Hacker News Search

vmception 4y ago
Because they took so long that the remaining assets value when up 300x ($100 - $30000) Any way, believe it when I see it
rglullis 4y ago
That is assuming that the whole "we got hacked" is a complete fabrication. It is possible, but isn't it completely short sighted? I mean, who would change places with him? His head has a price, and he will never be able to hide anywhere in the world or spend any of that money. He is going to live the rest of his life being watched by authorities all around the world and he will have thousands of people believing he is holding the stash.
- vmception 4y ago
  The US government indicted the BTC-E founder, that indictment details the hack of many exchanges including Mt Gox. Gox was fractional before Karpeles even bought it, due to this hack of bitcoin.
- vkou 4y ago
  It's pretty clear by now that he didn't hack his own exchange (the hacker was caught a few years ago). But he did operate it while being insolvent, as well as operate a bot to trade against his users. Either way, if restitution goes as currently planned, he's going to walk away from this an incredibly wealthy man. Individuals will keep suing him, but ~3 billion dollars can buy a lot of lawyers, and it seems unlikely that the government has anything left to prosecute him with.
dayvid 4y ago
Edit: Looked deeper into it. It's a really weird story, where it looks like they got hacked (https://www.theguardian.com/technology/2017/jul/27/russian-criminal-mastermind-4bn-bitcoin-laundering-scheme-arrested-mt-gox-exchange-alexander-vinnik https://www.theguardian.com/technology/2017/jul/27/russian-c...), he tried to fake financial data to make it look like they had money, and he got caught. In the end, he's making more money off of lying and the original investors are screwed. That's really lame. It's also unfortunate, because a lot of the vibe I get from crypto people I run into (more online than in-person), is survival of the cleverest, and anything is cool if you can get away with it. People I knew outside of crypto who are into it (more on the eng-side), are pretty cool, though and usually don't only trust Bitcoin and see most alt-coins as scams.
- vmception 4y ago
  Nobody got paid yet. This is going to drag out for a long long time. I also think the BTC-E issue is bigger and gives me reason to think Mark Karpeles wrongfully served jail time in Japan (for the reason that he served time, there could be other reasons if people like that kind of consequence).
- newguynewphone 4y ago
  Every crypto nut I have interacted with, will call you all sort of derogatory terms if you don't agree that web3 is the future and if a scam happens on any exchange, its because the user were stupid to trust them. Zero accountability for the scammers and fraudsters, it's always the "stupid" users fault.
  - bcrosby95 4y ago
    Well I guess it depends upon how you define "nut". I know several people that are big into crypto (we call them "true believers"), and look at scams failing as good things for the long term health of the system, while not blaming the victims, and they don't get particularly offended if you don't believe in web3 or crypto. If your definition of crypto nut is that they yell at you if you disagree with them, then yeah, by definition there will be no reasonable crypto nuts.
adastra22 4y ago
This information is out of date. The creditors took over the distribution process and are going to distribute the remaining bitcoin pro rata to creditors. Mark Karpales served about 2 years in prison.
- runarb 4y ago
  > Mark Karpales served about 2 years in prison. I do not think ha actually did serve any time. "he was sentenced to 30 months in prison, suspended for four years, meaning he will serve no time unless he commits additional offenses over the next four years." according to https://en.wikipedia.org/wiki/Mark_Karpel%C3%A8s https://en.wikipedia.org/wiki/Mark_Karpel%C3%A8s .
  - adastra22 4y ago
    Thanks for the correction. He was in jail for 10 months during the investigation, until he was finally released on bail. I think I conflated that with the sentence that he was ultimately handed (with some credit for time served). So he did serve some time. I'm not sure though if there is a big distinction between jail and prison in Japan like there is in the US though. https://www.newsbtc.com/news/mark-karpeles-from-mt-gox-out-of-jail-on-bail/ https://www.newsbtc.com/news/mark-karpeles-from-mt-gox-out-o...
111111101101 4y ago
This isn't true at all. For the current expected payouts see the calculator at https://www.ozcoin.com.au https://www.ozcoin.com.au

snovv_crash 4y ago

Tell me, what assets exactly are backing BTC which stop it from crashing just like Luna?

