Cryptocurrencies

[rkbabang]

On 7/18/2021 at 11:06 AM, SharperDingaan said:

it is not unreasonable to think of it a grey swan event; 

 

I think grey swan event is going too far.  Everyone's been talking about this for 3 or 4 years now. This is about as far from unexpected or out of the blue as you can get.    At this point if Tether never blows up it will shock more people than not.

Edited July 19, 2021 by rkbabang

[JRM]

1 hour ago, rkbabang said:

 

I think grey swan event is going too far.  Everyone's been talking about this for 3 or 4 years now. This is about as far from unexpected or out of the blue as you can get.    At this point if Tether never blows up it will shock more people than not.

 

Based on comments I've seen elsewhere I get the impression a large percentage of the hodlers are very naive to this risk.  The Bitcoin maximalists aren't touching the issue, either, which supports your argument that people "in the know" won't be surprised.  The fact that Michael Saylor is telling people to mortgage their house and buy Bitcoin while ignoring red flags such as this makes me think much less of the maximalist crowd.

[SharperDingaan]

A stable coin blow up is pretty much the definition of a grey swan event 

https://www.investopedia.com/terms/g/grey-swan.asp

 

'In other words, it is a risk with a potentially large impact but a low perceived likelihood of happening. Because there is a slight chance the event will occur it should be anticipated, particularly as it could shake up the world'

 

The pin prick could be anything. Tether is just one of many possible events, any kind of failure that 'breaks the buck' ANYWHERE will do it as well. 

 

SD

 

Edited July 20, 2021 by SharperDingaan

[fareastwarriors]

Couldn't repurpose them? Seems awfully wasteful.

 

 

 

Malaysian authorities seized 1,069 bitcoin mining rigs, laid them out in a parking lot at police headquarters, and used a steamroller to crush them.

https://www.cnbc.com/2021/07/19/malaysian-police-steamroll-1point25-million-worth-of-bitcoin-mining-rigs.html

[Pelagic]

21 hours ago, fareastwarriors said:

Couldn't repurpose them? Seems awfully wasteful.

 

 

 

Malaysian authorities seized 1,069 bitcoin mining rigs, laid them out in a parking lot at police headquarters, and used a steamroller to crush them.

https://www.cnbc.com/2021/07/19/malaysian-police-steamroll-1point25-million-worth-of-bitcoin-mining-rigs.html

 

Absolutely absurd. There are tons of gamers that want to buy GPUs but can't because of scalpers/miners, then this is just an extra slap in the face. So many other things you can do with the components. 

 

Quote

Hawari said that electricity theft by bitcoin miners led to three houses burning down in the city.

 

At least auction them off and let the proceeds go to rebuilding the homes. 

[rkbabang]

It isn't about justice, which would entail making injured parties whole.  It is about grandstanding. It is about a show of power, letting people know who's boss.  In short, it is government. It has no incentives to even try to do what's right.  It's just how it works.  They removed millions of dollars worth of valuable computer equipment from the world, while the injured parties remain injured. They are almost as bad as the criminals themselves.

[TwoCitiesCapital]

https://news.bitcoin.com/circle-publishes-usdc-attestation-reserve-report-reveals-segregated-accounts-in-usd-denominated-assets/

 

USDC also owns corporate bonds and commercial paper. Must not be backed by USD as stated.  

 

/Sarcasm

[SharperDingaan]

And it all ASSUMES the securities will NOT be frozen, should there be an 'event'. Any kind of 'liquidity' restriction (frozen account) and they break-the-buck. Do exactly what the US Fed tells you to, when they tell you, or they break you? Not quite the investment that you thought you had??

 

SD

 

 

Edited July 21, 2021 by SharperDingaan

[wachtwoord]

21 hours ago, rkbabang said:

It isn't about justice, which would entail making injured parties whole.  It is about grandstanding. It is about a show of power, letting people know who's boss.  In short, it is government. It has no incentives to even try to do what's right.  It's just how it works.  They removed millions of dollars worth of valuable computer equipment from the world, while the injured parties remain injured. They are almost as bad as the criminals themselves.

 

They are (much) worse. Criminals generally don't pretend to be the good guys.

[TwoCitiesCapital]

https://www.whatbitcoindid.com/podcast/gradually-then-suddenly-pt-2-bitcoin-first-principles

 

Probably the best conversation I've heard on Bitcoin as a currency as opposed to simply a store of value. Discusses the fundamentals of what characteristics make a good currency and then discusses why Bitcoin compares favorably to the alternatives - and with currencies it tends to be near winner take all as we're all incentivized to use the same means of payment. 

 

Not a Bitcoin maximalist myself, but definitely moved closer that direction after hearing this discussion. 

