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There are issues with almost every assertion and conclusion in this post, but I will limit my critique to the idea that the downward movement of BTC is capped a

by dpiers 6y ago

There are issues with almost every assertion and conclusion in this post, but I will limit my critique to the idea that the downward movement of BTC is capped at the % of BTC people are willing to sell. It's simply not true. The spot price of BTC is a function of what people are currently willing to pay and what people are willing to accept. If the primary source of demand and liquidity in the BTC trading markets collapses - which this article argues is Tether - the price could rapidly collapse even on small trading volumes. If you add in the fact that these exchanges allow trading on margin, you could have a situation where people are forced to liquidate their holdings regardless of the current price. It's the perfect storm for a flash crash.

thorwasdfasdf 6y ago
Ok, you make a good point about the possibility of collapsing demand. but, even after tether collapses, as long as bitcoin has sufficient buying demand, then there's no problem. (assuming there's a fixed set of HODLRS). As bitcoin sells off, the number of sellers decreases, correct? Assume on a given day, 10K buyers and 10k sellers. As the number of sellers decreases, the ratio of buyers to sellers increases, correct? maybe 10K buyers, 5k sellers, then 10k buyers, 1k sellers, then 10kbuyers 500 sellers, etc. this continues to put increasing upward pressure on BTC. The above example would still be true even if bitcoin buying demand went from 10k to 2k. (collapse of tether BTC demand) All that matters is that there's a certain minimum number of people willing to buy bitcoin for a given time period and the HODLRs who won't sell there BTC. as long as those two conditions are met, the number of buyers will soon outnumber sellers. it's just math in the end. how can this be wrong?
- owenversteeg 6y ago
  Ah, I see. Your problem is a fundamental lack of understanding of financial markets. I'd recommend Investopedia as an easy way to get into understanding things. First of all, in financial markets there is almost never a "fixed number" of buyers for anything, and especially not for something like Bitcoin. If you want to see something with (as good as you can get) to a fixed number of buyers, look at uranium. It's almost entirely used as fuel for nuclear reactors, which take years to build and to be shut down, so not only is the demand very stable, the future demand (for the next few years) can be pretty easily predicted. You'll be surprised to see that yes, sharp price drops can occur, even in such conditions. Next, of course, the market of sellers for Bitcoin, "HODLR" or not, certainly does not behave how you imagine. Some sellers are forced to exit large Bitcoin positions every day, with reasons ranging from tax liabilities not payable in Bitcoin, businesses that accept Bitcoin that do not wish to maintain a Bitcoin position, divorces, governments that seize Bitcoin, etc etc. Then of course you have people exiting Bitcoin because they're people and life happens: their partner told them Bitcoin was stupid, or their government added rules to holding Bitcoin that scare them, or they read that a shady entity was printing billions of fake dollars to buy Bitcoin, or they bought in years ago and wow, they can buy a car with the profit! or they bought in yesterday and the drop in price spooked them. None of this is to say anything about the price of Bitcoin or if you should buy Bitcoin - I'm just saying that your _reasons_ are deeply flawed.

by dpiers 6y ago

thorwasdfasdf 6y ago

Ok, you make a good point about the possibility of collapsing demand. but, even after tether collapses, as long as bitcoin has sufficient buying demand, then there's no problem. (assuming there's a fixed set of HODLRS). As bitcoin sells off, the number of sellers decreases, correct? Assume on a given day, 10K buyers and 10k sellers. As the number of sellers decreases, the ratio of buyers to sellers increases, correct? maybe 10K buyers, 5k sellers, then 10k buyers, 1k sellers, then 10kbuyers 500 sellers, etc. this continues to put increasing upward pressure on BTC. The above example would still be true even if bitcoin buying demand went from 10k to 2k. (collapse of tether BTC demand) All that matters is that there's a certain minimum number of people willing to buy bitcoin for a given time period and the HODLRs who won't sell there BTC. as long as those two conditions are met, the number of buyers will soon outnumber sellers. it's just math in the end. how can this be wrong?

owenversteeg 6y ago
Ah, I see. Your problem is a fundamental lack of understanding of financial markets. I'd recommend Investopedia as an easy way to get into understanding things. First of all, in financial markets there is almost never a "fixed number" of buyers for anything, and especially not for something like Bitcoin. If you want to see something with (as good as you can get) to a fixed number of buyers, look at uranium. It's almost entirely used as fuel for nuclear reactors, which take years to build and to be shut down, so not only is the demand very stable, the future demand (for the next few years) can be pretty easily predicted. You'll be surprised to see that yes, sharp price drops can occur, even in such conditions. Next, of course, the market of sellers for Bitcoin, "HODLR" or not, certainly does not behave how you imagine. Some sellers are forced to exit large Bitcoin positions every day, with reasons ranging from tax liabilities not payable in Bitcoin, businesses that accept Bitcoin that do not wish to maintain a Bitcoin position, divorces, governments that seize Bitcoin, etc etc. Then of course you have people exiting Bitcoin because they're people and life happens: their partner told them Bitcoin was stupid, or their government added rules to holding Bitcoin that scare them, or they read that a shady entity was printing billions of fake dollars to buy Bitcoin, or they bought in years ago and wow, they can buy a car with the profit! or they bought in yesterday and the drop in price spooked them. None of this is to say anything about the price of Bitcoin or if you should buy Bitcoin - I'm just saying that your _reasons_ are deeply flawed.