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I have to say, the crypto market's strong ties to traditional finance in this crash surprise me. I understand selling off stock because of expected corporate lo

by zionic 7y ago

I have to say, the crypto market's strong ties to traditional finance in this crash surprise me. I understand selling off stock because of expected corporate losses, I don't understand mass conversions to FIAT especially when "print more money" seems to be the fed's response to this.

qqn 7y ago
Exactly
majormajor 7y ago
My take on the selloff is people looking for liquid cash. Very similar to stockpiling home supplies. People are looking for stuff they can use or trade in the very short term because they don't know how bad it would get. It's a lot harder to do that today with crypto. I haven't seen anyone with strong reason to believe that companies are gonna be that much worse off a year from now than they were a month ago, or for the four years after that, so I don't see a reason to sell stocks based on expected company performance anymore than to sell crypto - but in the short term, everyone's stockpiling immediate goods.
- rabuse 7y ago
  Exactly. It's like here in Florida, when the systems go down after a hurricane, cash is king in the digital age.
- Finnucane 7y ago
  That sorta depends. The energy companies are getting squeezed by the oil price war, and they are heavily leveraged and dependent on high prices. A lot of companies loaded up on cheap debt, so the banks are screwed if liquidity issues mean defaults.
- isk517 7y ago
  I wouldn't be surprised if there was significant amount of sell off occurring because people are looking to start stockpiling home supplies. I've known more than a few conspiracy minded people that collect crypto currencies due to a belief that it will be a safe haven in the event of a government collapse, and the current Corona virus panic is probably causing a lot of them to realize that all of the bitcoin in the world may not be enough to get you a single roll of toilet paper if that time ever came.
- agumonkey 7y ago
  IIUC the metatheory is that in times of crisis btc would strengthen and become more fiat than fiat.. so far it's not. But who knows ... maybe people will leverage the events to move forward on crypto in the next weeks...
- comicjk 7y ago
  The average company a few years from now will probably be as profitable as the average company last year. But that's survivorship bias: some of the companies from last year might not be around anymore, and it's hard to predict which. I think that fear might be driving lower valuations.
jfengel 7y ago
One possibility is that it's because the stock market seems like a good buy for speculators right now. The stock market does have an underlying value long-term, in that stocks are pieces of companies that produce products. The true value of that is always uncertain, but various measures indicate that it may be approaching reality (after a long, overheated bull market). Crypto is more purely speculative, with no real underlying value aside from the hope that it will some day become the fiat currency of some nation. (Fiat currencies have a "value" in that they are the only thing a government will accept.) So it's possible that people are seeing bargains in another market. They need to move through fiat currency in order to buy it, but they don't hold it long enough for inflationary measures by central banks to affect it.
helen___keller 7y ago
> especially when "print more money" seems to be the fed's response to this The simple answer is that the quoted text isn't even a concern in your average investors head. Also why gold isn't doing great, and why the US dollar is doing just fine. People are escaping equities specifically, not the dollar. edit: If i had to guess, people are probably looking to maximize cash on hand with the goal of "buying the dip" when it looks like the market is going to bottom out.
rossdavidh 7y ago
Just an hypothesis (which applies to the stock market as well): if you already thought things were overvalued, but were just waiting for the right moment to cash out, then whether this moment makes rational sense or not, you get out now because you were going to get out soon anyway. Also, you may think everyone else is going to be "irrational" in this way, and wish to get out before they do. Sort of like buying toilet paper because you're worried about everybody else hoarding toilet paper.
- colechristensen 7y ago
  People have been saying for a while the stock market was ripe for a downturn. It had been in one of the longest periods of consistent gains ever. Lots of things were overvalued and with the double hit of a pandemic which is certainly already having economic effects and an oil war within OPEC, one tends to think that companies are going to start making significantly less money (compound with aging population not being replaced with young people). Jumping off a burning ship isn't necessarily irrational.
tomp 7y ago
Say you have an extra tampon and want a banana. I want a tampon but don't have a banana. What would you rather accept from me in exchange for a tampon, $cash or some BTC in your online crypto wallet? What do you believe has better chance of being exchangeable for a banana, from someone else?
- SuoDuanDao 7y ago
