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

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

#341

Post by pandaman » Thu, Jun 14, 2018, 4:39 AM UTC

DennisP wrote: post #291

joe_the_user wrote: post #283

Earlier quoted context omitted.

Indeed, though states have boots and guns on the ground to a last resort backup the value of their currency (including protecting against competition). So I'd pick "Fed-coin" as the last one to go down.

I've been reading up lately on how fiat money systems work, and it doesn't seem to me that boots and guns really help. Certainly there have been countries with plenty of soldiers who failed to maintain the value of their currency. You have to pay taxes in the local currency, but if the currency crashes you just have to pay a higher nominal amount of taxes. You can outlaw competing currencies, but you can only do that…

Fiat currency is essentially the government's IOUs denominated in themselves e.g. holding a dollar note entitles you to one dollar from the government.

It only has value because a government can ask others to settle part of this debt or take their property otherwise. Naturally, the amount of debt a government can issue this way is limited by the value of property it can threaten.

Zimbabwe, for example, cannot reach much of valuable property despite having some guns and boots. But the USA is a very different matter.

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

#342

Post by achompas » Thu, Jun 14, 2018, 4:51 AM UTC

copenja wrote: post #285

achompas wrote: post #238

Earlier quoted context omitted.

> 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 becaus…

That's an interesting question. Bernie Madoff’s Ponzi scheme is estimated to have lost clients $65 billion. The Bitcoin market cap is nearly double at $107 billion. But Bernie Madoff's $65 billion is all real dollars paid into the scheme. Bitcoin market cap doesn't track the amount of the money that has been paid into the current Bitcoin market. It simply estimates the current market price, then multiplies that numbe…

> But, I think it is fair to say that the Madoff scheme is in the same ballpark of Bitcoin.

I was going to comment on this, but I was blocked by my time manager. :(

Current market cap of BTC, at $111M, puts Madoff's scheme at about half of BTC. Compared to BTC's peak in 2017, Madoff's $$ is about a quarter. (supply * rough BTC price of $20,000).

Additionally, Madoff's scheme affected 4800 clients. [0] The amount of users on Coinbase as of late 2017 is about 2400x that amount [1]. So while amount "paid in" is lower, market cap is much higher. The affected userbase is also many multiples higher than Madoff's clientele.

So, my point: the difference in $$ is higher, and the difference in userbase is far higher.

More practically, note: we are comparing BTC to the largest grift in history. That's a lot of money.

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

[1] https://www.cnbc.com/2017/11/27/bitcoin-exchange-coinbase-ha...

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

#343

Post by achompas » Thu, Jun 14, 2018, 4:53 AM UTC

latchkey wrote: post #324

copenja wrote: post #285

Earlier quoted context omitted.

That's an interesting question. Bernie Madoff’s Ponzi scheme is estimated to have lost clients $65 billion. The Bitcoin market cap is nearly double at $107 billion. But Bernie Madoff's $65 billion is all real dollars paid into the scheme. Bitcoin market cap doesn't track the amount of the money that has been paid into the current Bitcoin market. It simply estimates the current market price, then multiplies that numbe…

Thank you. More people need to realize that market cap is meaningless in the context of crypto. It is just a multiplier of two numbers which makes it sound like a big number and thus interesting (which it is not). You explained it perfectly.

This horse has been beaten, but it trivializes the amount of money that entered late last year. I don't think it's all late money, but the money in BTC is not all "early" either.

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

#344

Post by jayd16 » Thu, Jun 14, 2018, 5:49 AM UTC

copenja wrote: post #285

achompas wrote: post #238

Earlier quoted context omitted.

> 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 becaus…

That's an interesting question. Bernie Madoff’s Ponzi scheme is estimated to have lost clients $65 billion. The Bitcoin market cap is nearly double at $107 billion. But Bernie Madoff's $65 billion is all real dollars paid into the scheme. Bitcoin market cap doesn't track the amount of the money that has been paid into the current Bitcoin market. It simply estimates the current market price, then multiplies that numbe…

As others have pointed out Madoff might not be a solid example as it was a single firm committing fraud vs the possibility of multiple actors abusing a bubble (and possibly committing fraud as well).

It might be closer to the abuse of sub-prime mortgages and mortgage-backed securities. Is feeding a bubble the same as pumping and dumping? Sure can be.

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

#345

Post by Nursie » Thu, Jun 14, 2018, 6:08 AM UTC

deltateam wrote: post #328

Nursie wrote: post #123

Earlier quoted context omitted.

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

no, not really Tether can already exist and be in circulation and people can be willing to buy it at a higher price from existing holders. In this event, Bitfinex/Tether needs to be willing to create more Tether, diluting the current supply to offset the greater demand and keep the peg. To me, it isn't important that "each Tether is backed by USD [in their bank account]", but they may accomplish it that way for consi…

> diluting the current supply to offset the greater demand and keep the peg.

Their peg is created explicitly by being 1:1, not by manipulating their supply. This is how they create trust that they aren't subject to market conditions or threatened by a run on redeeming their tokens.

To you it may not be important, but it's right there as a bold claim on their home page, and it's why they've been used.

