Cryptocurrencies

[Spekulatius]

Weekends in crypto are always like Wild West, I am guessing this is because institutional  players are not participating and all you have got is a bunch of gunslingers that are buying and selling on their mobile phones while gulping white claws or harder stuff.

 

BTC down ~11% as I write this while drinking Cabernet like a boomer. If you are trader, this is probably more a feature than a bug.

[Castanza]

57 minutes ago, RichardGibbons said:

I'm not that libertarian relative to others on the board, but I'm still not a fan of the argument that crypto should be banned because it makes illegal things easier. I can see why a state would say that, but as an individual, I think there's value in currencies not controlled by the state.

Because even if you think that the state is completely trustworthy, you could be wrong. And, if there is a way for individuals to remove their assets from state control, then the state is less likely to try to implement an oppressive system knowing that the people have an alternative.

Plus, just because something is the law doesn't make it right. For instance, the Nazis passed a bunch of laws expropriating Jewish wealth. Even if a Jew could flee Germany, they wouldn't be able to take their money with them. If cryptocurrencies existed then, the Nazis might still have tried the same thing, but wouldn't have been nearly as successful.

And maybe you don't think that can happen here, but we already have laws like civil forfeiture. The government can and does seize assets based on suspicion of criminal activity (and for assets like cash, its simple existence seems to often be considered sufficient "evidence" that the asset was acquired through criminal activity.) Effectively, civil forfeiture laws allow the police to steal any large sums of cash that that they happen to stumble upon. So we're part way there.

So, I understand why the government would want to eliminate a currency that limits its ability to oppress people. But as an individual, it seems like a good thing that a currency exists that limits the extremes of states' control.

You can hold both views simultaneously. I think the idea of crypto is great. But I think it’s highly likely the govt cracks down on it hard. Criminals always find a way, sure crypto provided a new avenue but really it’s a litmus test for how secure and anonymous it actually is. Hell the Taliban has been using Monero for quite some time. 

[Fly]

1 hour ago, Spekulatius said:

Weekends in crypto are always like Wild West, I am guessing this is because institutional  players are not participating and all you have got is a bunch of gunslingers that are buying and selling on their mobile phones while gulping white claws or harder stuff.

 

BTC down ~11% as I write this while drinking Cabernet like a boomer. If you are trader, this is probably more a feature than a bug.

The Weekend Dump has been a thing for a long time. I'd love to see some data to backtest the "Sell on Thursday and go away" theory.

[Spekulatius]

In my opinion, if crypto becomes large, it will be regulated by governments, it‘s that simple. As long as crypto stayed small in terms of total transaction value or total market cap relative to the government sponsernd currency, it can stay under the radar.

Now, that the cumulative market cap has cracked 1T in USD value however, it has become a factor and attracts attention because they basically become a competing currencies. No government in the world gives up control over their currency without a fight.

 

The reasons are many - if  crypto becomes more valuable and Acts/Substituts  currency, it is like printing native currency and causing inflation without the government benefiting from it.

The government also will lose control over payment flows with the obvious effect of benefiting the underground economy and tax evasion and organized crime.

For those reasons, government have an incentive to keep crypto small.

Governments cannot really eliminate crypto, but they can probably limit the total size (in terms of market cap) by discouraging institutions from using and owning them by various means. Institutional assets are where the real money is and if you prevent adoption by various means, the size of crypto should remain small compared to the flow of government government sponsernd currency and the total market value of printed USD.

Of course I don’t really now what will happen, but I do think any government will absolutely prevent a competing currency from becoming a large factor, if they can. Crypto is just that, a competing currency, printed by private parties often located outside the country borders.

 

 

Edited May 22, 2021 by Spekulatius

[Simba]

Let's assume

- Bitcoin replaces the dollar 

What price is bitcoin at these levels? Is it near the same market cap as US Dollar in circulation? 

Wouldn't the government start regulating it at that time.

Won't this all end badly, with the government coming in and banning / taxing the shit out of bitcoin?

[JRM]

I'm a sucker for a good conspiracy theory.  What do you guys think about this?