dmichulke 4y ago
Let's make it clear that the dollar lost more often 99% of its value than bitcoin. And it never recovered. I think this will hold in the future as well. Or are you rather concerned with the volatility? Because surely bitcoin crashed more often 80% than the dollar... So pick your poison...
thedudeabides5 4y ago
BTC is not pegged, that's the diff. When you don't claim a value, you don't need a 'backstop.'
- NovemberWhiskey 4y ago
  There were two pieces of this particular crypto asset framework. The first part was Luna, which was a generic coin with no pegging mechanism or backing assets. The second part was Terra, which was a USD-pegged stable coin. The novelty was a guaranteed mint/burn mechanism across the two which was intended to maintain the peg on Terra. As the prior poster correctly asserts, Luna was never pegged.
- snovv_crash 4y ago
  You always need a backstop, otherwise you only have scarcity and not intrinsic value. Scarcity gives value in a bull market when people want in, but only a backstop gives real intrinsic value in a bear market when people want out. It isn't like you can reverse the mining process and get back the electricity which was used to mint your BTC or something.
eric_cc 4y ago
LUNA minted trillions of brand new tokens within the span of a day or so rendering the token worthless. This is due to the way LUNA was tied to the algorithmic stablecoin UST. It was a true ponzi. BTC's max supply is capped and the release schedule of new coins is fixed and predictable. There is no possible way that trillions of new bitcoins could suddenly be created.
- jtaft 4y ago
  Do you think the value of Bitcoin will go to zero due to lost private keys?
  - eric_cc 4y ago
    I think it would sooner be rendered obsolete for another reason before this scenario. It would take a long, long time for this to play out.
  - wallacoloo 4y ago
    one usually hears the opposite argument: Bitcoin becomes more scarce as users lose their private keys. lost keys => smaller supply => higher price per unit. i can see the opposite argument though: lost keys => less desire to interact with bitcoin => lower demand => lower price per unit. so it might just be a wash.
    - ImPostingOnHN 4y ago
      The former relationship wouldn't play out IRL, since there's no authoritative "lost bitcoin registry" to signal to buyers that the supply has effectively decreased
      - netheril96 4y ago
        The buyers do not need to know about that. The effect of supply and demand on price doesn’t depend on anyone knowing supply and demand.
        ImPostingOnHN 4y ago
        the effect of supply on demand does indeed require that buyers know something about the supply I mean, just think about it for a moment: how many bitcoins were "lost" today? Was it 0 or 100,000? Perhaps it's -100,000, because somebody gained access to 100,000 that were previously lost. If it doesn't make a difference, then the supply isn't affecting demand If it DOES make a difference, then demand can't be affected, because nobody knows whether it was 0 or 100,000 or -100,000
paxys 4y ago
Nothing is stopping BTC from crashing to zero, so why is it not crashing to zero?
- postalrat 4y ago
  "Nothing is stopping BTC from crashing to zero" isn't true. Although it can still crash to zero.
- rednerrus 4y ago
  Because they continue to print Tether to prop the price up? Am I doing this right?
- chrismcb 4y ago
  Because there are enough people still buying it.
GaylordTuring 4y ago
Nothing, but I guess I don’t have to tell you that, since your question seems rhetorical in Nature. However, what keeps BTC from crashing is the same psychological effect that keeps Twitter, Facebook, Nike, or Coca-Cola from crashing: Brand awareness. Bitcoin sucks compared to many other cryptocurrencies, still it’s the most popular one because it was the first, because people know about it, and because people know that other people know about it. Even if you could fork Twitter and put it behind a different domain name, for example , Twutter, and you would add some functionality that everybody would like to have (let’s say an edit button), most people would still go to Twitter. If you could sell the rights to use the name Coca-Cola or Nike, even if you had to make it clear to the customer that the new product that you sold had nothing to do what so ever with old product, the names alone would be worth a couple of fortunes. So what’s stopping Bitcoin from crashing is the brain virus (or meme if you want) that has infected hundreds of people around the globe and made them believe that other people will know about and believe that Bitcoin is valuable. And since Bitcoin isn’t hooked up to a doomsday device like Luna and UST was, it can’t destroy itself.
- Sebb767 4y ago
  > And since Bitcoin isn’t hooked up to a doomsday device like Luna and UST was, it can’t destroy itself. I think you undersell that point: Bitcoin has proven itself. A lot of currencies have come and crashed, had backdoors, hacks, hard forks etc.; Bitcoin is simple-ish and stable. It also the longest surviving crypto currency. So it wields a lot of trust and market power.

