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Worries Grow That the Price of Bitcoin Is Being Propped Up

nytimes.com

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

#301

Post by mrhappyunhappy »

JulianMorrison wrote: post #157

Bitcoin is a system where you can have reasonably strong trust in the ledger and absolutely no trust in any other part of the market at all. It's a demonstration in practise that pure unregulated trade in the digital equivalent of used unmarked bills leads to a broken market where literally everything is a scam, crime pays, and meaningful business cannot be transacted. Its value is being propped up beyond this techni…

So if I request a payment in Bitcoin and someone fulfills my request, this is not meaningful business? How is everything a crime? What are you taking about???

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

#302

Post by mrhappyunhappy »

JulianMorrison wrote: post #271
jebeng wrote: post #208

Earlier quoted context omitted.

In what way is a transparent blockchain where every transaction is recorded and fully public analogous to unmarked bills?

Way to pick out a non-central point. But the answer is that cash and bitcoins are intrinsically self-authenticating but not owner-identified and do not rely upon a credit card / bank-account facility which can be shut down by authorities if it is being misused.

Here's a thought: if you bought Bitcoin with Fiat it is 100% identifiable to you. Please learn about blockchains before you talk.

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

#303

Post by mrhappyunhappy »

kelvin0 wrote: post #130

My question is: what is the value of a Bitcoin? It looks to me like a great way to transfer currency and facilitate exchange of goods, but not much more than that. So 'investing' in this digital currency itself does not make much sense to me, because intrinsically it has no 'real' value. I might be misinformed about the subject, in which case I would gladly like to be shown my error. For example, why don't I invest i…

The value of Bitcoin is in the global store of value. It is the network itself and the trust put into this network that gives it value, much the same as your trust in your local currency except on a global scale which makes it all that more valuable - this is without even going into the topic of trust and central authority.

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

#304

Post by rebuilder »

cma wrote: post #138
rebuilder wrote: post #48

Earlier quoted context omitted.

How would they fake the price while allowing trades and BTC withdrawals?

https://en.wikipedia.org/wiki/Mt._Gox

I remember mt. gox very well. They started having withdrawal delays, and then halted withdrawals of BTC as well as USD altogether, precisely because keeping withdrawals open would have been so expensive as to be impossible. I'm saying Bitfinex has no magic way around that, either.

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

#305

Post by leereeves »

mrhappyunhappy wrote: post #302
JulianMorrison wrote: post #271

Earlier quoted context omitted.

Way to pick out a non-central point. But the answer is that cash and bitcoins are intrinsically self-authenticating but not owner-identified and do not rely upon a credit card / bank-account facility which can be shut down by authorities if it is being misused.

Here's a thought: if you bought Bitcoin with Fiat it is 100% identifiable to you. Please learn about blockchains before you talk.

Your real identity isn't in the blockchain. You can only be identified if the identity of whoever you bought from is known, they know your identity, and they can be induced to share it, or if the transaction can be identified and you can be tracked from the transaction.

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

#306

Post by rebuilder »

amluto wrote: post #280
rebuilder wrote: post #48

Earlier quoted context omitted.

How would they fake the price while allowing trades and BTC withdrawals?

I can think of several: - An exchange could lie about the trade ticker. That's easy. I don't know what kind of ticker, if any, Bitfinex publishes or whether the market cares about the ticker. - An exchange could lie about the market data, especially if the exchange has a separate protocol for actual users and for the public at large. It's easy for an exchange to fail to publish an order that should be on the books, a…

I admit I've kind of lost track of the argument you're making here.

We're talking about why there is no premium on BTCUSD sold on BFX. If confidence in BFX having the reserves they claim to have drops, traders will want to get out, which in this case means buying cryptocurrency other than Tether. [1]

Outright faking the ticker is, IMO, not realistic for an exchange with as many users as BFX has. The discrepancy would stick out like a sore thumb.

