defined a dramatic plunge rather than a downturn over time is usually some kind of feedback loop where prices falling creates expectations that prices will drop even further and so on, often if the market is mostly driven by greater-fool-theory herd behavior.

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

#272

Post by sp821543 »

csomar wrote: post #239
sp821543 wrote: post #206

Earlier quoted context omitted.

Same TOS

I'm having trouble locating it but it is the same for Gdax except that it is individual market makers who make the spread and not coinbase itself.

Thank you for the clarification.

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

#273

Post by exelius »

darawk wrote: post #123
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.

It only works that way if you trust Tether and the exchanges. Given how shadowy the big ones are, I'm not sure that's a good idea.

It appears this kind of arbitrage is designed to push up the price of BTC -- as long as the price keeps going up, people aren't going to withdraw. Once we start to see a sell-off though, the exchanges will stop being able to pay in USD pretty quickly.

My thought is that every time Tether/Bitfinex sees a sell-off happening (which, being an exchange, they can) they issue a bunch of new Tether, push the price higher, and take the money of some more suckers entering the market by selling BTC. If true, this is basically just a ponzi scheme.

Without evidence to the contrary, this is the safest assumption at least. I cashed out a few days ago regardless; but I do think there's a big crash coming. I don't think cryptocurrency is inherently bad, just that Bitcoin is all hype.

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

#274

Post by panarky »

s17n wrote: post #259
panarky wrote: post #246

Earlier quoted context omitted.

Housing prices didn't crash after many years of vastly disproportionate negative sentiment. Housing prices crashed after most of the negative voices capitulated and bought into the speculative fervor, until there were no more buyers. Today, nearly everyone's gut instinct is that cryptocurrencies are scams, frauds, bubbles, Ponzis and tulips. Popular sentiment has been negative for years. How will this thing unravel b…

Actually, housing crashed when lots of people who had bought housing on credit turned out to be unable to service the debt. I don't think there's a similar scenario with bitcoin. On the other hand, a large secular demand will always exist for housing. The same is not true for bitcoin.

> Actually, housing crashed when lots of people who had bought housing on credit turned out to be unable to service the debt.

For completeness, "housing crashed when lots of people who had bought housing on credit turned out to be unable to service the debt and couldn't sell to someone else for more than they paid"

That italicized part is what caused the downward spiral, and that's the part that's relevant to Tethers and cryptocurrencies.

Most people with worries about escalating real estate prices had capitulated and bought in before the crash. With no more buyers, the self-reinforcing cycle went into reverse.

With cryptocurrency, the vast majority of wealthy people already think it's a scam, bubble, Ponzi or fraud. Unclear how a bubble can form when most people think it's a bubble.

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

#275

Post by aaavl2821 »

s17n wrote: post #266
aaavl2821 wrote: post #130

Earlier quoted context omitted.

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".

the irrational part is 1) an overestimation of the likelihood of bitcoin becoming worth $2 trillion in a reasonable timeframe (1 in 10 odds of that happening!?) and 2) underweighting the value of large changes in low probability levels: based on the above back of the envelope math, you ascribe 10 to 1 odds of bitcoin failing. the math that supports that is so imprecise as to be almost nonexistent, but the details are important: if the odds of it succeeding were 1%, or 0.1%, would you still invest? what evidence do you have that this number should be 10 to 1 rather than one of the above? have you given any thought to this, or to what probability of failure would make you get out of bitcoin?

have you thought through the likelihood that one of the binary scenarios you describe doesnt actually happen, but in fact that a gray area wins out: for example, bitcoin may continue to exist as it does now, as a fringe speculative asset class with vaguely defined but high potential. it may stabilize into the go-to currency for money laundering, funding illegal activities, etc. it may serve as a stable currency for a subset of the digital economy that just likes the libertarian appeal of bitcoin. if you look at where bitcoin is now, and try to draw a straight line to the future, it seems to me that youd intersect one of these scenarios rather.

if you havent thought these things through, but still invest, you are being irrational

edit: maths

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

#276

Post by goialoq »

heptathorp wrote: post #238
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…

Can anyone explain how this "arbitraged feedback loop" allegedly works? Arbitrage causes prices to converge, not spiral up or down.

Tether artificially inflates the price of tether to $1. It's "tethered"

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

#277

Post by wils124 »

panarky wrote: post #170
querulous wrote: post #136

Earlier quoted context omitted.

the market is extremely illiquid. even if you know it's a scam you have few options if you want to cash out. you can trade bitcoin for cash balances at various exchanges but actually withdrawing those balances is subject to miniscule daily/monthly withdrawal limits and if there's a run on the market those exchanges will almost certainly collapse. there's no significant over the counter market. you can swap your bitco…

> the market is extremely illiquid Trading is dominated by smart money -- whales, arbitrageurs, etc. Coinbase may have a lot of newbies buying 0.002 BTC, but these aren't the ones trading Tether. Whales and arbitrageurs have many facilities for withdrawing national currencies. They've completed the AML/KYC process. They have access to multiple banks in multiple countries. If the smart money knows Tethers are fraction…

I don't understand how people can confidently characterize the nature of crypto trading volume. How do you know where the bulk of trading volume is coming from? There's nothing whatsoever stopping wash trades. With sufficient capital you can massively manipulate trading volume.

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

#278

Post by panarky »

bcoates wrote: post #177
panarky wrote: post #170

Earlier quoted context omitted.

> the market is extremely illiquid Trading is dominated by smart money -- whales, arbitrageurs, etc. Coinbase may have a lot of newbies buying 0.002 BTC, but these aren't the ones trading Tether. Whales and arbitrageurs have many facilities for withdrawing national currencies. They've completed the AML/KYC process. They have access to multiple banks in multiple countries. If the smart money knows Tethers are fraction…

To put downward pressure on the exchange rates the smart money would have to be holding tons of tether to liquidate in the first place -- is there any reason to believe they are?

Who holds Tethers, the Reddit guy who just bought $200 of BTC on Coinbase? No, it's the guys trading large blocks on exchanges.

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

#279

Post by heptathorp »

hammock wrote: post #269
runeks wrote: post #256

Earlier quoted context omitted.

> 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.

If someone sells bitcoin for tether (because they want to redeem the tether and collect 20 cent profit) the price of bitcoin goes down, not up.

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

#280

Post by Fnoord »

goialoq wrote: post #110

Why does HN have an active discussion of every rehashed ("hashed", hah!) crypto ponzi/pyramid/fraud scheme that flies, but not every new MLM? There were always be scammers peddling garbage backed by lies. It's getting boring.

> Why does HN have an active discussion of every rehashed ("hashed", hah!) crypto ponzi/pyramid/fraud scheme that flies, but not every new MLM? > There were always be scammers peddling garbage backed by lies. It's getting boring.

What's even more boring is posts like yours which add to the meaningless noise. If you don't enjoy a subject on an article, don't bother reading it. There are tools which let you alter the content on HN such as [1] [2]

[1] http://www.taggernews.com/

[2] http://diethn.gq/

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