  What's the window on that question? I believe that QE has baked hyperinflation into the USD cake by now, that doesn't mean I expect it to hit main street by June.
  - tomp 7y ago
    Has it? QE has been happening for the last 10 years already, and inflation hasn't (in products; asset prices have inflated though).
    - SuoDuanDao 7y ago
      Precisely. My interpretation is that we would have had a deflationary cycle over the last decade had it not been for QE. Main street prices have remained fairly stable, but it looks to me like assets have priced in a strong future currency devaluation. I still think that devaluation is likely to happen.
glofish 7y ago
because bitcoin is not money, it is an asset, it is a property that can be traded for money but its value fluctuates and is not tied to anything other than people's perceived future value in it (which can be valuable, don't get me wrong there, all I am saying that it will change all the time)
- lawn 7y ago
  What should be considered money is subjective and the value of all money comes from people's perceived future value in it. Even gold coins and dollar notes.
  - Barrin92 7y ago
    there's a fairly objective definition of a currency. it's a store of value and it's a means of transaction. Bitcoin is not really a means of transaction except for illegal ones where people are willing to accept the high fees. Also, there is a clear difference in underlying value. Bitcoins value is entirely speculative. The US dollars value is guaranteed by the US government, which in turn is underpinned by real economic assets of the American economy and its firms and so on. Which are very much real and not imaginary.
    - lawn 7y ago
      No, that's not the definition of a currency. Money has different functions, where store of value, unit of account and medium of exchange are the popular ones. And they have different properties, such as acceptable, fungible, durable and divisible and others (properties also differ.) The big point is that these are subjective, and exists on a scale, and they vary from community to community. Cigarettes can be considered a currency in some prisons for example. > Bitcoin is not really a means of transaction except for illegal ones where people are willing to accept the high fees. I never mentioned Bitcoin. There are many other cryptocurrencies with low fees. And I've bought VPNs, VPS, domains and computers with them, purchases that are completely legal. > The US dollars value is guaranteed by the US government The dollar will only hold value as people believe that the government can manage the dollar correctly, so my statement still holds. There's nothing intrinsically valuable with a dollar note.
wayoutthere 7y ago
I have a hypothesis that Bitcoin post-2018 is largely held by a handful of major banks as a way to sidestep anti money laundering rules. It's widely known (and proven in court) that the major banks routinely serve billionaire-class criminals (real criminals like drug cartels and terror groups) and large crypto holdings and prop trading operations allow them to move money on and off their books with relative ease. A slowdown in money laundering activity (as would be expected during an extended period of restriction of goods and services) would lead to a rapid drop in crypto prices.
- simonh 7y ago
  I think this is a misunderstanding about how banks work. The board of directors or CEO of HSBC didn’t decide to get into the cartel money laundering business. Rather, some middle managers decided to turn a blind eye to some dodgy transactions, which got past the Bank’s AML controls, which were not up to scratch. I’m not justifying anything, they reneged on their legal responsibilities, but banks aren’t conscious entities that decide things like that. Also it’s highly unlikely a bank could hold vast BTC reserves without the regulators finding out about it. Anyway BTC is used for money laundering, but that doesn’t require holding reserves. Most money laundering transactions transit into and out of BTC very quickly. The only reason to keep BTC for very long is speculation.
- OGWhales 7y ago
  I believe a more likely theory for the crash was the large exchanges pushing the price down on various exchanges to make money off the leveraged longs and then pair that with panic and you see this price plummet.
Finnucane 7y ago
The money that they are injecting is only going to be a momentary stopgap against the coming credit collapse.
dageshi 7y ago
During the financial crisis circa 2007-8 gold also sold off initially when a lot of gold bugs believed it should rise higher given the financial markets instability. The reason was that people needed to sell their "winners" in order to cover their "losers". Stocks were down, they sold gold which was way up at that point to cover some of the losses and get cash.
- colechristensen 7y ago
  One winner of an investment strategy is regularly rebalancing your portfolio to a set of fixed ratios between asset classes. Let's say you want a 1:1 cash value ratio between stocks and gold. If stocks go up and gold goes down: sell stocks, buy gold. If stocks crash and gold spikes: sell gold, buy stocks. It's an easy way to buy high and sell low without going to extremes.
deleted 7y ago
[deleted]
baby 7y ago
If you understand that the market is just a reflection of human emotions, then you understand what happened to the cryptocurrency market. Panic spreads, and it is not rational.