[JRM]

On 7/21/2021 at 11:30 AM, TwoCitiesCapital said:

https://www.whatbitcoindid.com/podcast/gradually-then-suddenly-pt-2-bitcoin-first-principles

 

Probably the best conversation I've heard on Bitcoin as a currency as opposed to simply a store of value. Discusses the fundamentals of what characteristics make a good currency and then discusses why Bitcoin compares favorably to the alternatives - and with currencies it tends to be near winner take all as we're all incentivized to use the same means of payment. 

 

Not a Bitcoin maximalist myself, but definitely moved closer that direction after hearing this discussion. 

 

Good interview. I enjoyed the perspective.

 

Specific to Bitcoin, how can it be a new monetary system if a few whales control the majority of the Bitcoins?  Why does it make sense for any new monetary system to have so much inequity built in from the start.

 

I also don't like all of the the promotional content and daily affirmations I see from the maximalist crowd.  Really makes me think we're in some stage of a mania rather than any kind of utility driven market pricing.

 

There was another recent interview on the Pomp podcast I listened to with Greg Foss and David Collum.  I thought Collum was bout to 'red pill' Pomp and Foss about the silver supply\demand situation, but they got him off track.  Too bad.

[TwoCitiesCapital]

18 minutes ago, JRM said:

 

Good interview. I enjoyed the perspective.

 

Specific to Bitcoin, how can it be a new monetary system if a few whales control the majority of the Bitcoins?  Why does it make sense for any new monetary system to have so much inequity built in from the start.

 

I also don't like all of the the promotional content and daily affirmations I see from the maximalist crowd.  Really makes me think we're in some stage of a mania rather than any kind of utility driven market pricing.

 

There was another recent interview on the Pomp podcast I listened to with Greg Foss and David Collum.  I thought Collum was bout to 'red pill' Pomp and Foss about the silver supply\demand situation, but they got him off track.  Too bad.

 

Regarding whales, I don't view the accumulation of Bitcoin by a number of very patient, very forward thinking individuals, a few years back to be a bad thing. As for the inequity - we all had the opportunity to accumulate BTC at much lower prices. The way it was initially distributed was to a handful of hobbyists/experts who were using/testing it (makes sense - couldn't airdrop to the entire population who had no interest or ability to receive it) and since then something like 90% of the coins mined have been sold in the open market. I remember when BTC was $100/coin and thinking it was a bubble. It's no fault of the whales that I'm not a whale today - the fault is my own. That sounds pretty equitable to me. 

 

Also, nobody says the USD is broken because of the wealth accumulated by Zuckerberg, Buffett, Bezos, Page, etc. We can argue about the political system or the tax maneuvers that allowed it, but nobody really blames it on a failure of the underlying currency/unit of account. I don't know why I would view BTC differently. 

 

Lastly, the number of accounts owning less than 10 BTC has been growing nearly every year while the number of whale accounts has been shrinking. "Minnows" now own something like 20% of the all BTC outstanding while the whales (1000 BTC or more) control ~30% of the supply outstanding. Those with between 10-1000 own the remainder.  This is a much fairer distribution than wealth currently denominated in USD. 

 

 

 

 

[rkbabang]

1 hour ago, TwoCitiesCapital said:

Regarding whales, I don't view the accumulation of Bitcoin by a number of very patient, very forward thinking individuals, a few years back to be a bad thing. As for the inequity - we all had the opportunity to accumulate BTC at much lower prices. The way it was initially distributed was to a handful of hobbyists/experts who were using/testing it (makes sense - couldn't airdrop to the entire population who had no interest or ability to receive it) and since then something like 90% of the coins mined have been sold in the open market. I remember when BTC was $100/coin and thinking it was a bubble. It's no fault of the whales that I'm not a whale today - the fault is my own. That sounds pretty equitable to me. 

 

 

Agreed.  I remember when Bitcoin hit $1 for the first time and yet I didn't buy any until it went over $1k then back down to $200.  And even then I didn't buy as much as I should have.  I just dabbled.  It is the greatest investing mistake of my life, because I knew what it would be someday, I just thought that there would be plenty of time.

 

About the whales I like what Michael Malice said in another episode of that "What Bitcoin Did" podcast.

 

"The other good thing about bitcoin is it's allowing the right people to get very very wealthy, very very quietly".  

 

https://www.whatbitcoindid.com/podcast/understanding-anarchism

 

 

[rkbabang]

Amazon is finally getting serious about crypto and hopes to bring it to customers 'as soon as possible,' as it looks to hire a new blockchain lead

https://www.businessinsider.com/amazon-cryptocurrency-seeks-new-blockchain-leader-customers-payments-ecommerce-2021-7

[SharperDingaan]

The NA and Asian FANGs are just pushing the CBs to 'get off the pot'. Either issue CBDC soon, or we allow payment in BTC and enable a bypass of your currency controls. If Amazon can accept BTC, and Asian counterparts are not allowed to - Asias economies will go into recession as business moves to Amazon.