Note that I did not say that their peg could not conceivably work without 1:1 backing, I said that their claims would be a lie. As are their claims to have been subject to frequent audits - they've never completed a single one.

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

#346

Post by cup-of-tea » Thu, Jun 14, 2018, 6:40 AM UTC

JumpCrisscross wrote: post #241

cup-of-tea wrote: post #217

Earlier quoted context omitted.

> Creating billions of dollars’ worth of value with a ridiculous perpetual-motion fake-dollar-printing machine is a real innovation. That's what modern banking is. 95% of money in use is created by the private banks themselves.

> 95% of money in use is created by the private banks themselves Through a highly-regulated process. We haven't had a bank run on regulated deposits since the FDIC came into being.

Have you never been to an ATM that has run out of cash? You can't make a run on the banks any more. They'll just tell you, sorry, they've run out of cash. You'll still be able to pay your bills and taxes using legal tender, though (bank dollars).

I've already told you the fact that 95% of money doesn't exist outside of the private banking system. What kind of regulation do you think is stopping everyone from wanting to get paper money for their entire life savings?

For those who don't immediately see this, just think for a moment how much of your income ever leaves the banking system. Do you get paid in paper money? Pay your rent in paper money? Did you buy your car with paper money? The answer to these questions for everyone is increasingly no.

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

#347

Post by mishad » Thu, Jun 14, 2018, 6:45 AM UTC

compcoffee wrote: post #85

Consultant32452 wrote: post #68

Earlier quoted context omitted.

I think banks have an equal and opposite position. Our debts are their assets. Inflation reduces the value of their assets.

> Our debts are their assets. Inflation reduces the value of their assets. And our assets are their debts.

So for states which have net debt position (including the US), it is to their advantage to have steady price inflation (i.e. currency value steadily being worth less and less in purchasing power), so that the debt is steadily reduced in "real terms" size. And this is in fact exactly what many/most governments seek to do, using a combination of fiscal policy levers, including issuing debt (government bonds) and also measures such as QE.

Note the "steady" in the above - part of the value of a fiat currency is in its price stability (which is linked/coupled to the confidence people have in it and in the issuing government).

In both direction (inflationary Vs deflationary) and in stability, this is markedly different from what is happening with BTC.

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

#348

Post by sireat » Thu, Jun 14, 2018, 7:11 AM UTC

ComradeTaco wrote: post #216

scj wrote: post #194

Earlier quoted context omitted.

I haven't used Bitcoin, and from what I've read I have two questions about it being a currency: If I attempted to buy an ice cream cone with Bitcoin, will the money be transferred before the ice cream melts? What costs more, the transaction fees or the ice cream cone?

> If I attempted to buy an ice cream cone with Bitcoin, will the money be transferred before the ice cream melts? It will not. >What costs more, the transaction fees or the ice cream cone? There have been times where the average transaction cost was about $20. It's hovering around $0.80 cents now, to the best of my knowledge. So it depends on the market. I belief that the current strategy is to convince others that b…

Bitcoin as a great transaction medium WAS the strategy in the early years. This was the big promise.

As price and transaction fees rose the transaction medium for everyday things(like me paying for Namecheap hosting/domains in BTC in 2013) went away.

Many big vendors such as Steam actually stopped accepting BTC directly(or through 1 step processor such as Bitpay). It was too much trouble/risk and annoyed customers.

Cheaper/safer/more convenient than bank transfers. That Bitcoin promise has not been fulfilled.

SEPA is way cheaper/more convenient/safer than Bitcoin in Europe. Even in countries with troubled banking systems such as Venezuela, it is not normal to pay for regular items with BTC.

So Bitcoin "pivoted" to store-of-value strategy. Promise that offchain solutions like LN will handle transactions "any day now".

Hilariously Bitcoin.org just put back the low-fees part. https://news.bitcoin.com/bitcoin-org-reverts-back-to-fast-an...

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

#349

Post by sireat » Thu, Jun 14, 2018, 7:24 AM UTC

DINKDINK wrote: post #191

fitchjo wrote: post #66

Earlier quoted context omitted.

What evidence have you seen that tether is backed by real money? I haven't seen "definitive" proof/evidence either way, but it would seem there are certainly strong suspicions that tether is not backed by real money (e.g., never having completed an audit and being fired by their auditing firm).

Research rather than speculation: https://blog.bitmex.com/tether/

That was a decent report considering the source has the incentive to be pro Bitcoin.

And the best that positive report could come up with was:

* serious lack of Tether transparency is not necessarily fraud.

* some correlation with deposit balance in Puerto Rico

I will eat my hat if a respectable audit firm releases a Tether audit showing that Tether has been 1:1 backed by real USD reserves in all of 2017.

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

#350

Post by arisAlexis » Thu, Jun 14, 2018, 9:42 AM UTC

zik wrote: post #309

arisAlexis wrote: post #299

Earlier quoted context omitted.

usdt is a usd peg system with no fake money. did you ever read the technical details?

But it's claimed that it's not really a peg system at all - that Tether were fraudulently created while claiming they were pegged.

yes and because someone wrote about it then it's true right? I can't think of anybody wanting to spread FUD to profit from shorting...for the life of me, really. Who is the manipulator in this case?