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Money is not flowing "in" or "out" of assets (except when new assets are being created, via a new offering). Every purchase is also a sale, every sale is also a

Money is not flowing "in" or "out" of assets (except when new assets are being created, via a new offering). Every purchase is also a sale, every sale is also a purchase. It's a cognitive error to not understand the above, and it comes from extrapolation of the individual's point of view (when I buy X then my money goes "into" X) to the collective (when the price of X rises it must be because new money has "gone into" the X).

dustintrex 5y ago
I'm not sure what point you're trying to make here. If more people sell fiat and buy crypto, money is going "into" crypto. If more people sell crypto to buy fiat, money is coming "out" of crypto.
- bpodgursky 5y ago
  All sales have an equal amount of buying, and all buying involves an equal amount of selling. There's never a net movement in one direction.
  - deleted 5y ago
    [deleted]
  - p1necone 5y ago
    You can mine crypto/mint new NFTs/create new coins arbitrarily without paying external currency for them though.
    - deleted 5y ago
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    - deleted 5y ago
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    - nightski 5y ago
      In reality this is devaluing existing crypto relative to other assets. The OP still stands in that money does not flow into crypto. It's not a black hole. Fiat money is being traded for an asset between two parties. The other party gets the fiat. In other words, you can't create or destroy USD (for example) through a cryptocurrency. You can only affect the cryptocurrency itself. Otherwise we'd have a large problem on our hands...
- advisedwang 5y ago
  Their point is that thinking of money going "into" crypto means that the money is there to come out of it. And that's not generally true. When I buy a BTC, my dollar goes to someone else bank account, who then does whatever with that dollar (spends it on electricity, perhaps). If I later get out of BTC, I don't necessarily get my dollar back. So if $1B has gone "into" BTC, perhaps only $1M comes out of it later. So seeing there as a stock is misleading. That said, if you trust the maintainers of stablecoins, then the article's assumptions do hold. $1B spent on USDT and then later reversed should result in $1B coming back. So you can think of stablecoins as a stock (relative to the tethered currency at least)
  - hattmall 5y ago
    The money going in is the difference in price between buy and sell. If you buy for $5 and sell for $100 that is $95 of inflow. If you take your $100 and the buy another $100 worth, that was previously only worth $5. That's another $95 of inflow, but if you bought your original or it's value equivalent back for $100 it is not a new inflow. With traditional assets this is easy to determine, with crypto it's nearly impossible.
- NovemberWhiskey 5y ago
  There are X bitcoin and Y ether out there in circulation at the moment. All are currently owned in a definitive sense because blockchain ledger. When someone sells fiat and buys crypto, that implies that at the same time there is someone on the other side of the trade buying fiat and selling crypto; right? You can't have more of one than the other.
everfree 5y ago
The article is about stablecoin minting and redemption, not purchases or sales, so I'm not sure where this is coming from. The article also doesn't have anything to do with buying things or the prices of things rising. Stablecoins are very simple to measure inflows and outflows on, as explained in the article. When someone exchanges a real dollar for a USDC token and the dollar goes into the stablecoin issuer's bank account, that's an inflow. When someone exchanges a USDC token back for a real dollar out of the stablecoin issuer's bank account, that's an outflow. > except when new assets are being created, via a new offering That's exactly what's happening here. Each stablecoin mint is a new offering.
- dustintrex 5y ago
  > When someone exchanges a real dollar for a USDC token You're making the very large assumption here that people are exchanging real dollars for stablecoins, which is almost certainly not the case. Tether, in particular, seems to printing their stablecoins out of what appears to be thin air, or at best in exchange for sketchy IOUs.
  - everfree 5y ago
    USDC is a coin issued by the US-based company Circle Ltd. It's not related to Tether.
  - sumedh 5y ago
    > Tether, in particular, seems to printing their stablecoins out of what appears to be thin air, Everyone keeps saying they are printing but no one has the proof. Even the New York AG investigated Tether and just gave them a slap on the wrist
    - dustintrex 5y ago
      Do you really believe that a 10-person company run by a convicted fraudster (Devasini) is managing $78 billion dollars in assets, making them bigger than Vanguard or Schwab, despite the financial world not being able to find any evidence of what they're actually holding? https://www.bloomberg.com/opinion/articles/2021-10-07/matt-levine-s-money-stuff-looking-for-tether-s-money https://www.bloomberg.com/opinion/articles/2021-10-07/matt-l...
skybrian 5y ago
When you buy something using money in your bank account, your bank needs to pay their bank during settlement. Your bank has lower assets (and matching liabilities.) Their bank has more. This is presumably true for stablecoin deposits too. But what banks are they using? What assets end up changing hands?
- Grustaf 5y ago
  It's theoretically true, but Tether at least don't seem to be doing that. They don't even claim to be backed by more than a few percent of cash, and they have never been audited. Imagine a multidecacorn startup that never had submitted to an audit.
  - skybrian 5y ago
    They traded Tether for other kinds of money, and the money went... somewhere.
teh_infallible 5y ago
Money can absolutely flow “into” crypto. The result is an increasing market cap.
cperciva 5y ago
In some cases money definitely does flow into asset classes; people speak of money flowing into ETFs, for example, and in those cases ETF units absolutely are being minted. More fundamentally, money can flow into and out of assets simultaneously -- for example, money flows from scam victims into scams, and from scams out to scammers.
michaelcampbell 5y ago
Money flows into an asset as it flows out of another.

