Bitcoin’s Price Was Artificially Inflated Last Year, Researchers Say • Hacker News Board

Re: Bitcoin’s Price Was Artificially Inflated Last Year, Researchers Say

#121

Post by josu » Wed, Jun 13, 2018, 4:56 PM UTC

Jasper_ wrote: post #109

josu wrote: post #101

Earlier quoted context omitted.

Perspective. We didn't know it at the time, but looking back it's pretty obvious. Once the issue of the forks and the SegWit activation was cleared, the price rose relatively fast. And I'm talking in relative terms; it was undervalued relative to what happened next.

> Once the issue of the forks and the SegWit activation was cleared, the price rose relatively fast. Yes, we know the ship is unsafe because otherwise the front wouldn't have fallen off! We know the price rose. This article is suggesting that the price rose not because it was undervalued, but because it was manipulated upwards by people pumping it up with fake numbers.

No, that's not what the paper states.

>From March 1, 2017 to March 31, 2018, the actual Bitcoin price rises from around $1190 to $7000 for a 488% return. In contrast, the price series without the 87 Tether-related hours ends at around $4100, a 245% rise

>These 87 events account for less than 1% of our time series (over the period from the beginning of March 2017 to the end of March 2018), yet are associated with 50% of Bitcoin’s compounded return

They don't claim that all the price increase is correlated with Tether, but that it was certainly a big factor.

Re: Bitcoin’s Price Was Artificially Inflated Last Year, Researchers Say

#122

Post by john_moscow » Wed, Jun 13, 2018, 4:57 PM UTC

kgwgk wrote: post #28

Today Matt Levine talks about this paper in his daily column: https://www.bloomberg.com/view/articles/2018-06-13/judge-rul... "of these two explanations— 1) Bitcoin’s rapid and sustained rise is due to the fact that it satisfies a real economic need in an elegant way, and people have responded to that; or 2) Bitcoin’s rapid and sustained rise is due to a magical fountain of fake dollars that everyone just decided to…

I'd say there's a simpler explanation. Bitcoin has a limited predictable supply, so its price is mostly a function of the demand. And demand correlates with expectations, that typically follow the hype cycle [0]. I'm not sure how much someone managed to single-handedly manipulate the price, but the plain old human psychology, FOMO and the positive feedback loop for media writing about bitcoin demand definitely played their role. All by the book really.

[0] https://en.wikipedia.org/wiki/Hype_cycle

Re: Bitcoin’s Price Was Artificially Inflated Last Year, Researchers Say

#123

Post by Nursie » Wed, Jun 13, 2018, 4:58 PM UTC

deltateam wrote: post #54

Nursie wrote: post #43

Earlier quoted context omitted.

> IF current cryptocurrency owners are storing value in Tether so they they don't lose money, then more Tether's should be printed. Why ? Tether is supposed to be printed when (and only when) new dollars are given directly to them. If cryptocurrency owners want to store value in tethers, they must buy existing tethers with their cryptocurrency. That's how this is supposed to work. If more tethers are printed to fulfi…

okay, then for your case only the ELSE IF is important.

For my case?

Do you not mean "for the claims made by tether on their homepage to be true"?

Re: Bitcoin’s Price Was Artificially Inflated Last Year, Researchers Say

#124

Post by ComradeTaco » Wed, Jun 13, 2018, 4:58 PM UTC

captainbland wrote: post #110

kgwgk wrote: post #28

Today Matt Levine talks about this paper in his daily column: https://www.bloomberg.com/view/articles/2018-06-13/judge-rul... "of these two explanations— 1) Bitcoin’s rapid and sustained rise is due to the fact that it satisfies a real economic need in an elegant way, and people have responded to that; or 2) Bitcoin’s rapid and sustained rise is due to a magical fountain of fake dollars that everyone just decided to…

In either of these situations it seems like hodling until victory pays off. The real loser is, well, the planet as the network continues to consume more and more power.

Bitcoin could go the way of any number of other cyptos; back to zero.

In any case, nobody uses Bitcoin as a currency because it's logistically harder for 99.9% of people, and nobody uses it as a store of value because its insanely volitale. Bitcoin is really just a speculative asset.

Re: Bitcoin’s Price Was Artificially Inflated Last Year, Researchers Say

#125

Post by fatjokes » Wed, Jun 13, 2018, 4:59 PM UTC

spiorf wrote: post #79

Donzo wrote: post #74

Earlier quoted context omitted.

Real US Dollars have a very large arsenal with unimaginable destructive powers propping up their value. The dollars may be fake but the man with the gun who is standing behind them is very real.

This is the internet, and those weapons can't fire down here. Try, instead, to delete a two week old transaction from the bitcoin blockchain. You will find that even with military-sized funding, you can't. That's what is backing up bitcoin's value

Heh, reminds me of the time Anonymous tried to fight the Mexican drug cartels, thinking "this is the internet, and those weapons can't fire down here."

The cartels found one poster in a local internet cafe. They did their cartel thing. I didn't hear any more about that fight.

Re: Bitcoin’s Price Was Artificially Inflated Last Year, Researchers Say

#126

Post by thisisit » Wed, Jun 13, 2018, 5:00 PM UTC

craigc wrote: post #56

thisisit wrote: post #46

Earlier quoted context omitted.

