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The media tends to be extremely trigger-happy to blame a correction or dip in crypto on a single event like Tesla not accepting BTC while it's just as likely th

by hd4 5y ago

The media tends to be extremely trigger-happy to blame a correction or dip in crypto on a single event like Tesla not accepting BTC while it's just as likely that this is an effect of the wider market correction that's taking place after the inflation/CPI news this week.

gradys 5y ago
You'd think an intrinsically deflationary asset like Bitcoin would move differently in the face of USD inflation. Any explanation for why this might be?
- lvs 5y ago
  Because it's backed by the full faith and credit of absolute void.
  - dboreham 5y ago
    /dev/null
  - BitwiseFool 5y ago
    Are you talking about the Dollar?
    - selectodude 5y ago
      Gotta hold dollars to pay US taxes. Don't need to hold Bitcoin to do anything at all.
  - imtringued 5y ago
    Technically it is backed by guns, guns that convince other nations to trade in USD and guns that convince US citizens to pay taxes so that the guns are pointed at those who don't pay them. The other factor is that the US has adopted the USD. The actual reason (e.g. guns) doesn't matter, it only matters that the decision has been made. You can buy things in the US with USD. Therefore the value of the USD is tied to how much stuff a dollar buys you. The size of the Bitcoin economy is quite small. There are not many things whose price is denominated in Bitcoin, most shops just convert from the dollar price to Bitcoin, which means there is barely any price stickiness that keeps the value of Bitcoin stable. If anything it supports the instability of the exchange rate.
- rjknight 5y ago
  Inflation figures are a leading indicator of US monetary policy. All other things being equal, higher inflation readings now means relatively tighter US monetary policy later on. Yes, the Fed has committed to allowing some >2% inflation to make up for past <2% inflation, but it's still the case that policy might tighten one day, and higher inflation now still brings that day closer than it would have been with lower inflation.
  - imtringued 5y ago
    Yes, it's true, but persistent inflation requires persistent supply problems. I don't know anything about the gasoline pipeline but if they can't get it to work within a year it is going to cause persistent inflation. If they can get it fixed, gasoline inflation will go away. The Fed is betting that these incidents will resolve themselves, which is why raising rates may not be the best course of action. It's the same thing with Turkey, Argentina, Zimbabwe etc. They suffered from poor farm yields. Turkey needs more investment into agriculture chemical companies, Argentina suffered a drought in 2018, Zimbabwe had land repossession but financial problems and lack of education prevent the new owners from farming on the land they acquired for free. If Turkey can do enough investments it can solve its agriculture problems. If Argentina can diversify away from agriculture it will be less prone to droughts. If Zimbabwe supports farmers it can become self sufficient again. These are examples of persistent shortages, something fundamental broke there and the only way this can be fixed is by raising interest rates, crashing hard and then reallocating the economy to the things that are actually important.
- SamReidHughes 5y ago
  Maybe people are selling it to buy cheap stocks.
  - imtringued 5y ago
    Commodities are going up, because they are inflation hedges.
- whitepaint 5y ago
