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Crypto Market Roiled by New Allegations Against Tether, Bitfinex

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Re: Crypto Market Roiled by New Allegations Against Tether, Bitfinex

#121

Post by csa »

shawnz wrote: post #96
peterlk wrote: post #8

It's almost like unregulated financial institutions have a tendency to screw over their customers... No one could have predicted this in the consistently solvent, regulated, and trustworthy cryptocurrency market. It's too bad bitfinex got ripped off by a surely unrelated entity. /s Have we learned our lesson yet?

What's the lesson? That cryptocurrencies have different risks than other kinds of financial technologies? I think that is pretty commonly understood already.

> That cryptocurrencies have different risks than other kinds of financial technologies?

These are known risks that have regulations that significantly reduce the chance of them happening in regulated currency markets and banks.

Cryptos took the Wild West approach due to... something... and somehow think that the scams that people have used in the past with banks will not be used again with crypto.

SURPRISE!!!

Re: Crypto Market Roiled by New Allegations Against Tether, Bitfinex

#122

Post by Mengkudulangsat »

apo wrote: post #14

Here's the filing: https://iapps.courts.state.ny.us/fbem/DocumentDisplayServlet...

Skimming through this I've come to some conclusions:-

A reliable banking partner is prerequisite to run a fiat-crypto exchange. Loss of banking partner is fatal to an exchange, and should immediately trigger a wind-down. On the flip-side, the banking partner should in good faith, continue to process withdrawals until the wind-down is complete. Bitfinex's refusal to wind-down after the Wells Fargo decision is irresponsible. Wells Fargo's decision to immediately stop processing withdrawals without a grace period is bad faith.

Reliable banking relationships are difficult to maintain if you are not in the same jurisdiction with said bank. If you want to process USD, you have to be in the US. Multiple fiat-currency crypto exchanges are not sustainable due to this dynamic.

I see a sustainable status-quo as fiat-exchanges becoming single-jurisdiction, single fiat-base. Ironically, just like most banks.

Re: Crypto Market Roiled by New Allegations Against Tether, Bitfinex

#123

Post by techbubble »

abakker wrote: post #115
Obi_Juan_Kenobi wrote: post #108

Earlier quoted context omitted.

> There is no auditing whether he sold all his keys in the physical world. Are you trying to claim that someone would buy Satoshi's coins without moving them to a wallet they control? In this scenario, the person would have 'purchased' the coins with precisely zero assurance that Satoshi wouldn't just move them to a new address at any point, as he/she/they still have the private keys.

Someone could have the whole wallet... As I said, it is impossible to verify that that isn't the case. He could have taken a loan with the whole wallet as collateral. That isn't the same as claiming that Satoshi did that, but it's not like the audibility of the blockchain spreads all the way to the real world. There's really no saying what Satoshi has done, and the anonymity means there's no way to find out.

The only way anyone could assume control of the account as collateral is by knowing the private key. If the funds are not transferred to another wallet, then both parties now have knowledge of the private key. As such, the entity providing the loan has to trust that Satoshi will not move the funds. That would be an insane risk to take.

Re: Crypto Market Roiled by New Allegations Against Tether, Bitfinex

#124

Post by remcob »

abakker wrote: post #115
Obi_Juan_Kenobi wrote: post #108

Earlier quoted context omitted.

> There is no auditing whether he sold all his keys in the physical world. Are you trying to claim that someone would buy Satoshi's coins without moving them to a wallet they control? In this scenario, the person would have 'purchased' the coins with precisely zero assurance that Satoshi wouldn't just move them to a new address at any point, as he/she/they still have the private keys.

Someone could have the whole wallet... As I said, it is impossible to verify that that isn't the case. He could have taken a loan with the whole wallet as collateral. That isn't the same as claiming that Satoshi did that, but it's not like the audibility of the blockchain spreads all the way to the real world. There's really no saying what Satoshi has done, and the anonymity means there's no way to find out.

It.. doesn't work like that. Suppose someone sells you a private key, or even a hardware wallet, claiming that it "contains much Bitcoin". There's no way for you to be sure that the seller doesn't have a backup. Or is selling ten other copies to other people.

It's like trying to sell an account by selling the password to it. The first thing you do is change it so the previous owner can not get in anymore. Before you did that you can not be sure that you are the only one with access. On Bitcoin the only way to change the password is to move the funds to a new address.

Re: Crypto Market Roiled by New Allegations Against Tether, Bitfinex

#125

Post by chimpburger »

ticmasta wrote: post #77
ShorsHammer wrote: post #67

Everyone agree's that tether should have a 1-to-1 backing. The delicious irony in it all is that the money in your bank is backed by about $0.10 for every dollar they owe savers. I hope for the day when people expect the same of the banking system that underpins the whole economy.