> The math regarding Bitcoin’s price increase is actually pretty sound, and I encourage anyone who disagrees to read this article: https://medium.com/the-crypto-times/why-is-everyone-investin... . The article doesn't prove the math is sound except quote some people about price prediction and talk about how pricey bitcoin will get because population, gold market size etc. And then it also misses why people don't inves…

> I am sure many said something similar about housing prices in 2005. The difference is that the housing prices were clearly in a bubble and banks were intentionally packaging subprime mortgages that they knew were bad and selling them as a low risk investment. This is much much different than Bitcoin. I would argue that Bitcoin is the only asset class that is not currently in a bubble. > The article doesn't prove th…

What you are quoting about banks and bubbles is all in hindsight. At that time everyone and their grandmother thought real estate could only go up.

So, if you have data to backup the fact that bitcoin is not in a bubble, please show that. Until then it is just your gut feeling nothing more.

> What gives gold its value? It is not that it is used in jewelry.

But statistics disagrees with this point:

https://www.statista.com/statistics/274684/global-demand-for...

I haven't calculated but quick eyeballing tells me jewelry beats investment by a far far margin.

Additionally, gold for the most part is a risk-off (safe harbor) asset. As in people rush to gold when markets are crashing because it is supposed to be divisible etc. On the other hand people rush (and encouraged no less) to put money in bitcoin when markets are booming. So my gut feeling is that once we hit a rock in these booming times and S&P drops people will still prefer gold. But let's see how bitcoin performs during a market crash before we talk about it's investment potential in the same breath as gold.

Re: Bitcoin’s Price Was Artificially Inflated Last Year, Researchers Say

#127

Post by Donzo » Wed, Jun 13, 2018, 5:01 PM UTC

spiorf wrote: post #79

Donzo wrote: post #74

Earlier quoted context omitted.

Real US Dollars have a very large arsenal with unimaginable destructive powers propping up their value. The dollars may be fake but the man with the gun who is standing behind them is very real.

This is the internet, and those weapons can't fire down here. Try, instead, to delete a two week old transaction from the bitcoin blockchain. You will find that even with military-sized funding, you can't. That's what is backing up bitcoin's value

Why are you interpreting my comment as somehow anti-btc? Everything isn't binary.

Re: Bitcoin’s Price Was Artificially Inflated Last Year, Researchers Say

#128

Post by FireBeyond » Wed, Jun 13, 2018, 5:02 PM UTC

zaroth wrote: post #97

Jtsummers wrote: post #65

Earlier quoted context omitted.

From the Tether FAQ: > The Tether Platform is fully reserved when the sum of all tethers in circulation is less than or equal to the balance of fiat currency held in our reserve. That is to say, they offer no guarantee that 100% of USDT in circulation are backed by USD at any given moment.

Not that I would trust them, but literally the next sentence; Through our Transparency [1] page, anyone can view both of these numbers in near real-time. [1] - https://wallet.tether.to/transparency

And right beneath that,

"Our reserve account is regularly audited".

By whom? Where can anyone see these audits, for transparency's sake?

Re: Bitcoin’s Price Was Artificially Inflated Last Year, Researchers Say

#129

Post by FabHK » Wed, Jun 13, 2018, 5:03 PM UTC

Animats wrote: post #116

bhouston wrote: post #67

Earlier quoted context omitted.

My theory is that it was initially not backed fully but after the fact it became backed. A billion or two dollars is not that much money to eventually get, especially if you also hold a lot of valuable BTC as a result of this manipulation. Basically the unbacked tether allowed them to purchase BTC and with the great price increases that become worth way more than the unbacked tether allowing them to leverage that to…

How can it "become backed"? Anyone who buys Tether expects to get Tether tokens. If the issuers created Tether tokens from nothing, there's no way they can become backed. Where would the money come from? Tether isn't redeemable, anyway. You can't go to the Tether issuers and demand a dollar for your Tether token. Financial Times: Meanwhile, the supply of Tethers rapidly ballooned, from $50 million to $2.2 billion. Th…

> How can it "become backed"?

1. Create 1m Tether out of thin air (unbacked).

2. Use them to buy 1000 BTC (when the price was 1000$).

3. BTC Price goes up to 10,000$.

4. Sell 1000 BTC for $10m. Keep $9m, and put $1m into a bank account to "back the tether".

Re: Bitcoin’s Price Was Artificially Inflated Last Year, Researchers Say

#130

Post by paulgb » Wed, Jun 13, 2018, 5:03 PM UTC

gph wrote: post #35

paulgb wrote: post #30

Earlier quoted context omitted.

Say you print $100M USDT and do this, and the market moves up 10%, and you get lucky enough to find an OTC buyer willing to give you the market price. You rake in 110M for printing 100M. This is still a money printing business model, the market manipulation is just icing on the cake.

But printing the money is only useful in that it manipulates the market price to go that 10% higher which is where you make the profits. If they printed that money and everyone found it worthless and the market didn't response they wouldn't have a business model. Edit: I guess I should say that's the conjecture of those saying Tether was created purely for profit based on market manipulation. I don't have an inside k…

> But printing the money is only useful in that it manipulates the market price to go that 10% higher which is where you make the profits.

If you print money you have free money. That's pure profit. Anything else is just a bonus.