  That is just a ridiculous statement. If you want a hedge against inflation you'd buy something like shares of McDonald's (people will keep eating burgers), gold and other commodities, things that people need. No one actually needs Bitcoin. If Bitcoin disappeared right now, who would lose besides the people who hold Bitcoin? No one. If you want to circumvent the banks there are other ways to do so and very easily so. It's the biggest speculative bubbles of all time. And at the same time I believe it's a very important innovation by the way (solving the double-spending problem, or more precisely, making it good enough).
  - gradys 5y ago
    What is ridiculous exactly? That it's deflationary? Or the intuition that it should rise in the face of USD inflation (all else equal)?
    - whitepaint 5y ago
      That it should rise because of USD inflation.
      - chanc3e 5y ago
        Well put. The fundamentals are: pretty much everything in this world has a known fiat currency value. The difference with BitCoin is that you can't go to a farmer and buy his goods, or pick up a used car, go to an auction, or take a wedge of greenbacks and disappear. Until that becomes a ready reality, BitCoin is separate from actual trade, and completely vulnerable to speculation. Currencies are a shared dream, stop believing and they Tinkerbell. That said, a BitCoin does have a definitive value, and won't go away. But it's certainly not $50k.
      - imtringued 5y ago
        Exactly, this misconception is being repeated everywhere. It often goes up with inflation, not because of it. An asset with shrinking circulating supply will go up in price. It's self reinforcing because hoarding reduces the circulating supply. This is deflation and it's self reinforcing nature is why it is considered bad in economics. This happens completely independently of USD inflation. If USD inflation goes up then Bitcoin may go up by the same amount. However, inflation may affect hoarding instincts in either direction, which can wipe out the influence of inflation on the price of Bitcoin. For example, people may liquidate Bitcoin to buy commodities that are going up in price. The gasoline pipeline incident causes a shortage of gasoline, people start hoarding gasoline because it goes up much faster than the CPI average but Bitcoin itself can only protect against the CPI because Bitcoin holders want to buy things other than gasoline. If you are a consumer that needs nothing except gasoline then you would believe your Bitcoin are worth "CPI Bitcoin price" * (1+gasoline inflation rate). E.g. 25% gasoline inflation means it is worth 25% more than market rate, because you need 25% extra just to stay where you are. The obvious problem is that there are some goods that went down in price. Assuming 20% deflation, someone else is willing to accept 20% dollars less for his Bitcoin. The average of both is 5%, therefore the "CPI Bitcoin price" would go up 5%. However, since the gasoline guy wants the 25% gains, it makes more sense to liquidate Bitcoin and buy gasoline directly but the deflation guy remains, which paradoxically drags the price of Bitcoin below inflation because it no longer tracks CPI but rather the CPI without the things that went up.
- paulpauper 5y ago
  bitcoin, like gold, is only an effective hedge against a currency that is falling relative to the US dollar. If you have dollar-denominated assets , such as stocks, there is no need for Bitcoin to hedge inflation.
- mateuszf 5y ago
  > You'd think an intrinsically deflationary asset like Bitcoin would move differently in the face of USD inflation. Any explanation for why this might be? I guess because right now a big percentage of bitcoin price comes from speculation and not from people realizing its deflationary potential. Which probably will change in future.
throwaway5752 5y ago
