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The Bit Short: Inside Crypto’s Doomsday Machine

crypto-anonymous-2021.medium.com

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Re: The Bit Short: Inside Crypto’s Doomsday Machine

#241

Post by jerrymiller »

cryptoanonymous wrote: post #121
not2b wrote: post #110

It seems that this guy decided to go heavily into Bitcoin because of a mistaken belief that seems all too common: "At the time, I saw a market dislocation and the likelihood of significant dollar inflation due to the US Government’s likely response to the unfolding pandemic." He thought that government responses to severe crises that inject lots of money into the economy will cause "significant dollar inflation". In…

Hi, I'm the author. > Money isn't created primarily because governments print it; whenever a bank creates a loan money is created, and when they call in loans money disappears. Yes this is right, and I am in fact aware of this mechanism. As I say in the post: "[...] anticipated high levels of lending and consumer spending post-pandemic, seemed likely to fuel substantial USD inflation in real terms through the end of…

I recommend that you listen to this: https://www.coindesk.com/podcasts/the-breakdown-with-nlw/bre...

Re: The Bit Short: Inside Crypto’s Doomsday Machine

#242

Post by JSavageOne »

Majromax wrote: post #189

> Now fast-forward one year. In March of 2020, I bought a large amount of Bitcoin. At the time, I saw a market dislocation and the likelihood of significant dollar inflation due to the US Government’s likely response to the unfolding pandemic. I'm frustrated by this statement. If you predict inflation in the USD that is not currently priced into the market, then there are already plenty of conventional ways to make m…

You're frustrated by the fact that he invested in an asset that 4-5x'd his money in 10 months? Ok...

Re: The Bit Short: Inside Crypto’s Doomsday Machine

#243

Post by microtherion »

dragonwriter wrote: post #165
qeternity wrote: post #118

Earlier quoted context omitted.

People also don’t realize that moderate inflation is a good thing. You want a gentle inbuilt mechanism to encourage consumption. And we have good tools to combat inflation whereas we don’t really have any tools to combat deflation. There’s a reason nobody spends Bitcoin and it’s mostly not about fees or block size.

> People also don’t realize that moderate inflation is a good thing. Price stability is a good thing, and moderate deflation (which discourages productive investment) is worse than moderate inflation, so policy targeting moderate inflation is a good thing. This isn’t because moderate inflation is a good thing in and of itself, its because you can’t perfectly target price level outcomes with policy, so you want to bia…

> Price stability is a good thing, and moderate deflation (which discourages productive investment) is worse than moderate inflation, so policy targeting moderate inflation is a good thing.

That is one of the reasons. But arguably, even if a central bank could be 100% sure of hitting their inflation target exactly, they might still prefer moderate inflation to absolute price stability, because (a) it encourages productive investment and (b) it gives a simple mechanism for downward adjustment of sticky nominal prices/wages.

Re: The Bit Short: Inside Crypto’s Doomsday Machine

#244

Post by dragontamer »

robinhoodexe wrote: post #98

On kraken, one can short Tether against the US Dollar. Since Tether is usually pretty close to $1, I wonder if it’s worth it to open a short in case it’s all falling apart. I mean, in case of a crash the price of tether would most certainly fall, right?

Counterparty risk.

If Tether controls the price of Tether, they can simply cause Tether to spike to $2 or $10 for a few days or weeks, before leaving. Tether may drop below $1 afterwards, but you might get short-squeezed on the way out.

There's no way you can win vs an entity that fully controls the price.

Re: The Bit Short: Inside Crypto’s Doomsday Machine

#245

Post by adn37 »

> The first red arrow on the chart points to April 25th, 2019: the announcement of the OAG’s investigation. Notice how, as the investigation progresses, the issuance rate of Tether begins to rise — initially in large single blocks, of around $1B, every few months.

The below is an analysis of printed tethers vs known institutional buyers for 2020. I find a ratio of 4 to 1.

Tether market cap for 2020: march: 4.6B$, april: 6.3B$, may 8.8B$, july: 9.9B$, 29August: 10B$, 1stSept: 13B$, 28Sept: 15B$, Jan21: 24B$

Compared to known institutional buyers:

Grayscale: march: 500M$, april: 600M$, may: 1B$, july: 1.4B$, 31August: 1.8B$ (approx), 28Sept: 2B$

Microstrategy: 1.1B$ average price (august to september, as per https://bitcointreasuries.org/)

Difference: between march-september 2020, Tether printed 10B$ while the biggest known institutional buyers spent 2.6B$ (grayscale+microstrategy=1.5B$+1.1B$=2.6B$)

That is to say, Tether prints appear to be 4 times the big buyers amount.

ref for grayscale buy amounts: https://hackernoon.com/grayscales-gbtc-pump-effect-means-202...

Re: The Bit Short: Inside Crypto’s Doomsday Machine

#246

Post by willward1 »

This article really changed my view and caused my to sell most BTC.

Two things can be true: that BTC is a good long term inflation hedge AND the price is being manipulated short term by the tether scam.

I just think the risk reward of tether being shut down within the next year makes it pruden to take some gains off the table here - hopefully to get back in at a lower cost basis when the market clears.

Re: The Bit Short: Inside Crypto’s Doomsday Machine

#248

Post by dragonwriter »

dlubarov wrote: post #178
findthewords wrote: post #133

Earlier quoted context omitted.

Yes, but velocity of money is plummeting.

Is there reason to think that velocity will remain low in the long term, though? If it's just temporary economic effects caused by COVID (e.g. less physical commerce), then surely we will see higher inflation as those effects go away?

> Is there reason to think that velocity will remain low in the long term, though?

There's reason to believe that as velocity rebounds, ceteris paribus, monetary policy will tighten to avoid rapid inflation.

Congress may leave fiscal policy on autopilot all too often, but you aren't likely to find the Fed completely asleep at the monetary policy wheel.

Re: The Bit Short: Inside Crypto’s Doomsday Machine

#250

Post by otiose_tortoise »

It is very likely that Tether is a scam -- the evidence has been mounting for years -- but the peg won't break until the market believes it. Unfortunately, there isn't a good way to short Tether. You can short the Kraken USDT/USD pair on margin, but the margin rates are ~20% a year. You can borrow tethers on compound.finance, but the rates are ~15% a year. I think part of the reason we haven't seen the unwind of tether is simply because it's too expensive to short.

Also, no one will loan you their tether if you tell them you're going to break the peg and give them back a worthless token.

(I actually had a kraken short on for a while in ~2018 but gave up because it's just too expensive.)

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