 

 

[Spekulatius]

LOL:

https://webcache.googleusercontent.com/search?q=cache:5Z6siy-TQDUJ:https://defi100.org/+&cd=4&hl=en&ct=clnk&gl=au

[changegonnacome]

7 hours ago, Spekulatius said:

LOL:

https://webcache.googleusercontent.com/search?q=cache:5Z6siy-TQDUJ:https://defi100.org/+&cd=4&hl=en&ct=clnk&gl=au

DeFi is the future though i thought 

$32 million stolen from what i can see………..small-ish change in crypto land

Its when the USDT guys or similar disappear with a few billion that folks will wake up to quality of counter parties in this space……….one thing I can say about crypto for sure……..is that all things being equal its improved the average honesty & integrity level in promotional finance………cause every sleazeball I know in the outer edges of my professional circle has migrated over time into crypto/blockchain

[Pelagic]

1 hour ago, changegonnacome said:

DeFi is the future though i thought 

$32 million stolen from what i can see………..small-ish change in crypto land

Its when the USDT guys or similar disappear with a few billion that folks will wake up to quality of counter parties in this space……….one thing I can say about crypto for sure……..is that all things being equal its improved the average honesty & integrity level in promotional finance………cause every sleazeball I know in the outer edges of my professional circle has migrated over time into crypto/blockchain

I was thinking something similar. For example I haven't seen or heard about binary options or had anyone advertising a platform to trade them on since crypto really took off. 

[Spekulatius]

This is what a diversified portfolio of crypto looks like right now:

1) why are all crypto currencies so correlated? One would think that bad news for one crypto currency means it should create a tailwind for those that are “ sound “ but that’s not what is happening.

2) So Dogecoin, a crypto invented as a joke and with inflation build in is #4 by market cap and worth $38B. I guess Elon Musk is the answer?

 

[Fly]

3 hours ago, Spekulatius said:

This is what a diversified portfolio of crypto looks like right now:

1) why are all crypto currencies so correlated? One would think that bad news for one crypto currency means it should create a tailwind for those that are “ sound “ but that’s not what is happening.

2) So Dogecoin, a crypto invented as a joke and with inflation build in is #4 by market cap and worth $38B. I guess Elon Musk is the answer?

 

1- Crypto is still such a young asset class and Bitcoin is the flagship product. Bitcoin has name recognition as well as a relatively simple narrative (digital gold) that few other coins have challenged. Without Bitcoin the rest of the list would wither and die. 

2- Dogecoin shows the power of social media and the collective stupidity of social media. Elon Musk knows his audience and pumps the Doge themes to gain internet clout. His tweets on Bitcoin had similar effects on price. 

[Fly]

In other news, looks like Bitcoin mining power is physically leaving China. Short term bearish long term bullish. Look for some forced selling this week and capitulation. 

 

[Xerxes]

Thanks for posting that, the fact that Bitcoin is not re-absorbing the monetary energy (to use Saylor's wording) that it lost to the alt-coins during a crash is telling.

US Treasuries are the safe haven (among Japanese yen due carry trade) that rally during an equity market dislocation, as investors flee to liquidity. Even the mighty gold usually drops when the actual dislocation takes place.

In the crypto-economy, Bitcoin ought to be the safe haven where these alt-coiners should flee during the dislocation. I was kind of expecting Bitcoin to play that role, I guess it dropped less than others, so maybe still. Though somewhat hard to imagine that a whole host of speculators switching out of Dogecoin into Bitcoin as safe haven, as oppose to the US Dollar.

Of all the Bitcoin and crypto supporters that makes the round in the media, the one i have the most respect is Mike Novogratz. His view always resonates with me, perhaps it is his macro-trader background and the fact that he doesn't get Shakespearean like Saylor. I recall few months ago he was shorting the US Treasury as a hedge against a crypto collapse. This is someone who has been around ... yet is a crypto champion and a long term believer. I would like to invest in him company Galaxy Digital (40% cheaper i think now).

Than there is Jim Cramer who sold most of his crypto on the top of the market and bought a farm. Happy for him. That is also someone who has been around and has a nose for a trade when he sees it and doesn't get carried away. His 'trade' is a good proxy for how the rest of institutional investors probably saw crypto as well. To get on the trade, lever-up and when the time is right to let go.

