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'You can bet that if (I mean when) Bitcoin deflates, the loss is going to be mostly soaked up by the people who’ve bought in recently, the 95%-plus of ho
by guiomie 9y ago
'You can bet that if (I mean when) Bitcoin deflates, the loss is going to be mostly soaked up by the people who’ve bought in recently, the 95%-plus of holders who collectively own less than 5% of BTC.' ... Can someone help me understand this? How can the 5% buy back 95% of the bitcoin if the 95% tries to cash out? The 95% can't cash out no?
- wvenable 9y agoThose who bought bitcoin for considerably less years ago aren't going to lose as much real money as those buying in right now while it's high.
- cowsandmilk 9y agoI think what the article is saying is that 5% that own 95% didn't buy in at inflated prices. Those who own just 5% of bitcoins likely bought high, so they will be in the red on a crash. Those with more coinage tend to have bought low and will still be in the black if the market crashes. E.g. the Winklevoss twins bought 120,000 bitcoins at $10. If the market crashes to $1,010 from today's $16-17,000, they'll still be in the black by $120MM. Sure, on paper they'll have lost a billion dollars, but they're still not hurting.
- usrusr 9y agoNot being able to cash out is the entire point of a crash. Imagine the mathematical edge case of an infinitely fast crash, BTC becoming instantly worthless. In that situation, the 4% who still own almost all of the then-worthless BTC, if they did not fail to play their cards right, will already have almost all the paper money that the 95+% gave them over the course of building their modest "bitcoin fortunes" (though much of that paper money will already be burnt on ASICs and energy). The real crash will be an approximation of that hypothetical instant crash model, with individual outcomes based on quick and correct identification of the crash and (logical and: you need both to succeed) preferred access to the last round of buyers.