3 ms·

I wonder what % of our Economic stimulus was used to buy crypto, and how much of that money has simply disappeared over the past 24 hours.

distances 5y ago
It wouldn't disappear, money is just changing hands. Bitcoin doesn't add or destroy any value, it's just a speculative way of zero-sum trade. When you buy bitcoin, someone else gets your money.
- jasonlaramburu 5y ago
  Except it's not zero sum. It's turning out to be one of the most leveraged assets out there. If I borrow money (or print tether) to buy BTC at $50k and then the price drops to $35k that money is gone.
  - inter_netuser 5y ago
    tether as absolved of all charges, and is under continuous monitoring and audit by NY AG - who would love to jail to advance their careers. Imagine how impressive "jailed 100 BILLION dollar fraudsters" sounds on the resume. Nope, not a fraud. Print, lol. They are just a prime money market fund, setup exactly the same way the funds your parents kept in their 401k. Surprise, commercial banks that lend to you, like mortgage or car lease are actually creating money out of thin air. Unlike tether which is fully backed.
    - jasonlaramburu 5y ago
      >Surprise, commercial banks that lend to you, like mortgage or car lease are actually creating money out of thin air. Unlike tether which is fully backed. In the US commercial banks are required to maintain a certain % of cash reserves relative to all deposits. They are also FDIC insured. Tether is neither insured nor required to maintain any reserves. Their recent filings show that less than 3% of tethers are actually backed by cash, and the bulk of tether is backed by anonymous 'commercial paper,' aka IOUs. Tether also declined to disclose the credit rating of this commercial paper, or who the counter-parties are. Once the BTC world stops trying to hide, obfuscate or otherwise cover for bad actors it will be possible to create meaningful financial innovations that scale.
      - inter_netuser 5y ago
        It's backed better than your bank. Currently the required cash reserve by the Fed is __zero percent__. Yes, ZERO. Please check with your own eyes: https://www.federalreserve.gov/monetarypolicy/reservereq.htm https://www.federalreserve.gov/monetarypolicy/reservereq.htm Please observe that 3% is actually much higher than 0%. The rest of bank's book is usually assorted IOUs as well: commercial paper (aka bonds issued by companies) and mortgages. All of these assets that the Fed buys whenever any bank is in trouble, you can look this up in any news source. Tether is simply just another offshore bank. None of offshore USD deposits are insured by the FDIC. Yet, offshore banks hold trillions of dollars. They also have higher than zero reserves, just like Tether does. There is nothing going on, just clickbaity nonsense media churns out for ads.
        jasonlaramburu 5y ago
        The zero reserve requirement is temporary due to covid. It is normally 10-20% depending on size of the bank. If tether is all above board then why not disclose more about the commercial paper they hold? Other stablecoins seemingly have no issue there. Asking valid questions is not FUD.
        inter_netuser 5y ago