Lastly, back in 2017, the limited supply narrative of Bitcoin start to be replaced with an actual unlimited supply of crypto-currencies and assets. Same thing is happening now, surely, it takes away from the narrative.

Edited May 24, 2021 by Xerxes

[TwoCitiesCapital]

19 hours ago, changegonnacome said:

DeFi is the future though i thought 

$32 million stolen from what i can see………..small-ish change in crypto land

Its when the USDT guys or similar disappear with a few billion that folks will wake up to quality of counter parties in this space……….one thing I can say about crypto for sure……..is that all things being equal its improved the average honesty & integrity level in promotional finance………cause every sleazeball I know in the outer edges of my professional circle has migrated over time into crypto/blockchain

This is the wild west. Until regulators enter the space, this will continue to happen. No one is safe, but there are certainly protocols that have been around for some time with billions in volume/loans/transactions with limited issues (Aave, Compound, Curve, Yearn, Uniswap, etc). These are probably the safest bets since they haven't yet stolen billions in cash locked into them. 

This is also why I imagine that CeFi will be here for a bit and places like Coinbase and BlockFi will still play a major role going forward.  DeFi has major advantages (like not shutting down during the crypto crash last week - looking at you Coinbase!) but currently has a huge learning curve with limited regulatory infrastructure

 

Edited May 24, 2021 by TwoCitiesCapital

[JRM]

A decent read with added nuance to some of the anti-bitcoin arguments.

 

https://bariweiss.substack.com/p/the-case-against-bitcoin

[TwoCitiesCapital]

8 hours ago, JRM said:

A decent read with added nuance to some of the anti-bitcoin arguments.

 

https://bariweiss.substack.com/p/the-case-against-bitcoin

 I don't really think he makes great cases against Bitcoin. It's especially hard since no sources are cited and no data provided to back any of the claims. It's even harder when I've seen dramatically different figures elsewhere so would like to see him back his claims up. 

Quote

China, Iran and Russia are playing the dominant role in the world of cryptocurrency, In the last week of April, mining pools based in China accounted for roughly 90% of the processing power ("hast rate") 

 

It's hard to get an accurate picture, but most estimates I've seen have it closer to 50% of the hash rate. His 90% estimate is highly suspect without data supporting it - particularly in light of the recent hostilities China has launched against miners specifically.

Regardless of what the actual rate it, most agree that it has been falling over time. Peter Thiel himself has backed a U.S. based miner in West Texas using solar energy. Many other mining co's have announced start-ups including one in a small town in GA next to a hydroelectric station. I'd imagine the guy managing Thiel's money would know this and would have know there has been a multiyear trend in mining moving westward as renewable utilities become more competitive on pricing. 

Quote

What they leave out is that roughly 40% of crypto transactions are used for illicit activity

Again, no source cited and no numbers provided. I've heard many complain about Bitcoin's use in illicit activities, but have rarely seen them come up with a specific amount. He seems to do that here but provides no details. Other crypto advocates (obviously biased) have done similar analysis and determined it was ~1-2% or less. I imagine the truth is somewhere in between and will naturally come down with greater scrutiny and regulations in place. 

And honestly, if this were true, it'd be SOOOO easy to find the criminals using it. Just throw a dart at any Bitcoin transaction. You've got a 2/5 chance of hitting an illegal one and then you can publicly trace all of the transactions from the illicit wallet through various wallets until you can identify the offramp into fiat - most of which now have KYC requirements to have an account and withdraw cash. Or maybe they just spend it all online on porn and VPN's which is another ridiculous claim of his...

Quote

Bitcoin usage for purchases of goods and services has stagnated. The latest data available from Statista suggests that the largest use for Bitcoin in end markets is for prepaid gift cards, followed by payment for internet (largely pornography and gambling) and VPN services.

Again, would love the source. It was my understanding that while many do HODL, many others spend using lightning network for various online payments, large settlements for car/home purchases, and at individual merchants via Square's cash app. It's actually crazy to me to think in a time of accelerating institutional adoption and payment acceptances that we've seen over the past year that we could even make this claim with a straight face. 

