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Why you can’t cash out part 1: Bitcoin’s “price” is largely fictional

davidgerard.co.uk

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Re: Why you can’t cash out part 1: Bitcoin’s “price” is largely fictional

#121

Post by matthewbauer »

patrickg_zill wrote: post #47
dragonwriter wrote: post #35

Earlier quoted context omitted.

Bitcoin is not fiat; a fist currency is one whose value is based on its backing by a government (“fiat” specifically refers to the authoritative dictate of the State giving the currency value.)

The FT lexicon says: Paper money or coins of little or no intrinsic value in themselves and not convertible into gold or silver, but made legal tender by fiat (order) of the government. [1] Fiat money is an intrinsically worthless object, such as paper money, that is deemed to be money by law. ---- I will say that when Japan agreed to accept payment of taxes, with Bitcoin, they deemed it to be money. Probably I could…

> I will say that when Japan agreed to accept payment of taxes, with Bitcoin, they deemed it to be money.

I'm really interested in figuring out if this is true. What source is saying this? From what I can tell some taxes might apply to Bitcoin in Japan but in no way can you actually "pay" taxes in Bitcoin (you can obviously convert it to Yen first though).

Re: Why you can’t cash out part 1: Bitcoin’s “price” is largely fictional

#122

Post by sytelus »

josephagoss wrote: post #102

You can cash out Bitcoin and the price is actually very accurate. The money I see in my bank account is real I can assure you of that. Also I know friends that cash out six figures at a time and the price they get is within less than 1% difference to the last sell price. The number is accurate enough for most orders under $10,000,000. Has this person actually traded Bitcoin? You might not be able to sell a large orde…

Article author actually makes a great point and it stands regardless of your ability to cash out within 1%. Big investors on current markets can whip out huge profits for themselves by using techniques such as front running, wash trades, willybot, spoofing etc. Exchanges are not even prohibited from doing their own secret trades and using their own internal database and full knowledge of all other players.

If you are a trader with deep pockets, you should immediately realize all above established techniques (which is illegal on stock market) can generate you huge profits in no time in crypto market. Big players would literally have all the strings to play the market according to their will. Currently prices are 100X higher and 1% difference seems irrelevant but in mature markets 1% move is news worthy event.

I think its also worth pointing out that less than 1000 entities owns 40% of the bitcoins. I wouldn't be surprised if set of entities are willing to burn short term cash to inflate the prices just to attract other large scale investors in the game. This is like burning tinder to start the fire. The end game usually is massive cash outs as soon as fire has started. Typically this would kill the fire but in some cases it may keep going. In any case, the bad news to small investors is that expect to get killed at any point in time when your big brother decides to cash out. Until then, party on.

Re: Why you can’t cash out part 1: Bitcoin’s “price” is largely fictional

#123

Post by CaptainZapp »

davidgerard wrote: post #10
baddox wrote: post #5

Don’t all of the complaints about exchange rate and market cap apply to virtually any other item that is traded? Spread exists in forex and stock markets. Market cap is extremely commonly cited for stock markets. Sure, the effects may be stronger in Bitcoin due to its higher volatility, lower volume, etc., but that should be the author’s argument, instead of “if you don’t know the basic Finance 101 definitions of som…

(author here) This is targeted to the general public, who do actually need Finance 101, because they really don't know what they're getting lured into by the mindlessly positive articles and headlines in the mainstream press. Mostly written by people who don't understand either. I actually consider it seriously unethical to market cryptos as an investment to retail investors - they just do not understand the insane l…

  Market cap makes more sense for a stock, because it's in the range of the value for a company, and a whole company is something that does get bought and sold. This idea doesn't make any sense for a crypto.
I always wondered about that. Especially since people (and hucksters, trying to sell their wares) refer to Bitcoins as crypto currency.

I'm not a financial wiz kid, but market cap for a currency doesn't make any frigging sense to begin with.

Sure, you can count the amount floating around for a currency on various levelse (ususally expressed in mx) but I never felt that it makes sense to define this as "market cap".

The whole situation really reminds me of the Dutch tulip mania (https://en.wikipedia.org/wiki/Tulip_mania, the first speculative bubble in history).

At least with your "investment" there you were able to plant pretty flowers. Here, I fear, that a lot of small investors will get burned very, very badly.

Re: Why you can’t cash out part 1: Bitcoin’s “price” is largely fictional

#124

Post by aryehof »

A normal corporate stock price and hence market capitalization, is entirely a function of its actual book value (assets minus liabilities) and a factor representing expectations of future profits.

Bitcoins price and hence market capitalization, is entirely based on speculative buying and selling. It has no value if there are no speculative buyers, and that day will come.

What really saddens me is that the noble aspirations of Bitcoin being a decentralized, transparent medium of exchange and store of value, have been so totally crushed in the face of crazy bubble scale speculation.

Re: Why you can’t cash out part 1: Bitcoin’s “price” is largely fictional

#125

Post by bufferoverflow »

This article is pure FUD with lies.

1) The spread is not "plus or minus $500", it's a lot less. See for yourself:

http://bitcoinity.org/markets/bitstamp/USD

At this particular moment the spread is $23 on Bitstamp, zero on GDAX, $11 on Bitfinex, zero on Kraken, zero on it it (where "zero" is something under a dollar, there's not enough precision to display it).

