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Bitcoin surpasses $50K as major companies jump into crypto

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Re: Bitcoin surpasses $50K as major companies jump into crypto

#591

Post by efwfwef »

graeme wrote: post #551
guiomie wrote: post #293

Earlier quoted context omitted.

When I read a message like this, I conclude that bitcoin has another 10x to go since gold has a 10 trillion market cap. (Preemptively I'm going to say that gold market cap has almost nothing to do with its usage as a commodity, google it) reply

This seems to be flat out false. According to this 78% of gold globally is used in jewelry. Some other portion is used in electronics of industry. https://goldprice.com/project/facts-about-gold/ There’s no such reserve value for Bitcoin. You can’t look at it or hold it or do anything with it other than as a currency. I’ve seen widely varying stats estimating gold’s jewelry share but all of them are large.

That's a moot point, Gold actual usage has no relation with its usage as a store of value. It's used as a store of value because it's shiny and people associates it with "value".

Think: why are diamonds so expensive?

Re: Bitcoin surpasses $50K as major companies jump into crypto

#592

Post by graeme »

bhupy wrote: post #291
cwkoss wrote: post #256

Earlier quoted context omitted.

Is the loan secured to anything? What is the incentive for the borrower to repay this loan?

Yeah it's "overcollateralized". The borrower has to put 150% of the principal into escrow (this is enforced by the smart contract). If the borrower decides to flake, the lender gets to take the collateral.

What does the lender use as collateral?

And doesn’t this defeat the point of most loans? People use houses as collateral for mortgages, but other than that aren’t most loans given with substantially less collateral, all the way to zero collateral?

Even mortgages are usually less than 100% collateral. And the house isn’t in escrow! You use it.

Am I missing something fundamental? How does it make sense to borrow $100 and lock up $150 for the lifetime of the loan?

Re: Bitcoin surpasses $50K as major companies jump into crypto

#593

Post by bhupy »

opportune wrote: post #576
bhupy wrote: post #291

Earlier quoted context omitted.

Yeah it's "overcollateralized". The borrower has to put 150% of the principal into escrow (this is enforced by the smart contract). If the borrower decides to flake, the lender gets to take the collateral.

Just curious, from the perspective of the borrower, what is the purpose of an overcollateralized loan? If their collateral is just as liquid as their loan, why even take the loan at all?

Super good question, I was perplexed by this myself.

Basically what this financial instrument allows the borrower to do is maintain exposure to appreciating crypto assets while still leveraging its value for day to day spending.

For example, suppose you owned $1500 worth of BTC. Suppose you’re also bullish on BTC and expect it to appreciate, say 2x in a year. If you liquidated the $1500 to buy a MacBook or something, you’d lose out on that appreciation. Instead, I can lend you $1000 in cash, and you can put your $1500 as collateral (150%). A year later, you pay me back $1120, and then take back your BTC collateral; except by then it may have doubled in value to $3000 (let’s say). In fact, as long as BTC appreciates by at least 12%, the loan pays for itself.

As the lender, I am essentially enabling HODLers by providing them liquidity (in the form of stablecoins). Of course downside for the lender is that the buyer could bail AND the collateral could plunge in value.

Re: Bitcoin surpasses $50K as major companies jump into crypto

#594

Post by [deleted] »

kerng wrote: post #336

Bitcoin has been around for a while now and it has been down talked quite a bit on HN whenever it comes up. It now has a larger market cap as Facebook - so the market sees more value in Bitcoin than Facebook. The sentiment on HN seem still be mostly against it whenever it comes up. I wonder why that is? I'd imagine 10 years from now Bitcoin will still be around and likely much larger than today - I'm less positive ab…

[deleted]

Re: Bitcoin surpasses $50K as major companies jump into crypto

#595

Post by kbuck »

fbelzile wrote: post #558
lph wrote: post #425

Earlier quoted context omitted.

> That said, Tesla's Bitcoin purchase does make a lot of sense ... They then announced their Bitcoin purchase with fanfare that drove the price up, marking a quick return on their investment. Tesla is a car manufacturer! It doesn't make any sense at all! At any company that made sense, a CEO would lose his job for gambling $1B of company money in a casino totally unrelated to the company's business interests.

I'm just guessing here but they might be hedging against future trade restrictions set by China against US companies like Tesla. If another trade war was to happen, people in China might be able to buy a Tesla using Bitcoin vs having to buy a NIO.

I think there are a couple issues with this idea: firstly, they'd be accepting the Bitcoin, so they wouldn't need any on hand to process the purchases. Secondly, if China wants to prevent or restrict the sale of a physical good, especially one as large as a car, it's far easier to stop it from being imported (or manufactured) than to stop people from paying for it.

