Anyone else diversifying their crypto and a bit unsure about how high all the FAAANG stocks seem to be?
Bitcoin’s reliance on stablecoins harks back to the Wild West of finance
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Re: Bitcoin’s reliance on stablecoins harks back to the Wild West of finance
#172Seems there's a lot of resistance to bitcoin because they're afraid of it truly revamping the broken financial system.
Re: Bitcoin’s reliance on stablecoins harks back to the Wild West of finance
#173Earlier quoted context omitted.
So why can’t banks provide higher yields with simple savings accounts? If it’s got nothing to do with federal fund rates or middle men? Here in Europe banks are entering an existential crisis as the ECB maintains zero and negative interest rates (of course, this is simplified as there are actually several different federal funds). Banks can’t finance their business anymore. This led to increasing bank fees, bank merg…
> So why can’t banks provide higher yields with simple savings accounts? Because yield is the price that borrowers pay for borrowing funds. When there are a lot of funds available for borrowing and not many people wanting to borrow yields will fall. There is just nothing central banks or commercial banks can do to raise yields if there is little demand for loans.
> There is just nothing central banks or commercial banks can do to raise yields if there is little demand for loans.
I am sorry but I think you've got this completely the wrong way. The demand for loans did not shrink in the last couple of years: Look at the housing prices (including the infamously high rents) and the volume of credits people burden themselves with. Rather, the amount of liquidity (i.e. money) circulating around has increased significantly. This pushed interest rates down to a minimum. And why is that so? It's because central banks are flooding the economy with money for years. So it is well within their power to change that. But it won't be nice for many parts of our inflated economies ...
Re: Bitcoin’s reliance on stablecoins harks back to the Wild West of finance
#174Earlier quoted context omitted.
So why can’t banks provide higher yields with simple savings accounts? If it’s got nothing to do with federal fund rates or middle men? Here in Europe banks are entering an existential crisis as the ECB maintains zero and negative interest rates (of course, this is simplified as there are actually several different federal funds). Banks can’t finance their business anymore. This led to increasing bank fees, bank merg…
> So why can’t banks provide higher yields with simple savings accounts? If it’s got nothing to do with federal fund rates or middle men? Because banks are regulated (to avoid systemic risks), so they need to balance deposits with risk free loans (or discounting the riskier loans with extra capital). > Defi will sweep away the banking market on the long run if central banks keep doing their lax monetary policy for mu…
> they need to balance deposits with risk free loans
You mean "reserves". This is the reserve requirement of banks which they need to hold for deposits. These reserves are held by their responsible central bank. Which they need to pay for in the Euro zone (that's what it means federal fund rates being negative). So this gets me back to my initial point: Banks depend on the federal fund rates. DeFi systems do not.
But I agree with you, higher yields do reflect higher risks. Of course, depositing money in DeFi protocols is still riskier than leaving it on your bank. But bringing money to your bank means you're so risk averse you're willing to lose money for keeping your money. At least inside the Euro zone, currently.
Re: Bitcoin’s reliance on stablecoins harks back to the Wild West of finance
#175Earlier quoted context omitted.
Yeah, like online shopping. Remember that fad? Luckily the .com crash showed us that the critics were right and nobody ever got rich from that dumb idea again.
Don't remember anyone saying online shopping was a fad, just that a lot of companies were massively over valued.
I’m certain I’ve seen examples akin to “people want to touch and see the products before they’ll consider buying them”.
I think the difference with crypto is that over time as more people look under the veil the number of naysayers grow, whereas with online shopping the naysayers have gone extinct (maybe RMS uses only cash or something).
Last night I stumbled across a group freestyle rapping and hung out for a bit. At one point one of the rappers talked about putting money into AMC and how it was a bumpy rollercoaster of a ride.
It really put a face on the other side of a lot of these cryptos and meme stocks. It’s entirely possible the fellow was a savvy investor (he certainly could freestyle very well) however judging by how his posture went from exuberant and confident to deflated as soon as he mentioned AMC in his own freestyle I’m fairly confident he bought in at the top.
And it certainly didn’t surprise me that at my local stomping grounds I’d be hearing the dismayed crewing of the fleeced.
