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Can anyone with a more studied background in economics help hypothesize the after-effects on Bitcoin and other altcoins if this 814M 'digital counterfeiting' fo

Can anyone with a more studied background in economics help hypothesize the after-effects on Bitcoin and other altcoins if this 814M 'digital counterfeiting' for lack of a better term, is true? For example, 800M has been artificially pumped into the Bitcoin and general crypto ecosystem, like air in a bicycle tire. And this is a game theory sort of question, too: If this is true: now, what?

empath75 9y ago
If people want to pull dollars out of bitfinex, and can't redeem tethers, then the price of bitcoin will skyrocket on bitfinex due to tether hyperinflation (we're probably already seeing that, and have been for months). People will be buying bitcoin at basically any price on usdt denominated exchanges, and start moving them to other exchanges to sell. At that point, you'll start to see price differences between usdt and usd exchanges, as the bitcoin price skyrockets up on bitfinex and drops on gdax. Probably at some point, bitfinex will become insolvent and shutdown withdrawals entirely. Not sure what will happen then-- probably the price of bitcoin collapses in a general panic.
- mancerayder 9y ago
  Bittrex also uses USDT as their base, though. And I don't know who else. I think this is bigger than Bitfinex.
- rsynnott 9y ago
  Note that this basically happened with mtgox. It took a surprisingly long time to shake out.
python-guy-vt 9y ago
> For example, 800M has been artificially pumped into the Bitcoin. This is impossible with Bitcoin. Bitcoins can only be created via mining, Bitcoin mining is a proof-of-work crypto currency. Crypto's typically use proof-of-work or proof-of-stake in order to have value. Tether, on the other hand, seems to have no proof-of-work or proof-of-stake at all and just claims to have a 1:1 ratio of their currency to dollars. Seems there is some skepticism around this claim of a 1:1 ratio. If Tether, was found out to be a fraud I think it would have minimal impact on real Crypto currencies that use proof-of-work or proof-of-stake. The only negative impact would be the people that exchanged a real Crytpo for Tether might be burned and decided not to use/accept Crypto at all, which could impact the larger Crypto market a bit, but IMO I don't think it would shake it too badly, unless of course the main stream media took the story and click baited it with crappy headlines and poorly written articles that would falsely come to the conclusion that such a artificial pump is possible with real Crypto.
- aaavl2821 9y ago
  The statement that "this is impossible with bitcoin" is false. While initially bitcoins are issued as proof of work, as soon as there is a somewhat liquid secondary market then bitcoin becomes a financial asset with a value determined by the market. That value is effectively completely indepdent of any "inherent value" and fully determined by supply and demand
  - python-guy-vt 9y ago
    > fully determined by supply and demand With bitcoin you cannot manipulate the supply, therefore you can't magically create $800M out of thin air.
    - querulous 9y ago
      that's not how markets work. bitcoin has no intrinsic value, just a exchange rate with other things
      - python-guy-vt 9y ago
        that is exactly how markets work. > bitcoin has no intrinsic value, just a exchange rate with other things 1. It has proof-of-work, which gives it value 2. Supply of the coin and demand for the coins determine the price. The only thing that can vary widely is the demand, the supply cannot be fucked with (unlike fiat currency). It is impossible for whole bunch of new coins to suddenly appear out of thin air. There is no way to artificially inflate the supply.
        querulous 9y ago
        we're not talking about the number of bitcoins though, we're talking about it's value
        python-guy-vt 9y ago
        you can't talk about value without talking about supply
ajcodez 9y ago
Look to history: https://99bitcoins.com/price-chart-history/ https://99bitcoins.com/price-chart-history/ Speculation: When Mt Gox froze withdrawals and closed it either triggered or participated in a massive correction. If Tether allegations are true, I would speculate increased volatility in a bearish direction. It should start with rising volume on USD exchanges and shrinking volume on USDT exchanges as traders withdraw BTC, USD/USDT volatility on Kraken, BTC/USD and BTC/USDT price diverging across exchanges. Chicago futures if they open will set the reference price. If BTC anchor price is volatile alts will probably get hurt. KRW fiat rates will probably be affected. If it dips in the long run it could be a good buying opportunity.