by zionic 7y ago

qqn 7y ago

Exactly

majormajor 7y ago

My take on the selloff is people looking for liquid cash. Very similar to stockpiling home supplies. People are looking for stuff they can use or trade in the very short term because they don't know how bad it would get. It's a lot harder to do that today with crypto. I haven't seen anyone with strong reason to believe that companies are gonna be that much worse off a year from now than they were a month ago, or for the four years after that, so I don't see a reason to sell stocks based on expected company performance anymore than to sell crypto - but in the short term, everyone's stockpiling immediate goods.

rabuse 7y ago
Exactly. It's like here in Florida, when the systems go down after a hurricane, cash is king in the digital age.
Finnucane 7y ago
That sorta depends. The energy companies are getting squeezed by the oil price war, and they are heavily leveraged and dependent on high prices. A lot of companies loaded up on cheap debt, so the banks are screwed if liquidity issues mean defaults.
isk517 7y ago
I wouldn't be surprised if there was significant amount of sell off occurring because people are looking to start stockpiling home supplies. I've known more than a few conspiracy minded people that collect crypto currencies due to a belief that it will be a safe haven in the event of a government collapse, and the current Corona virus panic is probably causing a lot of them to realize that all of the bitcoin in the world may not be enough to get you a single roll of toilet paper if that time ever came.
agumonkey 7y ago
IIUC the metatheory is that in times of crisis btc would strengthen and become more fiat than fiat.. so far it's not. But who knows ... maybe people will leverage the events to move forward on crypto in the next weeks...
comicjk 7y ago
The average company a few years from now will probably be as profitable as the average company last year. But that's survivorship bias: some of the companies from last year might not be around anymore, and it's hard to predict which. I think that fear might be driving lower valuations.

jfengel 7y ago

One possibility is that it's because the stock market seems like a good buy for speculators right now. The stock market does have an underlying value long-term, in that stocks are pieces of companies that produce products. The true value of that is always uncertain, but various measures indicate that it may be approaching reality (after a long, overheated bull market). Crypto is more purely speculative, with no real underlying value aside from the hope that it will some day become the fiat currency of some nation. (Fiat currencies have a "value" in that they are the only thing a government will accept.) So it's possible that people are seeing bargains in another market. They need to move through fiat currency in order to buy it, but they don't hold it long enough for inflationary measures by central banks to affect it.

helen___keller 7y ago

> especially when "print more money" seems to be the fed's response to this The simple answer is that the quoted text isn't even a concern in your average investors head. Also why gold isn't doing great, and why the US dollar is doing just fine. People are escaping equities specifically, not the dollar. edit: If i had to guess, people are probably looking to maximize cash on hand with the goal of "buying the dip" when it looks like the market is going to bottom out.

rossdavidh 7y ago

Just an hypothesis (which applies to the stock market as well): if you already thought things were overvalued, but were just waiting for the right moment to cash out, then whether this moment makes rational sense or not, you get out now because you were going to get out soon anyway. Also, you may think everyone else is going to be "irrational" in this way, and wish to get out before they do. Sort of like buying toilet paper because you're worried about everybody else hoarding toilet paper.

colechristensen 7y ago
People have been saying for a while the stock market was ripe for a downturn. It had been in one of the longest periods of consistent gains ever. Lots of things were overvalued and with the double hit of a pandemic which is certainly already having economic effects and an oil war within OPEC, one tends to think that companies are going to start making significantly less money (compound with aging population not being replaced with young people). Jumping off a burning ship isn't necessarily irrational.

tomp 7y ago

Say you have an extra tampon and want a banana. I want a tampon but don't have a banana. What would you rather accept from me in exchange for a tampon, $cash or some BTC in your online crypto wallet? What do you believe has better chance of being exchangeable for a banana, from someone else?