Re: Bitcoin’s reliance on stablecoins harks back to the Wild West of finance
#176Earlier quoted context omitted.
It costs $1 to increase the market cap of a fiat pegged stable coin by $1, while changing the market cap of Bitcoin is a lot cheaper because there's no safe way for a market maker to provide substantial liquidity for it. At any time this dynamic can start working in the other direction, and the market cap of Bitcoin can fall below the net value converted to it.
I don't really know what you're saying. It's not much less safe to provide liquidity to bitcoin than to do so for any of the trillions in securities priced vastly in excess of the book value of their underlying assets.
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Re: Bitcoin’s reliance on stablecoins harks back to the Wild West of finance
#177Earlier quoted context omitted.
Sub 8.6% chance of funds disappearing? Absolutely! Listen, I'm no Berkshire Hathaway, but the likeyhood that BlockFi one of the world's largest holders of BitCoin and backed by $500+ million in VC funding just outright fails is very very low. I know, here come the Enron or Mt. Gox rebuttals. The regulation and oversight that BlockFi has is much greater than those other examples. It would be interesting if somebody co…
Wag, a mobile app for finding dog walkers, received $300M in VC funding. It failed. “Holds Bitcoin” and “received a pile of loose VC money” are not the gold standard of reliability in a financial provider that promises stable returns on a no-risk investment.
No-risk, LOL.
Re: Bitcoin’s reliance on stablecoins harks back to the Wild West of finance
#178Earlier quoted context omitted.
It costs $1 to increase the market cap of a fiat pegged stable coin by $1, while changing the market cap of Bitcoin is a lot cheaper because there's no safe way for a market maker to provide substantial liquidity for it. At any time this dynamic can start working in the other direction, and the market cap of Bitcoin can fall below the net value converted to it.
Well, no, it costs absolutely nothing to print off another billion Tethers. We only have the vaguest possible assurances that there's something behind each USDT, and they've already admitted it's not actual dollars.
I guess I should have said "fiat pegged and backed".
Re: Bitcoin’s reliance on stablecoins harks back to the Wild West of finance
#179Earlier quoted context omitted.
For what is worth, there's a huge blast radius if any of the top 3 collapse, with Tether (as the 3rd) likely having the smallest one - think of what happens to everything else when bitcoin crashes or even dips significantly.
Bitcoin crashes and dips all the time. It's lost over 80% of its value at least four times since it launched, plus the recent big 50% drawdown. It slows the cryptoeconomy for a year or so, but doesn't stop it, and then there's another bubble again ~2yrs later. Bitcoin's high but natural volatility is not the same thing as the price collapsing due to the system itself fundamentally breaking. For example, the Global Fi…
While tether is shady as hell, the fact that it is not deflationary, that the weaknesses in its balance sheets are more visible and that it is tied to a monetary policy that doesn't encourage hoarding makes it tamer than deflationary coins in many ways. Yeah if it collapses, some other cryptocoins are going to be more volatile than usual but even Musk tweets can do that (and this volatility may actually help prevent these coins from becoming systemically important and dangerous).
Deflationary coins on the other hand are super insidious, they can get hoarded on a wider scale to the point of displacing productive investment in the economy. With deflationary coins it's not the volatility that's dangerous, it's the lack of it creating gridlocks in other investment markets.
This happened before when there was attempts at stabilizing gold and it caused the Great Depression: https://benoitessiambre.com/specter.html
Re: Bitcoin’s reliance on stablecoins harks back to the Wild West of finance
#180Honestly stablecoins - specifically tether - is about the only thing about crypto that genuinely frightens me. Crypto rollercoaster - up down sideways and in circles - sure I'm game. Tether that is stable until it implodes...hell no. Even without direct exposure the blast radius worries me.
I find it weird that any person 'hodls' any crypto. I pick the rallies (like the one last night) and ride them, then sell. I cannot, besides stress, understand why anyone would hold crypto currencies at this point. It is too young and Wild West. That's why riding waves is easy and if you trade half decent you can make fortunes. But it can be gone tomorrow; for instance if Tether gets called on it's bluff.
You have not been playing long enough if this is your attitude. “Zoom out” is generally the quote on this.