Bitcoin on-chain transactions have exploded over the last 2-3 years and have regularly averaged the volumes at the 2017/2018 peak-mania. I don't have the ability to decipher how much of that is trading activity and how much is payments activity, but it certainly shows that transactions as a whole have exploded - which is weird if you actually believe everyone is HODLing/hoarding.

Then again, given the taxable liability many Bitcoiners now face from being so successful, I personally know people borrowing fiat against their BTC for spending needs to avoid the capital gains tax - so maybe there is some truth to payments usage coming down as the price goes up. 

 

 

Edited May 25, 2021 by TwoCitiesCapital

[Spekulatius]

I found this link interesting.

How to kill Bitcoin:

https://joekelly100.medium.com/how-to-kill-bitcoin-part-1-is-bitcoin-unstoppable-code-7a1b366f65ee

Some of things proposed seem a bit far fetched as they requires world wide coordination, but the idea to that a nation state could slow the mining to a crawl and then launch a 51%+ attack seems interesting.

[TwoCitiesCapital]

While we've all been going in circles on Chinese bans (again), illicit transactions (again), energy intensity (again) over the last few days, I wanted to put forward some other headlines: 

1) Goldman Sachs has come out in support of the idea that Bitcoin is it's own unique asset class with its own idiosyncratic risks

2) DBS (largest bank in Singapore) has said Bitcoin is a potentially a better store of value than the USD and "provides opportunity that [fiat] money cannot buy"

3) Ray Dalio, longtime Bitcoin critic, has suggested he now personally owns some and prefers it to bonds on this environment

None of this is "new" news per se - many have suggested BTC is it's own asset class or is an inflation hedge or a store of value. But just demonstrates every day there are more and more prominent people/institutions joining that chorus

[gfp]

I hadn't realized until this morning that Cryptocurrencies were not covered by the 'wash sale' rule.  I wonder how long that lasts and what percentage of US-citizen Crypto trades is actually reported to the IRS.

https://www.cnbc.com/2021/05/25/bitcoin-crash-opens-door-to-a-tax-loophole-for-investors.html

[rkbabang]

 

10 hours ago, Spekulatius said:

I found this link interesting.

How to kill Bitcoin:

https://joekelly100.medium.com/how-to-kill-bitcoin-part-1-is-bitcoin-unstoppable-code-7a1b366f65ee

Some of things proposed seem a bit far fetched as they requires world wide coordination, but the idea to that a nation state could slow the mining to a crawl and then launch a 51%+ attack seems interesting.

 

Exactly.  This is like saying the Government of the United States can destroy every city in China in a single day with nukes.  Sure, but will they?   How likely is this to happen?   There is a big difference between "could" and "likely will".  Can the governments of the world get together to destroy bitcoin?  Absolutely.  Will they?  I still think that it is likely that they won't.  I could, of course, be wrong about Bitcoin (or use of nukes).

[TwoCitiesCapital]

12 hours ago, TwoCitiesCapital said:

Again, no source cited and no numbers provided. I've heard many complain about Bitcoin's use in illicit activities, but have rarely seen them come up with a specific amount. He seems to do that here but provides no details. Other crypto advocates (obviously biased) have done similar analysis and determined it was ~1-2% or less. I imagine the truth is somewhere in between and will naturally come down with greater scrutiny and regulations in place. 

https://www.wsj.com/articles/cryptocurrency-has-yet-to-make-the-world-a-better-place-11621519381

/\/\ Another decidedly negative take on BTC, but at least one that has some numbers behind it and sources cited. Chainalysis, a crypto security firm, estimates ~$5 billion of illicit activity in 2020 which was ~0.3% of total transaction volume (source go.chainalysis.com/2021-crypto-crime-report). 

Meanwhile, Thiel's guy is saying 40% in hit hit-piece while providing nothing to back up that 130x discrepancy. 

 

[Spekulatius]

30 minutes ago, rkbabang said:

 

 

Exactly.  This is like saying the Government of the United States can destroy every city in China in a single day with nukes.  Sure, but will they?   How likely is this to happen?   There is a big difference between "could" and "likely will".  Can the governments of the world get together to destroy bitcoin?  Absolutely.  Will they?  I still think that it is likely that they won't.  I could, of course, be wrong about Bitcoin (or use of nukes).