SuoDuanDao 7y ago
What's the window on that question? I believe that QE has baked hyperinflation into the USD cake by now, that doesn't mean I expect it to hit main street by June.
- tomp 7y ago
  Has it? QE has been happening for the last 10 years already, and inflation hasn't (in products; asset prices have inflated though).
  - SuoDuanDao 7y ago
    Precisely. My interpretation is that we would have had a deflationary cycle over the last decade had it not been for QE. Main street prices have remained fairly stable, but it looks to me like assets have priced in a strong future currency devaluation. I still think that devaluation is likely to happen.

glofish 7y ago

because bitcoin is not money, it is an asset, it is a property that can be traded for money but its value fluctuates and is not tied to anything other than people's perceived future value in it (which can be valuable, don't get me wrong there, all I am saying that it will change all the time)

lawn 7y ago
What should be considered money is subjective and the value of all money comes from people's perceived future value in it. Even gold coins and dollar notes.
- Barrin92 7y ago
  there's a fairly objective definition of a currency. it's a store of value and it's a means of transaction. Bitcoin is not really a means of transaction except for illegal ones where people are willing to accept the high fees. Also, there is a clear difference in underlying value. Bitcoins value is entirely speculative. The US dollars value is guaranteed by the US government, which in turn is underpinned by real economic assets of the American economy and its firms and so on. Which are very much real and not imaginary.
  - lawn 7y ago
    No, that's not the definition of a currency. Money has different functions, where store of value, unit of account and medium of exchange are the popular ones. And they have different properties, such as acceptable, fungible, durable and divisible and others (properties also differ.) The big point is that these are subjective, and exists on a scale, and they vary from community to community. Cigarettes can be considered a currency in some prisons for example. > Bitcoin is not really a means of transaction except for illegal ones where people are willing to accept the high fees. I never mentioned Bitcoin. There are many other cryptocurrencies with low fees. And I've bought VPNs, VPS, domains and computers with them, purchases that are completely legal. > The US dollars value is guaranteed by the US government The dollar will only hold value as people believe that the government can manage the dollar correctly, so my statement still holds. There's nothing intrinsically valuable with a dollar note.

wayoutthere 7y ago

I have a hypothesis that Bitcoin post-2018 is largely held by a handful of major banks as a way to sidestep anti money laundering rules. It's widely known (and proven in court) that the major banks routinely serve billionaire-class criminals (real criminals like drug cartels and terror groups) and large crypto holdings and prop trading operations allow them to move money on and off their books with relative ease. A slowdown in money laundering activity (as would be expected during an extended period of restriction of goods and services) would lead to a rapid drop in crypto prices.

simonh 7y ago
I think this is a misunderstanding about how banks work. The board of directors or CEO of HSBC didn’t decide to get into the cartel money laundering business. Rather, some middle managers decided to turn a blind eye to some dodgy transactions, which got past the Bank’s AML controls, which were not up to scratch. I’m not justifying anything, they reneged on their legal responsibilities, but banks aren’t conscious entities that decide things like that. Also it’s highly unlikely a bank could hold vast BTC reserves without the regulators finding out about it. Anyway BTC is used for money laundering, but that doesn’t require holding reserves. Most money laundering transactions transit into and out of BTC very quickly. The only reason to keep BTC for very long is speculation.
OGWhales 7y ago
I believe a more likely theory for the crash was the large exchanges pushing the price down on various exchanges to make money off the leveraged longs and then pair that with panic and you see this price plummet.

Finnucane 7y ago

The money that they are injecting is only going to be a momentary stopgap against the coming credit collapse.

dageshi 7y ago

During the financial crisis circa 2007-8 gold also sold off initially when a lot of gold bugs believed it should rise higher given the financial markets instability. The reason was that people needed to sell their "winners" in order to cover their "losers". Stocks were down, they sold gold which was way up at that point to cover some of the losses and get cash.

colechristensen 7y ago
One winner of an investment strategy is regularly rebalancing your portfolio to a set of fixed ratios between asset classes. Let's say you want a 1:1 cash value ratio between stocks and gold. If stocks go up and gold goes down: sell stocks, buy gold. If stocks crash and gold spikes: sell gold, buy stocks. It's an easy way to buy high and sell low without going to extremes.

deleted 7y ago

[deleted]

baby 7y ago

If you understand that the market is just a reflection of human emotions, then you understand what happened to the cryptocurrency market. Panic spreads, and it is not rational.