dustintrex 5y ago

I'm not sure what point you're trying to make here. If more people sell fiat and buy crypto, money is going "into" crypto. If more people sell crypto to buy fiat, money is coming "out" of crypto.

bpodgursky 5y ago
All sales have an equal amount of buying, and all buying involves an equal amount of selling. There's never a net movement in one direction.
- deleted 5y ago
  [deleted]
- p1necone 5y ago
  You can mine crypto/mint new NFTs/create new coins arbitrarily without paying external currency for them though.
  - deleted 5y ago
    [deleted]
  - deleted 5y ago
    [deleted]
  - nightski 5y ago
    In reality this is devaluing existing crypto relative to other assets. The OP still stands in that money does not flow into crypto. It's not a black hole. Fiat money is being traded for an asset between two parties. The other party gets the fiat. In other words, you can't create or destroy USD (for example) through a cryptocurrency. You can only affect the cryptocurrency itself. Otherwise we'd have a large problem on our hands...
advisedwang 5y ago
Their point is that thinking of money going "into" crypto means that the money is there to come out of it. And that's not generally true. When I buy a BTC, my dollar goes to someone else bank account, who then does whatever with that dollar (spends it on electricity, perhaps). If I later get out of BTC, I don't necessarily get my dollar back. So if $1B has gone "into" BTC, perhaps only $1M comes out of it later. So seeing there as a stock is misleading. That said, if you trust the maintainers of stablecoins, then the article's assumptions do hold. $1B spent on USDT and then later reversed should result in $1B coming back. So you can think of stablecoins as a stock (relative to the tethered currency at least)
- hattmall 5y ago
  The money going in is the difference in price between buy and sell. If you buy for $5 and sell for $100 that is $95 of inflow. If you take your $100 and the buy another $100 worth, that was previously only worth $5. That's another $95 of inflow, but if you bought your original or it's value equivalent back for $100 it is not a new inflow. With traditional assets this is easy to determine, with crypto it's nearly impossible.
NovemberWhiskey 5y ago
There are X bitcoin and Y ether out there in circulation at the moment. All are currently owned in a definitive sense because blockchain ledger. When someone sells fiat and buys crypto, that implies that at the same time there is someone on the other side of the trade buying fiat and selling crypto; right? You can't have more of one than the other.

everfree 5y ago

The article is about stablecoin minting and redemption, not purchases or sales, so I'm not sure where this is coming from. The article also doesn't have anything to do with buying things or the prices of things rising. Stablecoins are very simple to measure inflows and outflows on, as explained in the article. When someone exchanges a real dollar for a USDC token and the dollar goes into the stablecoin issuer's bank account, that's an inflow. When someone exchanges a USDC token back for a real dollar out of the stablecoin issuer's bank account, that's an outflow. > except when new assets are being created, via a new offering That's exactly what's happening here. Each stablecoin mint is a new offering.

dustintrex 5y ago
> When someone exchanges a real dollar for a USDC token You're making the very large assumption here that people are exchanging real dollars for stablecoins, which is almost certainly not the case. Tether, in particular, seems to printing their stablecoins out of what appears to be thin air, or at best in exchange for sketchy IOUs.
- everfree 5y ago
  USDC is a coin issued by the US-based company Circle Ltd. It's not related to Tether.
- sumedh 5y ago
  > Tether, in particular, seems to printing their stablecoins out of what appears to be thin air, Everyone keeps saying they are printing but no one has the proof. Even the New York AG investigated Tether and just gave them a slap on the wrist
  - dustintrex 5y ago
    Do you really believe that a 10-person company run by a convicted fraudster (Devasini) is managing $78 billion dollars in assets, making them bigger than Vanguard or Schwab, despite the financial world not being able to find any evidence of what they're actually holding? https://www.bloomberg.com/opinion/articles/2021-10-07/matt-levine-s-money-stuff-looking-for-tether-s-money https://www.bloomberg.com/opinion/articles/2021-10-07/matt-l...

skybrian 5y ago

When you buy something using money in your bank account, your bank needs to pay their bank during settlement. Your bank has lower assets (and matching liabilities.) Their bank has more. This is presumably true for stablecoin deposits too. But what banks are they using? What assets end up changing hands?

Grustaf 5y ago
It's theoretically true, but Tether at least don't seem to be doing that. They don't even claim to be backed by more than a few percent of cash, and they have never been audited. Imagine a multidecacorn startup that never had submitted to an audit.
- skybrian 5y ago
  They traded Tether for other kinds of money, and the money went... somewhere.

teh_infallible 5y ago

Money can absolutely flow “into” crypto. The result is an increasing market cap.

cperciva 5y ago

In some cases money definitely does flow into asset classes; people speak of money flowing into ETFs, for example, and in those cases ETF units absolutely are being minted. More fundamentally, money can flow into and out of assets simultaneously -- for example, money flows from scam victims into scams, and from scams out to scammers.

michaelcampbell 5y ago

Money flows into an asset as it flows out of another.