        1. reserve requirements have been 0% in many first world countries for decades. 2. I agree tether runs their operation in a bit of an opaque way. However, that should be the criticism indeed, not the composition of their portfolio, which is much the same as any other bank, really. To steelman Tether's position, it seems that their opaqueness is an intentional strategy to make them more resilient. They could easily get a bank charter somewhere, however you lose control, and must share it with the regulator. Regulators will review and approve directors/offices of the bank, you may in fact lose control over your own business. It also comes with all sorts of jurisdictional and political risk. Having been in that industry, I can sympathize with Tether, it's extremely hostile to large fintechs. They could be targeted simply for political reasons, or because someone connected decides to destroy by leveraging their regulator buddies power. How do you prevent that, without being opaque and telling those that may target you, exactly where all your assets are so they can just freeze them directly? I really wonder if they ever disclosed to NY AG whose commercial paper they hold.
- jasonlaramburu 5y ago
  When the price crashes money disappears.
  - imtringued 5y ago
    >When the price crashes money disappears. Thought experiment. I buy 1 BTC and pay you $50k. The current market price is $35k. Where did the $15k go?
    - jakeva 5y ago
      That depends, doesn't it? Where did I get that BTC? Did I mine it in 2010, or did I buy it last month for $64k?
      - imtringued 5y ago
        Maybe I wasn't clear enough. What I really mean is that we sit down in the same room. You bought the BTC for $1 in 2013. Today I give you $50k in $100 dollar bills, you send me your 1 Bitcoin. I am deliberately ignoring the current exchange rate to prove a point. What happened is that I overpaid by $15k, I immediately lost $15k on this transaction. You got a bargain and gained $15k on top of the $35k you would have gotten from simply holding onto your Bitcoin in this transaction. jasonlaramburu says "When the price crashes money disappears." but there are still 500 $100 dollar bills in the room. The price "crashed" by $15k the moment I purchased the BTC but the money I gave you didn't disappear, it just changed hands in a very unfair manner.
        jasonlaramburu 5y ago
        I suspect this thought experiment is overly simplistic to the point of not being useful. Person A has $50k worth of BTC. Person B has $50k worth of cash (some % of which they got from the stimulus). So now 'the room' has $100k in assets. A and B exchange their assets. A+B still equals $100k. $BTC drops by $15k. A+B=$85k. There is now $85k in assets in the room. $15k was lost.
- vadansky 5y ago
  In this case wouldn't it be like the stimulus went to Chinese mining farms (if that was the case)?
fsagx 5y ago
Does it matter? The economic stimulus money "simply appeared" when checks were printed or payments were direct deposited.
- Grustaf 5y ago
  No, if it's spent buying stuff in the US it stimulates the economy.
- jasonlaramburu 5y ago
  Yes, we will struggle with the inflation and currency devaluation caused by the stimulus for years to come. If that money actually made its way into the US economy it might not matter, but some nonzero percentage was used to buy crypto at a peak, the value of which is now gone.
  - Scarblac 5y ago
    But the $ money is still there, it went to whoever had the bitcoin before it was bought.