>> The delicious irony in it all is that the money in your bank is backed by about $0.10 for every dollar they owe savers. I'll be generous and assume you know thtat banks don't store your money in a big vault a la Scrooge McDuck There's a big difference between banks redistributing your money as loans and mortgages vs. a cryptocurrency tied to a supposed dollar-backed instrument 100% controlled by the same party. Th…

You misunderstood. With the "Fractional Reserve Banking" system, banks lend out money that is NOT under deposit. They are licensed to lend out money created from nothing. This is the mechanism by which money is created https://courses.lumenlearning.com/boundless-economics/chapte...

Re: Crypto Market Roiled by New Allegations Against Tether, Bitfinex

#126

Post by panarky »

Felz wrote: post #29
driverdan wrote: post #16

Earlier quoted context omitted.

Anyone in the cryptocurrency space with half a brain knew something was up the minute they refused an independent audit. It was only a matter of time before someone brought charges and/or Tether collapsed.

Which does make it rather curious that the music's kept playing, so far. Is "common knowledge" that it's probably a complete fraud (like this filing should give) required to pop the tether bubble? Or will even this not be enough?

People have been yelling that Tether is a ponzi fraud since it launched in 2015.

And yet it still trades 1:1 to USD today, after the court filing was released.

So is there some magic force that keeps the fraud running, and prevents market participants from cashing out their Tether in the mother of all bank runs?

If you hold Tether why wouldn't you sell?

Or is there more to the story than just "Tether is an obvious fraud"?

Re: Crypto Market Roiled by New Allegations Against Tether, Bitfinex

#127

Post by nonbel »

csa wrote: post #121
shawnz wrote: post #96

Earlier quoted context omitted.

What's the lesson? That cryptocurrencies have different risks than other kinds of financial technologies? I think that is pretty commonly understood already.

> That cryptocurrencies have different risks than other kinds of financial technologies? These are known risks that have regulations that significantly reduce the chance of them happening in regulated currency markets and banks. Cryptos took the Wild West approach due to... something... and somehow think that the scams that people have used in the past with banks will not be used again with crypto. SURPRISE!!!

> "Cryptos took the Wild West approach due to... something... and somehow think that the scams that people have used in the past with banks will not be used again with crypto."

The point is that people who make bad decisions will fail before becoming too big to fail. This is in the genesis block of bitcoin.

Re: Crypto Market Roiled by New Allegations Against Tether, Bitfinex

#128

Post by marvinalone »

nostrademons wrote: post #116
abakker wrote: post #111

Earlier quoted context omitted.

>The US dollar hasn't been backed by anything since 1971 and is still ticking strong. I think you might be overstating. The US dollar is not backed by an asset because it is an asset . At this point, the dollar is backed by the government, the government's authority, its military power, and the future value of its debt. That is not gold, but it is not nothing either.

By the same token, cryptocurrencies are backed by the computing networks underlying them, the potential future usage of these computing networks, and by your ability to buy guns, drugs, and hacks with them. This is also not gold (although you can buy gold-backed cryptocurrency: see Digix), but not nothing either. That's why cryptocurrency evangelists harp on adoption and new use-cases: the value of any currency is pr…

USD is backed (among other things) by the government accepting taxes in it. If you don't pay, they will come to your house with guns and take you away. This creates a demand for USD that is completely unlike any demand for crypto.

Re: Crypto Market Roiled by New Allegations Against Tether, Bitfinex

#129

Post by keyle »

peterlk wrote: post #8

It's almost like unregulated financial institutions have a tendency to screw over their customers... No one could have predicted this in the consistently solvent, regulated, and trustworthy cryptocurrency market. It's too bad bitfinex got ripped off by a surely unrelated entity. /s Have we learned our lesson yet?

Greed begets greed. The sad part, really, is that the ideology of cryptocurrency at the start was never about greed.

Re: Crypto Market Roiled by New Allegations Against Tether, Bitfinex

#130

Post by abecedarius »

therein wrote: post #76
themagician wrote: post #71

Earlier quoted context omitted.

The lesson will never be learned. The Ponzi scheme is as old as money itself. It’s never gone away. The one thing that crypto currency truly has revolutionized is the Ponzi scheme. You can do it any number of ways, add any number of twists, and do it over and over again. With crypto you don’t even have to be subtle. When the pot gets big enough you just outright steal it. It’s possible that Satoshi himself will try t…

> It’s possible that Satoshi himself will try to liquidate his stake at some point, crashing BTC itself and make off with a cool billion. Who knows. That might have been the plan all along. Not quite possible with the auditing capabilities Bitcoin provides. The moment any amount from those accounts is moved, Bitcoin would probably tank.

Why should it tank? This would resolve uncertainty about the fate of a few percent of the whole supply, so the direct effect is bounded by that few percent (depending on how likely the market thinks it's been lost).

Indirectly it could jump-start a recursive reaction, but then anything could.

Dumping most of it all at once could tank the price, but to do that Satoshi would have to be an idiot.

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