Re: Bitcoin surpasses $50K as major companies jump into crypto

#596

Post by solveit »

phs318u wrote: post #577
VoiceOfWisdom wrote: post #528

Earlier quoted context omitted.

How would you suggest hedging against the death of fiat currency without buying a non fiat currency?

Maybe it's just me, but if we truly see the (global) death of fiat currency, the inability of Elon Musk to sell a Tesla is gonna be among the very least of anyone's problems.

In general yes, but I think Musk's inability to sell Teslas is going to be a major problem for the particular person deciding whether Tesla buys BTC or not.

Re: Bitcoin surpasses $50K as major companies jump into crypto

#597

Post by ffggvv »

tippytippytango wrote: post #481
ffggvv wrote: post #135

the saddest thing is people see it as a success because its price has gone up. But the entire idea behind it was to be a decentralized currency. Its absolutely failed at that. What its succeeded at is being a speculative gambling instrument like beanie babies or tulips. So yes, it's "successful" currently in that its price is going up, but no, no one actually uses or cares about using it as a currency or buys it for…

A failed currency and successful store of value. You win some, you lose some.

it’s not a successful store of value. it’s volatility is way too high. the gold price changes but it’s actually not very volatile at all intraday. the volatility of btc isn’t decreasing as the price goes up either.

it’s just a succesful speculation instrument as of the current date because it’s at all times high. we’ll see if it stays that way perpetually but that’s not a good store of value.

Re: Bitcoin surpasses $50K as major companies jump into crypto

#598

Post by graeme »

BLKNSLVR wrote: post #24
onepointsixC wrote: post #11

Earlier quoted context omitted.

How so? Bitcoin's excitement comes entirely from its value in fiat, as opposed to regular usage in daily life.

Bitcoin as the gateway to Ethereum and the possibilities opened up by smart contacts such as the currently embryonic DeFi market. Paradigm shift isn't too strong a terminology.

What are some use cases? Someone downthread mentioned loaning money where 150% of the money is put in escrow as collateral. This didn’t make any sense to me.

But some of the smartest people I follow are hyped about Defi. So....what can you do with it? Or could you do if adopted.

Re: Bitcoin surpasses $50K as major companies jump into crypto

#599

Post by nfin »

ineedasername wrote: post #516
trident5000 wrote: post #410

Earlier quoted context omitted.

I use it and I pay lower fees. You pay the price you deserve.

I though you paid the price dictated by the market/bidding system... How does bitcoin figure out what is deserved?

You (or your wallet, or both... depending of your wallet and your settings) choose the fees you like (the wallet could guesstimate based on the current congestion and your time preference).

The miners then choose the transactions they want to include in a way, as to maximize their gains. As a block can only hold a certain amount of transactions and the limit being set by the weight-units [1], miners will want to prioritize the transactions that offer them bigger fees per weight unit, or usually expressed as sats/vbyte (satoshis per virtual bytes).

So if you don't need a transaction to arrive in the next 1-2 hours, you can lower your fees, and the transaction might pass in the night (although BTC is international, congestion is less on US night time and especially week-ends) or if not, probably in the week-end. If it doesn't clear fast enough, or as fast as hoped, then RBF (replace-by-fee) or CPFP (child-pays-for-parent) might help (manually or an increase of the fee could be automated by the wallet every set amount of time).

TL;DR: there is a free market for transactions, but the price is not dictated by the market (and there is no real bidding system), instead you suggest a fee, and see if any miner around the world wants to include it in a block (and you can adjust if the outcome isn't achieved, which has similar results to a bidding system... but is more like natural supply/demand mechanism, as miner do not guarantee to include a transaction).

Helpful to see current unconfirmed transactions (and sats/vbyte): https://jochen-hoenicke.de/queue/#0,30d [info: the legend is clickable, and makes it easier to view how many higher paying transactions there are]

[1]: https://en.bitcoin.it/wiki/Weight_units

Re: Bitcoin surpasses $50K as major companies jump into crypto

#600

Post by dodobirdlord »

adhoc32 wrote: post #249
boc wrote: post #214

Earlier quoted context omitted.

That scenario makes no sense in the real world because the US government would just regulate/ban it before it got to that point. Once BTC even starts to threaten the sovereignty and power of the USD, it's game over for Bitcoin and the laissez-faire environment that helped it grow.

At that time it will be impossible to ban because a large percentage of the US population will be exposed to it. If in spite of that they do decide to ban it there is not much they can do except ban the exchanges. The Bitcoin network is impossible to ban without heavily censoring the internet. Also what the US is going to do about the other countries of the world, invade them in order to ban the BTC?

Banning the exchanges is about all it would take. Besides, the current chorus is that large companies moving a share of their cash holdings into Bitcoin will drive the price way up. If the government bans Bitcoin then that's not going to happen.
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