This was from Musk's announcement as can be plainly seen from https://trends.google.com/trends/explore?date=now%201-d&geo=US&q=tesla%20not%20accepting%20bitcoin https://trends.google.com/trends/explore?date=now%201-d&geo=... and https://www.coindesk.com/price/bitcoin https://www.coindesk.com/price/bitcoin At 3pm PT on 5/12, Bitcoin was at $54.6k USD. Musk tweeted https://twitter.com/elonmusk/status/1392602041025843203 https://twitter.com/elonmusk/status/1392602041025843203 at 3:06pm. Two hours later, BTC was at $47.7k. One cannot blame the media on this, and it's not the result of macroeconomic news.
- lhorie 5y ago
  DOGE's drop over the weekend also more or less coincided w/ Musk's appearance on SNL (where he called it a "hustle"). If you recall, the previous rise in BTC also followed closely on the tails of the news that Tesla was getting into BTC. Kinda insane that a single guy can make almost the entirety of the crypto market swing 10-20% every time they mention crypto.
  - colechristensen 5y ago
    It’s almost like crypto has very little actual value outside of speculation...
    - kordlessagain 5y ago
      There is yet a killer use case, but AI is coming so just hang on a hot minute. Well be above 100k in six months. Machine learning APIs and Lighting payments are a match made in heaven.
      - paxys 5y ago
        You just strung together some meaningless words.
        amusedcyclist 5y ago
agency 5y ago
It literally started dropping the minute the tweet came out...
- bhay 5y ago
  Indeed it did. I saw the tweet within a minute of it being posted and watched the crash happen live on TradingView.
amznthrwaway 5y ago
HN posters tend to be extremely trigger-happy to attack the media, without doing any diligence on timing. Unfortunately, these overly confident posters never learn, never stop spewing bullshit, and never become worthwhile contributors to society.
danhak 5y ago
There was a massive spike downward literally the minute Musk sent the tweet. When the price is stable for hours then collapses after an event, you can pretty safely infer the correlation.
uncomputation 5y ago
If the market of crypto was less of a bull run, I’d be inclined to agree, but a lot of the people in it right now are driven entirely by pumpers/peddlers (Anthony Pompliano, Michael Saylor, David Gokhshtein, etc.), Elon Musk tweets, and speculation/wanting to strike it rich. I think when the market is this speculative, it’s fair to blame a downturn on one event (with a pretty close timestamped correlation - you can see BTC tumble after Elon’s tweet and DOGE after he called it a “hustle” on SNL).
dragontamer 5y ago
If the dollar is inflating away, you'd want to sell dollars and buy BTC and otherwise run away from the dollar. The inflation argument makes no sense. Inflation would cause BTC to go up in value. Something else is causing BTC to drop in value. Personally, I think this has more to do with Vitalik's $Billion donation to charity. What do you think would happen when a whale decides to sell $1-Billion worth of various cryptocoins? I bet they're liquidating all of those various cryptocoins into BTC, and then using the large BTC-exchanges to convert it into fiat. All this Tesla stuff seems like a red-herring to me.
acchow 5y ago
Tesla's announcement was about the environmental impact of bitcoin. Proof of work coins are down precipitously whereas the main proof of stake coin (Cardano) is up significantly. The timing with the announcement is more than just "macroeconomic effects".
- kvz 5y ago
  I wouldn’t be surprised if they bought Cardano’s ADA ahead of this. It’s the biggest crypto that already implemented proof of stake, so the most likely place anyone seeking refuge may move value to, increasing its price dramatically. This could make it a dump & pump, if that makes sense. Dump BTC with a claim that pumps ADA.

