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

nytimes.com

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

#231

Post by gtlondon »

binarymax wrote: post #147
Retric wrote: post #105

Earlier quoted context omitted.

Fraud seems to be easier than you might think. For comparison Bitcoin is about the size Madoff was dealing with. Bitcoin is still loose change in terms of the global economy.

Too bad it isn't also loose change in terms of global energy use :(

Total myth.

Nobody has ever formulated an accurate prediction without gaping holes in the logic.

Also, even with their exaggerated calculations is still a tiny, tiny fraction of that used by traditional banking. (and not even on the same scale as internet use).

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

#232

Post by the_cat_kittles »

john_moscow wrote: post #122
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…

i just want to tip my hat to such a succinct, and in my view accurate summary.

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

#233

Post by makomk »

craigc wrote: post #27

I am fully prepared to receive negative points for this comment, but I do not believe there is anything new here. This narrative has been pushed by the media for almost a year now. The article even claims: > This method is not conclusive, but it has helped government authorities and academics spot suspicious activity in the past. I haven’t read the entire 66 page report yet, but assume for a second that the relations…

Yeah, this narrative has been around for a while and there have always been two major problems with it:

- If Bitfinex was buying Bitcoins on their own exchange with fake USD in order to push the price up, they wouldn't do so by printing Tether because USD on Bitfinex is not backed by Tether - it's supposed to be backed directly by USD in Bitfinex-owned bank accounts, with Tether only being minted as necessary to handle Tether withdrawals. (Someone even found externally-visible evidence that there wasn't enough Tether in existence to cover the Bitfinex USD balances - naturally, this was seen as further proof it was a scam.)

- During the period in question, it was Coinbase/GDAX which was pushing the price up, and that exchange never accepted Tether. The price of Bitcoin on Bitfinex and the other exchanges was pretty much always lower than GDAX, or to put this another way, Tether USD was worth more than its face value during the time when Bitfinex was supposedly printing it to push the Bitcoin price up. This is the exact opposite of what should have happened if they were doing so.

It looks, at a quick glance, like this still has the same problems.

Edit: this is more clever than the previous arguments, in that it also uses evidence from round-number trading biases and odd end-of-the-month behaviour of the kind you'd expect if Bitfinex had to make the Tether shortfall disappear for their monthly audit, and also examines outflows of Tether from Bitfinex to other exchanges. (The round-number stuff is less convincing since the divergence between exchanges and even between currencies on the same exchange was particularly bad around round numbers.)

They also attempted to test the hypothesis that the Tether printing was a reaction to demand by comparing the amount of printing with the Tether-USD price. Unfortunately, they used the price on the Kraken exchange which had almost no volume or market depth compared to the potential Bitfinex-Bitcoin-GDAX route. Basically, no-one actually used it, and so it didn't accurately represent how much it'd cost to actually exchange any substantial amount of Tether to USD or vice-versa. It's entirely unsurprising that it wasn't correlated with anything of note.

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

#235

Post by craigc »

hluska wrote: post #214
craigc wrote: post #27

I am fully prepared to receive negative points for this comment, but I do not believe there is anything new here. This narrative has been pushed by the media for almost a year now. The article even claims: > This method is not conclusive, but it has helped government authorities and academics spot suspicious activity in the past. I haven’t read the entire 66 page report yet, but assume for a second that the relations…

Good comment, I just have one picky edit (attached to a story I enjoy). You wrote, "during a bull market, when the price started to decline." It's the opposite. Bull markets are when price starts to increase. Bear markets are when price starts to decline. Years ago, I had an amazing macroeconomics professor named Alex Kelly. Dr. Kelly was an amazing educator with an incredible sense of humour, a penchant for telling…

Oh I am well aware of the difference. I meant what I said though. During a bull market it is smart to buy up the dips. During a bear market it is smart to sell the rallies.

For example last year there was a point during the bull market when the price dropped from $5k to $3k and that was one example of “when the price started to decline”.

Thanks for the story!

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

#236

Post by tomkarlo »

craigc wrote: post #181
tomkarlo wrote: post #166

Earlier quoted context omitted.

It's an interesting question, but rationally it seems like BTC should decline during a market crash / recession. It's arguably a way to store value as other assets decline, but given that it has no yield, the rational thing to do after that decline is over would be to cash in your BTC and use it to purchase those other assets that have declined, such as real estate, bonds or stocks, and now have either attractive yie…

I wrote a bit about my opinion in a reddit thread a while back. It is here if you are interested, but a fair warning it will probably be quite an unpopular opinion with the hacker news crowd: https://www.reddit.com/r/BitcoinMarkets/comments/7xq7mp/comm...

The problem isn't that it's unpopular, it doesn't seem (from the post) like you have some kind of underlying economic or financial principle supporting your argument.

* why would it have an inverse relationship with other assets? It's not a short. It's still valued based on purchase price vs sale price, adjusted for risk. If risk has risen and nothing has changed about purchase or sale price, why would it rise?

* if Bitcoin was at a market-clearing price before a downturn, and other assets are now much cheaper, why would BTC then be comparatively more attractive in terms of expected investment returns?

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

#237

Post by [deleted] »

joe_the_user wrote: post #210
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…

Creating billions of dollars’ worth of value with a ridiculous perpetual-motion fake-dollar-printing machine is a real innovation. Creating money by printing is not a new thing. Making people believe that the money you've created with whatever hocus-pocus is real and that investment X will just spew money indefinitely is not at all a new thing. It is one very standard old thing. That by itself doesn't prove bitcoin i…

[deleted]

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

#238

Post by achompas »

joe_the_user wrote: post #210
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…

Creating billions of dollars’ worth of value with a ridiculous perpetual-motion fake-dollar-printing machine is a real innovation. Creating money by printing is not a new thing. Making people believe that the money you've created with whatever hocus-pocus is real and that investment X will just spew money indefinitely is not at all a new thing. It is one very standard old thing. That by itself doesn't prove bitcoin i…

> Making people believe that the money you've created with whatever hocus-pocus is real and that investment X will just spew money indefinitely is not at all a new thing.

Across so many people, and at BTC's market cap though? I think that's unprecedented. Penny stocks or pyramid schemes, sure, but they never affect this many people or hit 12-digit valuations.

(By the way, fiat money doesn't count as an example because it is backed by a variety of government support structures (which are very much not hocus-pocus) and it does not appreciate in value indefinitely relative to the cost of goods.)

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

#239

Post by JumpCrisscross »

john_moscow wrote: post #122
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…

> Bitcoin has a limited predictable supply

Lots of things have predictably limited supplies. Most of them don't go through a hype cycle.

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

#240

Post by jandrese »

yifanl wrote: post #69
craigc wrote: post #41

Earlier quoted context omitted.

But the article and report do not prove that Tethers are not backed by USD. In fact, it constantly says, “If Tether is not fully-backed by dollars”. All it definitively claims is that Tethers were used to buy Bitcoin when the Bitcoin price fell last year.

Of course they don't, the only reasonable way to prove such a claim would be to make a full audit of Tether. Which as of the moment is out of the cards due to lack of a willing auditor.

I don't think there is a lack of auditors that would take the job. I think there is a lack of auditors that would release the report that Tether wants.
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