distances 5y ago

It wouldn't disappear, money is just changing hands. Bitcoin doesn't add or destroy any value, it's just a speculative way of zero-sum trade. When you buy bitcoin, someone else gets your money.

jasonlaramburu 5y ago
Except it's not zero sum. It's turning out to be one of the most leveraged assets out there. If I borrow money (or print tether) to buy BTC at $50k and then the price drops to $35k that money is gone.
- inter_netuser 5y ago
  tether as absolved of all charges, and is under continuous monitoring and audit by NY AG - who would love to jail to advance their careers. Imagine how impressive "jailed 100 BILLION dollar fraudsters" sounds on the resume. Nope, not a fraud. Print, lol. They are just a prime money market fund, setup exactly the same way the funds your parents kept in their 401k. Surprise, commercial banks that lend to you, like mortgage or car lease are actually creating money out of thin air. Unlike tether which is fully backed.
  - jasonlaramburu 5y ago
    >Surprise, commercial banks that lend to you, like mortgage or car lease are actually creating money out of thin air. Unlike tether which is fully backed. In the US commercial banks are required to maintain a certain % of cash reserves relative to all deposits. They are also FDIC insured. Tether is neither insured nor required to maintain any reserves. Their recent filings show that less than 3% of tethers are actually backed by cash, and the bulk of tether is backed by anonymous 'commercial paper,' aka IOUs. Tether also declined to disclose the credit rating of this commercial paper, or who the counter-parties are. Once the BTC world stops trying to hide, obfuscate or otherwise cover for bad actors it will be possible to create meaningful financial innovations that scale.
    - inter_netuser 5y ago
      It's backed better than your bank. Currently the required cash reserve by the Fed is __zero percent__. Yes, ZERO. Please check with your own eyes: https://www.federalreserve.gov/monetarypolicy/reservereq.htm https://www.federalreserve.gov/monetarypolicy/reservereq.htm Please observe that 3% is actually much higher than 0%. The rest of bank's book is usually assorted IOUs as well: commercial paper (aka bonds issued by companies) and mortgages. All of these assets that the Fed buys whenever any bank is in trouble, you can look this up in any news source. Tether is simply just another offshore bank. None of offshore USD deposits are insured by the FDIC. Yet, offshore banks hold trillions of dollars. They also have higher than zero reserves, just like Tether does. There is nothing going on, just clickbaity nonsense media churns out for ads.
      - jasonlaramburu 5y ago
        The zero reserve requirement is temporary due to covid. It is normally 10-20% depending on size of the bank. If tether is all above board then why not disclose more about the commercial paper they hold? Other stablecoins seemingly have no issue there. Asking valid questions is not FUD.
        inter_netuser 5y ago
        1. reserve requirements have been 0% in many first world countries for decades. 2. I agree tether runs their operation in a bit of an opaque way. However, that should be the criticism indeed, not the composition of their portfolio, which is much the same as any other bank, really. To steelman Tether's position, it seems that their opaqueness is an intentional strategy to make them more resilient. They could easily get a bank charter somewhere, however you lose control, and must share it with the regulator. Regulators will review and approve directors/offices of the bank, you may in fact lose control over your own business. It also comes with all sorts of jurisdictional and political risk. Having been in that industry, I can sympathize with Tether, it's extremely hostile to large fintechs. They could be targeted simply for political reasons, or because someone connected decides to destroy by leveraging their regulator buddies power. How do you prevent that, without being opaque and telling those that may target you, exactly where all your assets are so they can just freeze them directly? I really wonder if they ever disclosed to NY AG whose commercial paper they hold.
jasonlaramburu 5y ago
When the price crashes money disappears.
- imtringued 5y ago
  >When the price crashes money disappears. Thought experiment. I buy 1 BTC and pay you $50k. The current market price is $35k. Where did the $15k go?
  - jakeva 5y ago
    That depends, doesn't it? Where did I get that BTC? Did I mine it in 2010, or did I buy it last month for $64k?
    - imtringued 5y ago
      Maybe I wasn't clear enough. What I really mean is that we sit down in the same room. You bought the BTC for $1 in 2013. Today I give you $50k in $100 dollar bills, you send me your 1 Bitcoin. I am deliberately ignoring the current exchange rate to prove a point. What happened is that I overpaid by $15k, I immediately lost $15k on this transaction. You got a bargain and gained $15k on top of the $35k you would have gotten from simply holding onto your Bitcoin in this transaction. jasonlaramburu says "When the price crashes money disappears." but there are still 500 $100 dollar bills in the room. The price "crashed" by $15k the moment I purchased the BTC but the money I gave you didn't disappear, it just changed hands in a very unfair manner.
      - jasonlaramburu 5y ago
        I suspect this thought experiment is overly simplistic to the point of not being useful. Person A has $50k worth of BTC. Person B has $50k worth of cash (some % of which they got from the stimulus). So now 'the room' has $100k in assets. A and B exchange their assets. A+B still equals $100k. $BTC drops by $15k. A+B=$85k. There is now $85k in assets in the room. $15k was lost.
vadansky 5y ago
In this case wouldn't it be like the stimulus went to Chinese mining farms (if that was the case)?

fsagx 5y ago

Does it matter? The economic stimulus money "simply appeared" when checks were printed or payments were direct deposited.

Grustaf 5y ago
No, if it's spent buying stuff in the US it stimulates the economy.
jasonlaramburu 5y ago
Yes, we will struggle with the inflation and currency devaluation caused by the stimulus for years to come. If that money actually made its way into the US economy it might not matter, but some nonzero percentage was used to buy crypto at a peak, the value of which is now gone.
- Scarblac 5y ago
  But the $ money is still there, it went to whoever had the bitcoin before it was bought.