 

The obvious target is China, and acceleration of the CBDC solution to keeping the Yuan and Renminbi seperate.

Work with the rest of the world or do yout own thing; your choice, but the clock is ticking.

 

A little anarchy is not a bad thing!

 

SD

 

 

[ValueArb]

On 6/30/2021 at 5:59 PM, rkbabang said:

Well said SD. Tether May be a fraud. People have suspected as much for years. I don’t use tether, I don’t hold tether. If and/or when it collapses people who are holding it will lose a lot of money, but I will still have my Bitcoin along with maybe a nice opportunity to buy more cheap.

 

How will Tether collapse without causing substantial drawdowns in BTC and other crypto? What happens to Saylor and other large leveraged holders if BTC drops to $20k or $10k? If he's a billion underwater on his BTC loans, does the the board force liquidate their BTC (Saylor is down close to $500M the last 6 months on BTC)? How many other large holders have substantial margin loans? It seems like a lot of the BTC increase was accompanied by holders margining to buy more.

 

Reading Burry and others I correctly timed the housing bubble. Being unwilling to sell my home, and totally mis-estimating how low housing prices would go, I pulled all my equity out at the peak to invest in the stock market, where I was earning 25%+ returns. Since I planned to stay in my house for decades seemed like a no brainer to sidestep the damage in housing while leveraging cheap money in what had been an easy market for me to make a far higher return.

 

Obviously I didn't understand that the housing collapse would lead to the stock market dropping 50%, and that my portfolio of illiquid micros would do even worse. Owning half as many stocks as I had levered up to buy was painful for a very long time. 

 

A collapse in one large instrument or market frequently bleeds over to other markets. If I owned a significant amount of BTC I'd also want to own a significant number of puts at $10k or $20k to protect me from a rapid unrolling of overleveraged holders, and position me to buy in at the bottom and take advantage of the rebound. 

[ValueArb]

On 7/19/2021 at 9:51 AM, fareastwarriors said:

Couldn't repurpose them? Seems awfully wasteful.

 

 

 

Malaysian authorities seized 1,069 bitcoin mining rigs, laid them out in a parking lot at police headquarters, and used a steamroller to crush them.

https://www.cnbc.com/2021/07/19/malaysian-police-steamroll-1point25-million-worth-of-bitcoin-mining-rigs.html

 

This was a net benefit for BTC miners. I own MARA calls, so first China shuts down their Chinese competitors and now this, it's just making me more bullish on their near term prospects.

[ValueArb]

On 6/29/2021 at 4:37 PM, TwoCitiesCapital said:

 

Why does no one describe money market funds like this? Not a single person has an issue with money market funds doing reverse repos, or owning corporate paper and highly-rated short-term debt instruments. But when Tether does it serves as evidence of fraud and lack of backing? 

 

I don't like Tether. I don't use Tether. I think Tether's backing strategy is questionable and would benefit from greater transparency and regulation like our money market system does. But I do not allege fraud because no evidence of fraud has yet been released and those that latch onto this asset statement as evidence simply demonstrate their misunderstanding of "cash equivalents" in the current fiat backed financial system.  

 

Also, this paper alleges the fraud will be found out in the "deflationary" environment that is about to be unleashed and then highlights 2018 and early 2020 as deflationary environments. Why wasn't the fraud uncovered in either of those episodes? Are 75+% drawdowns peak to trough insufficient to uncover a ponzi scheme? Why would the next one be any different? 

 

 

 

Money market funds are audited. You can be highly confident that the assets are there.

 

One criticism of Tether was that they claimed to own a significant amount of the assets in certain instruments but couldn't be detected doing any transactions in those markets. So maybe there is a suspicion they are now claiming ownership of a wider number of instruments across many larger markets to prevent the fraud from being discovered.

 

Either way, you will only be able to get evidence of fraud post-collapse. Tether could virtually eliminate fraud allegations by undergoing a full audit, the fact they won't do that when a clean audit would be hugely financially beneficial for them makes it highly likely some level of fraud is occurring. My bet is a bunch of related party loans to other crypto companies rather than an outright ponzi.

[TwoCitiesCapital]

On 7/24/2021 at 2:49 PM, ValueArb said:

 

Money market funds are audited. You can be highly confident that the assets are there.

 

One criticism of Tether was that they claimed to own a significant amount of the assets in certain instruments but couldn't be detected doing any transactions in those markets. So maybe there is a suspicion they are now claiming ownership of a wider number of instruments across many larger markets to prevent the fraud from being discovered.

 

Either way, you will only be able to get evidence of fraud post-collapse. Tether could virtually eliminate fraud allegations by undergoing a full audit, the fact they won't do that when a clean audit would be hugely financially beneficial for them makes it highly likely some level of fraud is occurring. My bet is a bunch of related party loans to other crypto companies rather than an outright ponzi.

