Worries Grow That the Price of Bitcoin Is Being Propped Up • Hacker News Board

Re: Worries Grow That the Price of Bitcoin Is Being Propped Up

#161

Post by oldgradstudent » Thu, Feb 01, 2018, 5:13 PM UTC

sciyoshi wrote: post #149

simias wrote: post #84

The somewhat ironic part is that one of the core concepts of Bitcoin is that you can't counterfeit it. You can mathematically prove how many coins you own, if somebody sends you 3 BTC then once it's been validated on the blockchain you know that the money is now yours, they can't have lied, it can't bounce like a cheque Except this Bitfinex thing shows that while an amount of bitcoin can't be manipulated or counterfe…

> They're literally making up money as they see fit. I'm playing devil's advocate here (I agree that the whole Tether situation is concerning), but also genuinely curious - is this any different than what banks have been doing for forever with fractional reserve? Even if Bitfinex is overcommitted and there's more USDT in circulation than they have in USD reserves, is there a problem unless a lot of people try to conv…

In a panic (which happens periodically) a lot of people try to convert at once. But there's no central bank to bail them out.

Re: Worries Grow That the Price of Bitcoin Is Being Propped Up

#162

Post by ProblemFactory » Thu, Feb 01, 2018, 5:13 PM UTC

jnordwick wrote: post #103

Here a possible explanation on what Tether is doing and the economics behind why there is such an incentive behind pump and dump BTC. I think they are running a currency board pegging USDT to USD, and then using the BTC gained to push up BTC even further. Part of the idea of a currency is a stable value, that means supply and demand need to be matched. With a fixed quantity such as all the common cryptos, when demand…

I don't understand why Tether would be doing all that. They could have a very simple business model:

1. Accept USD and issue USDT in return,

2. Buy US Treasury bonds, which yield 1.5-2.5% for 3 month to 5 year bonds,

3. If people cash out their USDT later, Tether gets to keep the interest profit.

There is essentially zero risk: as they are buying USD bonds, they always keep their principal, and no exposure to currency fluctuations. And in the extremely unlikely case that the US Treasury would refuse to honor its debt, the world economy would be in such a crisis that nobody would even notice a small crypto exchange going under.

Do you think that Tether got greedy, invested its USD reserves in more risky assets (crypto or real world), lost money, and is now trying to cover up the shortfall?

Re: Worries Grow That the Price of Bitcoin Is Being Propped Up

#163

Post by ttul » Thu, Feb 01, 2018, 5:13 PM UTC

conanbatt wrote: post #131

simias wrote: post #84

The somewhat ironic part is that one of the core concepts of Bitcoin is that you can't counterfeit it. You can mathematically prove how many coins you own, if somebody sends you 3 BTC then once it's been validated on the blockchain you know that the money is now yours, they can't have lied, it can't bounce like a cheque Except this Bitfinex thing shows that while an amount of bitcoin can't be manipulated or counterfe…

The most interesting thought to me right now is how the situation will develop if or bitfinex/tether crashes the market hard. I am not a fan of the SEC getting involved. Taking crypto as an experiment, I think it is better for the market to take a hit and then find organic solutions. If the SEC gets involved and busts bitfinex/tether, the community loses the opportunity to become 'unbailable'. Yes , people will lose…

The SEC has instilled a level of trust in the financial markets that has enabled humanity’s most spectacular century. Why is that a problem?

Re: Worries Grow That the Price of Bitcoin Is Being Propped Up

#164

Post by acct1771 » Thu, Feb 01, 2018, 5:14 PM UTC

monktastic1 wrote: post #151

conanbatt wrote: post #131

Earlier quoted context omitted.

The most interesting thought to me right now is how the situation will develop if or bitfinex/tether crashes the market hard. I am not a fan of the SEC getting involved. Taking crypto as an experiment, I think it is better for the market to take a hit and then find organic solutions. If the SEC gets involved and busts bitfinex/tether, the community loses the opportunity to become 'unbailable'. Yes , people will lose…

You could say that humanity has repeatedly and organically come to a solution broadly known as government and regulation.

Worked great in 2008.

Re: Worries Grow That the Price of Bitcoin Is Being Propped Up

#165

Post by marcandre » Thu, Feb 01, 2018, 5:15 PM UTC

I'm wondering how many people are shorting USDT on Kraken? The potential downside is having to pay interest. The upside is 100% win. With enough short position, Tether will run out of funds and the price will have to crash. Disclosure: I'm short USDT.

