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Post-script: Is this good news for Bitcoin? Oh this is great news for Bitcoin. If you don't believe Bitfinex's $600 million in liabilities are worth a copper sh

Post-script: Is this good news for Bitcoin? Oh this is great news for Bitcoin. If you don't believe Bitfinex's $600 million in liabilities are worth a copper shilling, the only option for getting your value out of Bitfinex is to swap your liability for Bitcoin, which drives up the price of Bitcoin at the margin. Correct me if I'm wrong here, but this seems to be an argument for BTC/USD going up on Bitfinex -- but not necessarily elsewhere. Is the market failing to price in the fact that "USD on account at Bitfinex" has a value which is not identical to that of "USD in a regulated US bank account"?

patio11 9y ago
Yep, you'd expect to eventually see a sustained divergence to price in an elevated level of counterparty risk (like we saw back at Mt. Gox). In the short run, though, arbitrage bots gonna arbitrage.
- cperciva 9y ago
  In the short run, though, arbitrage bots gonna arbitrage. Don't people who run arbitrage bots usually understand concepts like counterparty risk? Do they not realize that by moving money into Bitfinex they're potentially acquiring a large amount of assets which will end up being devalued?
  - ThrustVectoring 9y ago
    It depends on the experience level of people running them. Cryptocurrencies have a good deal of enthusiasts YOLO-ing on them, as far as I can tell.
    - askmike 9y ago
      Can confirm: I created an open source TA tool[1] for crypto markets that can function as a trading bot. If only I got a penny every time someone emailed me saying they are total beginners, looking for help installing it and hooking it up to their $xx,xxx account. [0] https://gekko.wizb.it/ https://gekko.wizb.it/
      - lawlessone 9y ago
        interesting branding :)
  - xapata 9y ago
    It might be easier to commit money to an arbitrage bot than to understand the risks involved.
gnarbarian 9y ago
Poloniex trades USDT for quite a few ccs https://poloniex.com/exchange#usdt_str https://poloniex.com/exchange#usdt_str
panarky 9y ago
Oh this is great news for Bitcoin If the price of Bitcoin has been inflated by 600 million USD that doesn't really exist, then when this unwinds it will be bad news for Bitcoin.
- jerkstate 9y ago
  that's about 0.6% of the market cap of bitcoin
  - dlp211 9y ago
    And a whole lot of trust.
  - bufferoverflow 9y ago
    You can't compare money and market cap directly. Millions of dollars can move the market cap by billions. It's because the books on exchanges are relatively thin.
  - barrkel 9y ago
    Price is set by marginal transactions, not the amount of money converted over time.
  - jack_pp 9y ago
    "market cap" is a very bad representation of the overall value which is impossible to actually estimate. try selling 600 million worth of btc and see how that cap changes.
    - cloakandswagger 9y ago
      Dump large amounts of ANY asset and it will crash. It's only crypto that gets accused of having a "fake" market cap though.
      - standupstandup 9y ago
        It's only crypto that uses the term "market cap" to mean "outstanding crypto-tokens * price". That isn't what the term means in conventional finance. It's normally applied to shares.
Kazamai 9y ago
Trust in exchanges is what keeps Bitcoin prices up. This is bad for Bitcoin and all digital assets.

patio11 9y ago

Yep, you'd expect to eventually see a sustained divergence to price in an elevated level of counterparty risk (like we saw back at Mt. Gox). In the short run, though, arbitrage bots gonna arbitrage.

cperciva 9y ago
In the short run, though, arbitrage bots gonna arbitrage. Don't people who run arbitrage bots usually understand concepts like counterparty risk? Do they not realize that by moving money into Bitfinex they're potentially acquiring a large amount of assets which will end up being devalued?
- ThrustVectoring 9y ago
  It depends on the experience level of people running them. Cryptocurrencies have a good deal of enthusiasts YOLO-ing on them, as far as I can tell.
  - askmike 9y ago
    Can confirm: I created an open source TA tool[1] for crypto markets that can function as a trading bot. If only I got a penny every time someone emailed me saying they are total beginners, looking for help installing it and hooking it up to their $xx,xxx account. [0] https://gekko.wizb.it/ https://gekko.wizb.it/
    - lawlessone 9y ago
      interesting branding :)
- xapata 9y ago
  It might be easier to commit money to an arbitrage bot than to understand the risks involved.

gnarbarian 9y ago

Poloniex trades USDT for quite a few ccs https://poloniex.com/exchange#usdt_str https://poloniex.com/exchange#usdt_str

panarky 9y ago

Oh this is great news for Bitcoin If the price of Bitcoin has been inflated by 600 million USD that doesn't really exist, then when this unwinds it will be bad news for Bitcoin.

jerkstate 9y ago
that's about 0.6% of the market cap of bitcoin
- dlp211 9y ago
  And a whole lot of trust.
- bufferoverflow 9y ago
  You can't compare money and market cap directly. Millions of dollars can move the market cap by billions. It's because the books on exchanges are relatively thin.
- barrkel 9y ago
  Price is set by marginal transactions, not the amount of money converted over time.
- jack_pp 9y ago
  "market cap" is a very bad representation of the overall value which is impossible to actually estimate. try selling 600 million worth of btc and see how that cap changes.
  - cloakandswagger 9y ago
    Dump large amounts of ANY asset and it will crash. It's only crypto that gets accused of having a "fake" market cap though.
    - standupstandup 9y ago
      It's only crypto that uses the term "market cap" to mean "outstanding crypto-tokens * price". That isn't what the term means in conventional finance. It's normally applied to shares.

Kazamai 9y ago

Trust in exchanges is what keeps Bitcoin prices up. This is bad for Bitcoin and all digital assets.