They could raise BTC prices on their own exchange using USDT, which they control and can create at will. That's what this whole discussion is about, in the larger context. But that would, again, lead to a premium on BFX, which isn't there.

They would therefore need to be suppressing the price, which they could do by cooking their own books, selling BTC they don't actually hold. This would be very foolish, as they'd be creating an exploitable market inefficiency. People would buy on BFX and sell elsewhere, and slowly (or very quickly) BFX's reserves would diminish until they would have to stop processing withdrawals of BTC. See mt. gox.

[1]Of course, since other exchanges use USDT trading as well, it's possible this damps price premiums somewhat. But you'd still expect a premium on BFX et al. compared to, say, Bitstamp.

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

#307

Post by tim333 »

wcoenen wrote: post #285
nickbauman wrote: post #186

Earlier quoted context omitted.

The problems we're seeing with cryptocurrencies are utterly unsurprising if you know what money really is and how it actually works. I think people who are excited about cryptocurrencies assume that money is merely a tool to facilitate transactions between parties of people. The fundamental model of this is two people bartering goods, lol, in some sort of imagined "forest primeval" before money was invented. That mon…

> if you know what money really is and how it actually works OK, I'll bite. What is money really and how does it actually work?

>What is money really and how does it actually work?

On of the most interesting ideas I've read on this is from Debt The First 5000 Years, written by an anthropologist who took the approach of studying how societies actually use money rather than the economists approach of coming up with theories without much looking at real people.

Basically he says the idea that it originated from barter is pretty much never found in the historical record. 'Primitive' societies tend more to tally favours so you give someone food one day, it's remembered and they help you fix your roof another, without any formal currency measure. Formal currencies were often forced on people with threats of violence to get the natives to do stuff. Say you want to raise an army you declare a tax on everyone of so many coins which they can earn by feeding or serving in your army and people who don't come up with the tax are attacked in some manner.

Or you come up with some debt everyone owes and that kind of thing. Eg from the book

>In 1895, for example, France invaded Madagascar...

>...and declared the country a French colony. One of the first things General Gallieni did after “pacification,” as they liked to call it then, was to impose heavy taxes on the Malagasy population, in part so they could reimburse the costs of having been invaded...

leading on to in the modern day:

>But owing to IMF-imposed austerity programs, the government had to cut the [malaria] monitoring program. Ten thousand people died. I met young mothers grieving for lost children...

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

#308

Post by tim333 »

rst wrote: post #234
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…

"Of course maybe they're not actually crooks and they do have the money." Well then, an audit by competent third parties, inspecting where they got their funds, how much they actually have on hand, and whether it covers all potential liabilities (including calls on the supposedly dollar-backed tethers) would go a long way to clearing up the matter. Bitfinex announced an audit with great fanfare early last year. They…

Or they may be crooks and also have the money. I suspect that with people selling bitcoins for tether they didn't bother changing the bitcoins into usd but thought we can hold these things while they go up and pocket the difference. But if they've been smart with bitcoin trading they may be well ahead.

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

#309

Post by tim333 »

Alex3917 wrote: post #147
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…

Keep in mind that Bitfinex can have the money and still be crooks. The feds probably care more about money laundering than they do about whether or not the money actually exists. Even if all the money behind Tether is real, the end result for the markets may be the same.

It would be much less of a disruption if they didn't go bust.

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

#310

Post by tim333 »

mtgx wrote: post #41
jandrese wrote: post #7

“It’s a signal to the market of what those who have scrutinized the situation already believe: There is a problem here,” said Jill Carlson, a former trader at Goldman Sachs who now consults with a variety of virtual currency companies. “The dissolution of a relationship between an auditor and a company is very rarely a good sign that the company is behaving in accordance with market best practices.” When you're getti…

And yet they were able to print like 800 million USDT a month after being subpoenaed by the US government. Strange, no?

I'm not sure the US govt has any direct jurisdiction to stop them. And the investors receiving the USDT probably weren't aware of the subpoena.
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