loceng 4y ago

What functionality was different between Bitcoin and Luna? Is Luna not run off of Bitcoin? So if Luna could function as a Ponzi scheme, why doesn't Bitcoin inherently have that same capability or function embedded into it? Or is there something preventing that from happening with Bitcoin? Confused.

eric_cc 4y ago
Terra (token LUNA) is its own chain. Trillions of brand new LUNA tokens were minted within the span of a day or so rendering the token worthless. This is due to the way LUNA was tied to the algorithmic stablecoin UST. It was a true ponzi. BTC's max supply is capped and the release schedule of new coins is fixed and predictable. There is no possible way that trillions of new bitcoins could suddenly be created.
- NovemberWhiskey 4y ago
  >There is no possible way that trillions of new bitcoins could suddenly be created. That's a slightly strong perspective; it is not impossible; it is merely extremely hard.
  - eric_cc 4y ago
    > it is merely extremely hard. Care to elaborate how it could be done? Even if it were to happen, which it could not, the chain would fork from the moment before the hack and continue on without the hack.
    - NovemberWhiskey 4y ago
      Change to Bitcoin Core; hard fork; majority of miners and nodes move to new fork. The only reason we're not calling "Bitcoin Cash" by the name "Bitcoin" is that the last part didn't happen, right?
      - eric_cc 4y ago
        Consensus. Why would the majority people adopt broken bitcoin?
        NovemberWhiskey 4y ago
        You asserted it was impossible; it isn't. It's merely, as I said, extremely hard.
        anothernewdude 4y ago
        Bitcoin already faces this problem.
    - sha255 4y ago
      It’s interesting how cryptocurrency advocacy makes otherwise intelligent people discard all principles of engineering with forceful statements like “it’s impossible,” when the only thing realistically standing between someone and as much Bitcoin as they want is SHA-2 compromise. I’m amazed with the money in play that it hasn’t happened yet. It speaks to the strength of the SHA-2 suite (and, complicatedly for me, the NSA) that it’s survived this well with a giant target on its back thanks to cryptocurrency. Even here, you’ve assumed such an event would be a hack. Sure, one is not going to introduce trillions of coins, but a fast way to design a desired SHA-2 solution is a lot of cryptocurrencies’ factorization heel and played correctly could slowly make one incredibly wealthy (played poorly, it’d just collapse the entire currency and probably the whole idea). You know how we’re all terrified of fast factorization and its implications for cryptography? Do you really think with the basically five minutes of research the industry has into quantum computing that SHA-2 is good enough for the entire life of a currency? We’ve already shown that coins can’t fork to change stupid shit, so I mean, good luck with an owned hash. So, hard, not impossible. Just don’t forget: once upon a time we thought MD5 was awesome and you’ve never heard of MD4.
      - eric_cc 4y ago
        “It’s impossible” - I agree it’s almost always too strong. However, remember we’re discussing the creation of trillions of bitcoin. Even if it occurred, do you really believe the chain would remain? It would be forked. I just can’t imagine a chain being totally compromised and its users being okay with it - both would need to be true.
        solveit 4y ago
        A smart attacker wouldn't create trillions of bitcoin, they would create a steady trickle of bitcoin indistinguishable from a medium-sized private mining operation that is too small to be noticed for a good while but large enough to make the attacker very very rich. It won't be noticed for months or even years and you cannot erase years of history. There will be no fix, only damage control. That said, SHA-2 being broken is not very high up on my list of cryptocurrency failure modes if only because there are much more immediate concerns... and I suspect most other people implicitly feel the same way.
    - Sebb767 4y ago
      > Care to elaborate how it could be done? Either someone puts up an enormous amount of computational power to flood the chain or someone finds a fatal flaw in sha256 and uses that to flood the chain. The former is basically impossible, the latter is just very unlikely. Either way, if someone manages that feat, we can consider Bitcoin practically broken.
- loceng 4y ago
  So I don't think this point proves they're different functionality - other than the single factor of with more controllers then "printing" a bunch of coins wiping out the value decided by the market isn't easily possible? It's this single point of failure ("one" controller vs. distributed to diversify risk) that you're stating is what makes it a true Ponzi vs. Bitcoin?
- 0110101001 4y ago
  It's certainly debatable whether Bitcoin has any real worth as a currency or as an investment, or if it's just another giant speculative bubble waiting to fall apart. But it's definitely looking like "anonymously drop a protocol and disappear" was a smart move. All these Ethereum-based token coins seem like they're trying to answer the question "what if Bitcoin had a central banker, but it's a kid in his 20s with a CS degree?"
  - jcpham2 4y ago
    Drop the idea and leave was the best thing anyone could've ever done in this scenario. At the end of the day the creator is the weakest link.
- deleted 4y ago
  [deleted]