by hd4 5y ago

gradys 5y ago

You'd think an intrinsically deflationary asset like Bitcoin would move differently in the face of USD inflation. Any explanation for why this might be?

lvs 5y ago
Because it's backed by the full faith and credit of absolute void.
- dboreham 5y ago
  /dev/null
- BitwiseFool 5y ago
  Are you talking about the Dollar?
  - selectodude 5y ago
    Gotta hold dollars to pay US taxes. Don't need to hold Bitcoin to do anything at all.
- imtringued 5y ago
  Technically it is backed by guns, guns that convince other nations to trade in USD and guns that convince US citizens to pay taxes so that the guns are pointed at those who don't pay them. The other factor is that the US has adopted the USD. The actual reason (e.g. guns) doesn't matter, it only matters that the decision has been made. You can buy things in the US with USD. Therefore the value of the USD is tied to how much stuff a dollar buys you. The size of the Bitcoin economy is quite small. There are not many things whose price is denominated in Bitcoin, most shops just convert from the dollar price to Bitcoin, which means there is barely any price stickiness that keeps the value of Bitcoin stable. If anything it supports the instability of the exchange rate.
rjknight 5y ago
Inflation figures are a leading indicator of US monetary policy. All other things being equal, higher inflation readings now means relatively tighter US monetary policy later on. Yes, the Fed has committed to allowing some >2% inflation to make up for past <2% inflation, but it's still the case that policy might tighten one day, and higher inflation now still brings that day closer than it would have been with lower inflation.
- imtringued 5y ago
  Yes, it's true, but persistent inflation requires persistent supply problems. I don't know anything about the gasoline pipeline but if they can't get it to work within a year it is going to cause persistent inflation. If they can get it fixed, gasoline inflation will go away. The Fed is betting that these incidents will resolve themselves, which is why raising rates may not be the best course of action. It's the same thing with Turkey, Argentina, Zimbabwe etc. They suffered from poor farm yields. Turkey needs more investment into agriculture chemical companies, Argentina suffered a drought in 2018, Zimbabwe had land repossession but financial problems and lack of education prevent the new owners from farming on the land they acquired for free. If Turkey can do enough investments it can solve its agriculture problems. If Argentina can diversify away from agriculture it will be less prone to droughts. If Zimbabwe supports farmers it can become self sufficient again. These are examples of persistent shortages, something fundamental broke there and the only way this can be fixed is by raising interest rates, crashing hard and then reallocating the economy to the things that are actually important.
SamReidHughes 5y ago
Maybe people are selling it to buy cheap stocks.
- imtringued 5y ago
  Commodities are going up, because they are inflation hedges.
whitepaint 5y ago
That is just a ridiculous statement. If you want a hedge against inflation you'd buy something like shares of McDonald's (people will keep eating burgers), gold and other commodities, things that people need. No one actually needs Bitcoin. If Bitcoin disappeared right now, who would lose besides the people who hold Bitcoin? No one. If you want to circumvent the banks there are other ways to do so and very easily so. It's the biggest speculative bubbles of all time. And at the same time I believe it's a very important innovation by the way (solving the double-spending problem, or more precisely, making it good enough).
- gradys 5y ago
  What is ridiculous exactly? That it's deflationary? Or the intuition that it should rise in the face of USD inflation (all else equal)?
  - whitepaint 5y ago
    That it should rise because of USD inflation.
    - chanc3e 5y ago
      Well put. The fundamentals are: pretty much everything in this world has a known fiat currency value. The difference with BitCoin is that you can't go to a farmer and buy his goods, or pick up a used car, go to an auction, or take a wedge of greenbacks and disappear. Until that becomes a ready reality, BitCoin is separate from actual trade, and completely vulnerable to speculation. Currencies are a shared dream, stop believing and they Tinkerbell. That said, a BitCoin does have a definitive value, and won't go away. But it's certainly not $50k.
    - imtringued 5y ago
      Exactly, this misconception is being repeated everywhere. It often goes up with inflation, not because of it. An asset with shrinking circulating supply will go up in price. It's self reinforcing because hoarding reduces the circulating supply. This is deflation and it's self reinforcing nature is why it is considered bad in economics. This happens completely independently of USD inflation. If USD inflation goes up then Bitcoin may go up by the same amount. However, inflation may affect hoarding instincts in either direction, which can wipe out the influence of inflation on the price of Bitcoin. For example, people may liquidate Bitcoin to buy commodities that are going up in price. The gasoline pipeline incident causes a shortage of gasoline, people start hoarding gasoline because it goes up much faster than the CPI average but Bitcoin itself can only protect against the CPI because Bitcoin holders want to buy things other than gasoline. If you are a consumer that needs nothing except gasoline then you would believe your Bitcoin are worth "CPI Bitcoin price" * (1+gasoline inflation rate). E.g. 25% gasoline inflation means it is worth 25% more than market rate, because you need 25% extra just to stay where you are. The obvious problem is that there are some goods that went down in price. Assuming 20% deflation, someone else is willing to accept 20% dollars less for his Bitcoin. The average of both is 5%, therefore the "CPI Bitcoin price" would go up 5%. However, since the gasoline guy wants the 25% gains, it makes more sense to liquidate Bitcoin and buy gasoline directly but the deflation guy remains, which paradoxically drags the price of Bitcoin below inflation because it no longer tracks CPI but rather the CPI without the things that went up.
paulpauper 5y ago
bitcoin, like gold, is only an effective hedge against a currency that is falling relative to the US dollar. If you have dollar-denominated assets , such as stocks, there is no need for Bitcoin to hedge inflation.
mateuszf 5y ago
> You'd think an intrinsically deflationary asset like Bitcoin would move differently in the face of USD inflation. Any explanation for why this might be? I guess because right now a big percentage of bitcoin price comes from speculation and not from people realizing its deflationary potential. Which probably will change in future.