 

I don't disagree. As mentioned, my best guess is they probably are either lending or comingling the money to/with Bitfinex so Bitfinex can generate a higher yield/return from the cash then would otherwise be earned sitting in cash. 

 

As long as there isn't a problem with Bitfinex and whatever investments they're making, there shouldn't be a problem with Tether. But that's more akin to owning equity in Bitfinex with none of the upside and all of the downside. This is why I won't own it.  

 

Agreed an audit would make likely clear up the uncertainty and it seems they're unwilling to do that which is shady. But I also don't think it's entirely a fraudulent ponzi scheme as they've been through multiple severe corrections (50-80%) and it didn't fall apart. I also don't necessarily think the blow-up of Tether would permanently crater the entire crypto market, but it would obviously be a bad thing for sentiment and flows in the near-term as billions would be eviscerated in potential crypto demand if Tether was unable to maintain the peg. I'd rather it just go quietly into the night as people move towards more transparent and audited options like USDC, GUSD, Dai, Paxos, etc. 

[rkbabang]

3 hours ago, TwoCitiesCapital said:

I'd rather it just go quietly into the night as people move towards more transparent and audited options like USDC, GUSD, Dai, Paxos, etc. 

 

That is definitely the best case scenario, the market choosing less shady options, which could force tether to submit to an audit if they really do have nothing to hide or it will just be out competed if it does have something to hide. 

 

Also I think eventually there will be an official USD coin from the Fed.   If that happens most or all of the USD pegged stable coins will go away, because if you want to convert a crypto to US dollars there will be a direct way to do it.

 

[TwoCitiesCapital]

4 hours ago, rkbabang said:

 

That is definitely the best case scenario, the market choosing less shady options, which could force tether to submit to an audit if they really do have nothing to hide or it will just be out competed if it does have something to hide. 

 

Also I think eventually there will be an official USD coin from the Fed.   If that happens most or all of the USD pegged stable coins will go away, because if you want to convert a crypto to US dollars there will be a direct way to do it.

 

 

CBDCs will only disintermediate stablecoins if they are ERC-20 compliant (or compliant with whatever dominant blockchain/smart contracts exist at that time). Otherwise, the primary use case of stablecoins remains intact - retaining a short-term store of value on blockchain without having to make the trade-off of multiple day length delays in getting money off of, and onto, the blockchain again. 

 

I think the ideal in the crypto industry will be to redefine what is "stable". It's ironic to me that cryptoCURRENCIES rely on the stability of the USD when one of the primary rallying cries of the industry in that the USD is not stable and declines in value. I understand that it is two very separate time frames in consideration, but it's still funny to me.

 

Seems to me that fiat-backed stablecoins currently serve as a "means to an end" and are not fundamentally supported by the overall ethos of the crypto environment. My guess is they won't be around in 10-years regardless of whether or not CBDCs are ERC-20 compliant tokens or not. My guess is that Bitcoin, or some other solution, will have reached the point of such wide acceptance that downside volatility will be tolerable and crypto-native services will have no use for pricing things in fiat anymore. Maybe that is a pipedream, but it certainly seems to be what DAI and other types of services would point to...once backed by something other than 3rd-party, centralized, USD-backed stablecoins for the value peg. 

 

 

[SharperDingaan]

It's more like Etherium creates a new standard that works with CBDC.

Stablecoin itself is just another currency pegged to something (USD). However, national currencies have a CB defending the peg, whereas a stablecoin just has a pile of collateral valued according to the buoyancy of the crypto market. A great deal of money can be made if you can break a CB's currency peg (Ie: Soros, BoE). Breaking a stable coin peg is a lot easier, and only a little less profitable  

 

SD

 

Edited July 31, 2021 by SharperDingaan

[SharperDingaan]

You might want to be out of stablecoin until the discussion paper is released

https://www.reuters.com/article/us-usa-fed-brainard-digital/feds-brainard-cant-wrap-head-around-not-having-u-s-central-bank-digital-currency-idUSKBN2F1038

 

SD

[fareastwarriors]

New SEC Boss Wants More Crypto Oversight to Protect Investors

 

The nation’s top securities regulator has unusual expertise in digital assets, but he says he’s no cheerleader for them—and has no timetable for a Bitcoin ETF.

 

https://www.bloomberg.com/news/articles/2021-08-03/will-government-regulate-crypto-sec-chair-gary-gensler-on-bitcoin-and-oversight?srnd=premium

[Xaston]

On 3/2/2021 at 7:31 PM, Xaston said:

How long before a floor punk is worth more than a Bitcoin?

 

World's best NBA bettor just bid 2.1 million for an alien punk and the bid was not accepted.

 

The answer was not very long, and it's worth WAY more now.  Punk floor is about 144k right now.