empath75 9y ago

If people want to pull dollars out of bitfinex, and can't redeem tethers, then the price of bitcoin will skyrocket on bitfinex due to tether hyperinflation (we're probably already seeing that, and have been for months). People will be buying bitcoin at basically any price on usdt denominated exchanges, and start moving them to other exchanges to sell. At that point, you'll start to see price differences between usdt and usd exchanges, as the bitcoin price skyrockets up on bitfinex and drops on gdax. Probably at some point, bitfinex will become insolvent and shutdown withdrawals entirely. Not sure what will happen then-- probably the price of bitcoin collapses in a general panic.

mancerayder 9y ago
Bittrex also uses USDT as their base, though. And I don't know who else. I think this is bigger than Bitfinex.
rsynnott 9y ago
Note that this basically happened with mtgox. It took a surprisingly long time to shake out.

python-guy-vt 9y ago

> For example, 800M has been artificially pumped into the Bitcoin. This is impossible with Bitcoin. Bitcoins can only be created via mining, Bitcoin mining is a proof-of-work crypto currency. Crypto's typically use proof-of-work or proof-of-stake in order to have value. Tether, on the other hand, seems to have no proof-of-work or proof-of-stake at all and just claims to have a 1:1 ratio of their currency to dollars. Seems there is some skepticism around this claim of a 1:1 ratio. If Tether, was found out to be a fraud I think it would have minimal impact on real Crypto currencies that use proof-of-work or proof-of-stake. The only negative impact would be the people that exchanged a real Crytpo for Tether might be burned and decided not to use/accept Crypto at all, which could impact the larger Crypto market a bit, but IMO I don't think it would shake it too badly, unless of course the main stream media took the story and click baited it with crappy headlines and poorly written articles that would falsely come to the conclusion that such a artificial pump is possible with real Crypto.

aaavl2821 9y ago
The statement that "this is impossible with bitcoin" is false. While initially bitcoins are issued as proof of work, as soon as there is a somewhat liquid secondary market then bitcoin becomes a financial asset with a value determined by the market. That value is effectively completely indepdent of any "inherent value" and fully determined by supply and demand
- python-guy-vt 9y ago
  > fully determined by supply and demand With bitcoin you cannot manipulate the supply, therefore you can't magically create $800M out of thin air.
  - querulous 9y ago
    that's not how markets work. bitcoin has no intrinsic value, just a exchange rate with other things
    - python-guy-vt 9y ago
      that is exactly how markets work. > bitcoin has no intrinsic value, just a exchange rate with other things 1. It has proof-of-work, which gives it value 2. Supply of the coin and demand for the coins determine the price. The only thing that can vary widely is the demand, the supply cannot be fucked with (unlike fiat currency). It is impossible for whole bunch of new coins to suddenly appear out of thin air. There is no way to artificially inflate the supply.
      - querulous 9y ago
        we're not talking about the number of bitcoins though, we're talking about it's value
        python-guy-vt 9y ago
        you can't talk about value without talking about supply

ajcodez 9y ago

Look to history: https://99bitcoins.com/price-chart-history/ https://99bitcoins.com/price-chart-history/ Speculation: When Mt Gox froze withdrawals and closed it either triggered or participated in a massive correction. If Tether allegations are true, I would speculate increased volatility in a bearish direction. It should start with rising volume on USD exchanges and shrinking volume on USDT exchanges as traders withdraw BTC, USD/USDT volatility on Kraken, BTC/USD and BTC/USDT price diverging across exchanges. Chicago futures if they open will set the reference price. If BTC anchor price is volatile alts will probably get hurt. KRW fiat rates will probably be affected. If it dips in the long run it could be a good buying opportunity.