It's a bit like this century version of the  James Bond "Goldfinger" plot, if you replace gold with bitcoin.

[TwoCitiesCapital]

1 hour ago, gfp said:

I hadn't realized until this morning that Cryptocurrencies were not covered by the 'wash sale' rule.  I wonder how long that lasts and what percentage of US-citizen Crypto trades is actually reported to the IRS.

https://www.cnbc.com/2021/05/25/bitcoin-crash-opens-door-to-a-tax-loophole-for-investors.html

I hadn't realized either! Thanks for sharing!

The downside to how crypto is taxed is very apparent in the Ether/DeFi world. Ether is spent on every transaction and is a consumable input - much like a commodity would be. And every spend of Ether is currently a taxable capital gain - but since the Ether is "spent", that spend can be capitalized into the new basis of whatever activity you're initiating. 

Lots of gains and adjusted basis to keep track of since it's not as simple as looking at a fixed $ commission but rather a fluctuation gas cost and a fluctuating price of Ether. 

Just imagine if real 'gas' was taxed that way - you realized a capital gain/loss on the gasoline used every time you drove somewhere to generate economic activity based on what the price of gasoline was at when used versus when you purchased it. Weird. 

Edited May 25, 2021 by TwoCitiesCapital

[DeepSouth]

If you are willing to trust a 3rd party with API access to accounts/wallets, Cointracker.io is a great platform for cyrpto tax monitoring. 

[changegonnacome]

I think the main point still stands that WSJ article is working towards but didnt quite get there on - the increase in illicit crime facilitated by bitcoin/monero/others has not been met, yet, by truly incremental and wide spread improvement to society’s lot at a large since BTC’s invention. Nobody in my wider circle can say or articulate how the existence of bitcoin has benefited their lives in anyway. Not a single one. Btw just because your cousin Vinny bought an unproductive asset sardine and it went up is not a incremental societial benefit. 

I’m open to the idea that things are still very early and those benefits are yet to come but right now the burden of proof is on bitcoin evangelists because clearly were still in the “show me this makes things better stage” of crypto. I see lots of dreams, lots of tech laser beamed eye optimism and herd seduced by clever technology on the one hand ( a solution looking for a problem) and the usual get rich quick snake oil salesmen riding on the back of the credibility and enthusiasm of the nerds.

Its a fascinating space from sociological perspective and must watch TV……….as the clicks and coverage demonstrates in main stream media and in the twitter-sphere……as someone said before in this thread the only area I might considering investing in is in the ‘picks and shovels’ end but frankly I dont have the stomach to hold my nose and pick up the dollars sitting on the ground. Every time I see a sh!tcoin listed with FIVE zeroes to the right of the decimal point or blatant pump and dump ‘articles’ in coinX publication, or full on scam like moonbois/DeFi100 scam, or thought leaders/ influencers (think Pomp) in this space so happily encouraging & goading their audience to HODL or buy the dip………..I get the same feeling I get when I watch documentaries on the great follies of the past……that human beings enmasse can be so greedy and thoughtless of their fellow man that they’d run over them in the pursuit of adding a half cents to their cents.

In summary I think less of the human race the longer and the more I study the crpyto space. It actually makes me slightly depressed to dig deeper into it and the various schemes and traps set for retail (a lot of its retail audience disgustingly being retail in developing countries with low incomes (Indonesia, Philippines etc.). I get to see where the marketing dollars get spent for every West Coast companies sh!tcoin launch. I want to be clear I think at its core crypto or more correctly blockchain has a dedicated group of honest nerds in love with the possibly of software to solve real world problems and maybe they will….…….in their orbit, attracted by the grayness of regulatory classification, might be assembled one of the highest densities of amoral people ever seen in human history in a single industry with the exception of probably 17th century piracy.

 

P.S. - stuff like the below…….its so accepted even slightly celebrated that the space is rotten top to bottom……its really amazing…..but I guess like a casino you know the game is rigged ….you just hope you get lucky (or your in the RIGHT secret telegram group that isn’t in the bag holder group)

https://twitter.com/twocommapauper/status/1397106939193085952?s=21

 

 

Edited May 27, 2021 by changegonnacome