Re: Worries Grow That the Price of Bitcoin Is Being Propped Up

#166

Post by aje403 » Thu, Feb 01, 2018, 5:18 PM UTC

ttul wrote: post #163

conanbatt wrote: post #131

Earlier quoted context omitted.

The most interesting thought to me right now is how the situation will develop if or bitfinex/tether crashes the market hard. I am not a fan of the SEC getting involved. Taking crypto as an experiment, I think it is better for the market to take a hit and then find organic solutions. If the SEC gets involved and busts bitfinex/tether, the community loses the opportunity to become 'unbailable'. Yes , people will lose…

The SEC has instilled a level of trust in the financial markets that has enabled humanity’s most spectacular century. Why is that a problem?

The magical "beat the man" ethos is now gone, some dystopian bureaucracy allusion, the ride's ending, prohibition is over

Re: Worries Grow That the Price of Bitcoin Is Being Propped Up

#167

Post by lloyd-christmas » Thu, Feb 01, 2018, 5:19 PM UTC

JonnyNova wrote: post #144

lloyd-christmas wrote: post #129

Earlier quoted context omitted.

Their comment is based on historical facts, making it apples and oranges. Your speculation has no substance, but is 'absolutely' true? I'm not sure I follow that logic.

The apples to oranges is in reference to comparing Bitcoin to the AI's as a whole. AI as a whole survived the winter but a random implementation from 1985 did not. My comment was comparing Bitcoin as an implementation of a cryptocurrency to previous implementations of AI that have generated hype and then became either irrelevant or obsolete.

Correct me if I'm wrong, but wasn't back-propagation one of the major techniques in the AI of the 80s? It's 90% of mainstream AI today. Activision was one of the major publishers prior to the video game crash. Today it has the largest share of the market. Just because some things fall out of favor doesn't mean all of them do, especially the most popular ones.

Re: Worries Grow That the Price of Bitcoin Is Being Propped Up

#168

Post by kahnpro » Thu, Feb 01, 2018, 5:19 PM UTC

superkuh wrote: post #2

First they ignore you, then they laugh at you, then they fight you, then you win.

Or, in reality:

First they ignore you, then they laugh at you, then they fight you, then you lose.

Re: Worries Grow That the Price of Bitcoin Is Being Propped Up

#169

Post by jnordwick » Thu, Feb 01, 2018, 5:20 PM UTC

ProblemFactory wrote: post #162

jnordwick wrote: post #103

Here a possible explanation on what Tether is doing and the economics behind why there is such an incentive behind pump and dump BTC. I think they are running a currency board pegging USDT to USD, and then using the BTC gained to push up BTC even further. Part of the idea of a currency is a stable value, that means supply and demand need to be matched. With a fixed quantity such as all the common cryptos, when demand…

I don't understand why Tether would be doing all that. They could have a very simple business model: 1. Accept USD and issue USDT in return, 2. Buy US Treasury bonds, which yield 1.5-2.5% for 3 month to 5 year bonds, 3. If people cash out their USDT later, Tether gets to keep the interest profit. There is essentially zero risk: as they are buying USD bonds, they always keep their principal, and no exposure to currenc…

> Do you think that Tether got greedy, invested its USD reserves in more risky assets

Yes. Obviously there are simpler ways to run a scam, but not as profitable.

I also think that this might not have started out as a fraud. Madoff didn't original. I think they feel into this sort of thing.

Re: Worries Grow That the Price of Bitcoin Is Being Propped Up

#170

Post by api » Thu, Feb 01, 2018, 5:20 PM UTC

conanbatt wrote: post #131

simias wrote: post #84

The somewhat ironic part is that one of the core concepts of Bitcoin is that you can't counterfeit it. You can mathematically prove how many coins you own, if somebody sends you 3 BTC then once it's been validated on the blockchain you know that the money is now yours, they can't have lied, it can't bounce like a cheque Except this Bitfinex thing shows that while an amount of bitcoin can't be manipulated or counterfe…

The most interesting thought to me right now is how the situation will develop if or bitfinex/tether crashes the market hard. I am not a fan of the SEC getting involved. Taking crypto as an experiment, I think it is better for the market to take a hit and then find organic solutions. If the SEC gets involved and busts bitfinex/tether, the community loses the opportunity to become 'unbailable'. Yes , people will lose…

I wish people would find organic solutions, but history shows that people reliably fall for the same scams over and over and over again. Gambling is one of the oldest economic activities and remains as profitable as ever.

I've been shocked before at how little due diligence large investors sometimes do, especially when a mania is in effect. These are professionals whose job it is to invest wisely. What do you think the average person who is ignorant of the depth and complexity of finance is going to do? Are they even qualified to evaluate complex financial products?