2) Yes, you can cash out, a lot. There are dozens of huge exchanges where the daily volume is in billions.

https://coinmarketcap.com/currencies/bitcoin/#markets

For instance, Bitfinex USD/BTC 24-hr volume is $1.2 billion.

And that's just one currency pair on one exchange.

Re: Why you can’t cash out part 1: Bitcoin’s “price” is largely fictional

#126

Post by rspeer »

patrickg_zill wrote: post #47
dragonwriter wrote: post #35

Earlier quoted context omitted.

Bitcoin is not fiat; a fist currency is one whose value is based on its backing by a government (“fiat” specifically refers to the authoritative dictate of the State giving the currency value.)

The FT lexicon says: Paper money or coins of little or no intrinsic value in themselves and not convertible into gold or silver, but made legal tender by fiat (order) of the government. [1] Fiat money is an intrinsically worthless object, such as paper money, that is deemed to be money by law. ---- I will say that when Japan agreed to accept payment of taxes, with Bitcoin, they deemed it to be money. Probably I could…

The US government considers bitcoin a commodity. You will not find examples of them considering it a currency.

Re: Why you can’t cash out part 1: Bitcoin’s “price” is largely fictional

#127

Post by log_base_login »

inimino wrote: post #62
log_base_login wrote: post #59

Earlier quoted context omitted.

Thank you for the explanation. What I find interesting, in addition to your description of the price elasticity being at issue, is precisely _what_ a bitcoin represents. In fact, what _all_ cryptocurrency represent, to my knowledge...and that is, some increasingly unbreakable cryptographical mechanism by which information may be passed at ever more secret rates. The question I have is: precisely who is in the market…

The "crypto" in bitcoin is about being able to know that the copy of the blockchain you have is indeed the "authentic", consensus blockchain. It has nothing to do with keeping anything secret, as the entire blockchain is literally as public as it is possible for data to get.

Thank you for clarifying that for me.

I recall reading some article about how, when mining for bitcoin (for example), what was really being mined are progressively larger prime numbers, or scientific data, or some such data requiring lots of computation.

Isn't there something of real value being mined? If not, what is being done when people _mine_ bitcoins?

Re: Why you can’t cash out part 1: Bitcoin’s “price” is largely fictional

#128

Post by omarforgotpwd »

josephagoss wrote: post #102

You can cash out Bitcoin and the price is actually very accurate. The money I see in my bank account is real I can assure you of that. Also I know friends that cash out six figures at a time and the price they get is within less than 1% difference to the last sell price. The number is accurate enough for most orders under $10,000,000. Has this person actually traded Bitcoin? You might not be able to sell a large orde…

I think the point he’s making is that everybody could not cash out at the listed price at once if something were to happen that made holding bitcoin undesirable (such as say, a possible crack for their elliptic curve crypto implementation). However, the same is true for banks which only keep 10% of deposits. Bank deposits are FDIC insured up to $250,000 though.

Re: Why you can’t cash out part 1: Bitcoin’s “price” is largely fictional

#129

Post by PeterisP »

log_base_login wrote: post #127
inimino wrote: post #62

Earlier quoted context omitted.

The "crypto" in bitcoin is about being able to know that the copy of the blockchain you have is indeed the "authentic", consensus blockchain. It has nothing to do with keeping anything secret, as the entire blockchain is literally as public as it is possible for data to get.

Thank you for clarifying that for me. I recall reading some article about how, when mining for bitcoin (for example), what was really being mined are progressively larger prime numbers, or scientific data, or some such data requiring lots of computation. Isn't there something of real value being mined? If not, what is being done when people _mine_ bitcoins?

Mining is a "proof of work" event - in essence, you generate a random value so that a cryptographic hash total block would end with a particular number of zeroes. Such a block + hash is trivial to verify but very time/effort consuming to create, thus proving that you spent a large amount of (otherwise useless) work to "mine" that block.

Having a large amount of work required is what prevents a malicious actor from tampering with the chain, since doing so requires doing as much work as all the other miners together.

Re: Why you can’t cash out part 1: Bitcoin’s “price” is largely fictional

#130

Post by krrrh »

omarforgotpwd wrote: post #128
josephagoss wrote: post #102

You can cash out Bitcoin and the price is actually very accurate. The money I see in my bank account is real I can assure you of that. Also I know friends that cash out six figures at a time and the price they get is within less than 1% difference to the last sell price. The number is accurate enough for most orders under $10,000,000. Has this person actually traded Bitcoin? You might not be able to sell a large orde…

I think the point he’s making is that everybody could not cash out at the listed price at once if something were to happen that made holding bitcoin undesirable (such as say, a possible crack for their elliptic curve crypto implementation). However, the same is true for banks which only keep 10% of deposits. Bank deposits are FDIC insured up to $250,000 though.

Banks are also backed by the fed which is there to prevent failures, and the government through too big to fail. Even in the case of the Bank of the United States (which despite its name was just an ordinary bank) whose failure in 1930 kicked off the bank panics of the 1930s, when it was liquidated the depositors received 92.5% of their deposits.

Most failures of crypto exchanges have resulted in a total or near-total loss for depositors, and triggered rushes to the exit on other exchanges.

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