throwaway5752 5y ago

This was from Musk's announcement as can be plainly seen from https://trends.google.com/trends/explore?date=now%201-d&geo=US&q=tesla%20not%20accepting%20bitcoin https://trends.google.com/trends/explore?date=now%201-d&geo=... and https://www.coindesk.com/price/bitcoin https://www.coindesk.com/price/bitcoin At 3pm PT on 5/12, Bitcoin was at $54.6k USD. Musk tweeted https://twitter.com/elonmusk/status/1392602041025843203 https://twitter.com/elonmusk/status/1392602041025843203 at 3:06pm. Two hours later, BTC was at $47.7k. One cannot blame the media on this, and it's not the result of macroeconomic news.

lhorie 5y ago
DOGE's drop over the weekend also more or less coincided w/ Musk's appearance on SNL (where he called it a "hustle"). If you recall, the previous rise in BTC also followed closely on the tails of the news that Tesla was getting into BTC. Kinda insane that a single guy can make almost the entirety of the crypto market swing 10-20% every time they mention crypto.
- colechristensen 5y ago
  It’s almost like crypto has very little actual value outside of speculation...
  - kordlessagain 5y ago
    There is yet a killer use case, but AI is coming so just hang on a hot minute. Well be above 100k in six months. Machine learning APIs and Lighting payments are a match made in heaven.
    - paxys 5y ago
      You just strung together some meaningless words.
      - amusedcyclist 5y ago

agency 5y ago

It literally started dropping the minute the tweet came out...

bhay 5y ago
Indeed it did. I saw the tweet within a minute of it being posted and watched the crash happen live on TradingView.

amznthrwaway 5y ago

HN posters tend to be extremely trigger-happy to attack the media, without doing any diligence on timing. Unfortunately, these overly confident posters never learn, never stop spewing bullshit, and never become worthwhile contributors to society.

danhak 5y ago

There was a massive spike downward literally the minute Musk sent the tweet. When the price is stable for hours then collapses after an event, you can pretty safely infer the correlation.

uncomputation 5y ago

If the market of crypto was less of a bull run, I’d be inclined to agree, but a lot of the people in it right now are driven entirely by pumpers/peddlers (Anthony Pompliano, Michael Saylor, David Gokhshtein, etc.), Elon Musk tweets, and speculation/wanting to strike it rich. I think when the market is this speculative, it’s fair to blame a downturn on one event (with a pretty close timestamped correlation - you can see BTC tumble after Elon’s tweet and DOGE after he called it a “hustle” on SNL).

dragontamer 5y ago

If the dollar is inflating away, you'd want to sell dollars and buy BTC and otherwise run away from the dollar. The inflation argument makes no sense. Inflation would cause BTC to go up in value. Something else is causing BTC to drop in value. Personally, I think this has more to do with Vitalik's $Billion donation to charity. What do you think would happen when a whale decides to sell $1-Billion worth of various cryptocoins? I bet they're liquidating all of those various cryptocoins into BTC, and then using the large BTC-exchanges to convert it into fiat. All this Tesla stuff seems like a red-herring to me.

acchow 5y ago

Tesla's announcement was about the environmental impact of bitcoin. Proof of work coins are down precipitously whereas the main proof of stake coin (Cardano) is up significantly. The timing with the announcement is more than just "macroeconomic effects".

kvz 5y ago
I wouldn’t be surprised if they bought Cardano’s ADA ahead of this. It’s the biggest crypto that already implemented proof of stake, so the most likely place anyone seeking refuge may move value to, increasing its price dramatically. This could make it a dump & pump, if that makes sense. Dump BTC with a claim that pumps ADA.