lumost 4y ago

The fact that crypto is correlated with tech stock valuations should be raising eyebrows. Flash back a few years and the hypothesis that bitcoin would hedge inflation/fiat depreciation was standard. If BTC is correlated with equities, why not just hold productive equities?

twofornone 4y ago
It's a shame, a couple years ago BTC was anticorrelated with markets. Then institutional investors started playing and since then crypto largely just tracks the markets. I wonder, where do these investors park their cash when they sell holdings during downturns?
jliptzin 4y ago
I never understood the argument why crypto was a good store of value. Sure, it’s an ingenious new transactional system, making global payments mostly frictionless, etc, but that’s true whether the value of 1 Bitcoin is $1 or $50,000. If everyone’s just converting back to fiat anyway, only keeping enough BTC transiently to settle transactions, why hold it long term?
- brazzy 4y ago
  Greed.
- sfblah 4y ago
  That’s not totally true. The value of a Bitcoin does relate to how much effort miners put in. So, $1 might be low enough to allow some sort of attack on the network.
  - vel0city 4y ago
    > The value of a Bitcoin does relate to how much effort miners put in. It looks like you have the causal relationship there backwards. A bitcoin currently has value, so there's a lot of effort miners put in to get the block rewards + fees. But the amount of effort a miner puts in doesn't make the price go up, the price can move independently to hashrate.
- nickff 4y ago
  If the transient use of a cryptocurrency is increasing, the demand for it will be, and the price will follow. If the price is increasing fast enough, it could be worth holding. The same is true of any money or asset used for payments/settling debts (like gold or silver).
  - richardwhiuk 4y ago
    Only if people hold it for the transaction for a significant length of time. If people want to get out ASAP, then the faster that transactions happen, the less demand for bitcoin there will be.
  - Barrin92 4y ago
    this doesn't work super well because if a currency appreciates in value due to usage and you start to hold it, that means there's less of an incentive to spend it in the first place. That's one of the reasons why we're not trading in gold coins any more, it's almost exclusively turned into an appreciating store of value. Deflationary currency is undesirable as a means of exchange because you don't want to use it, and that is also one of the reasons why central banks target low inflation rates.
- meetups323 4y ago
  This is why IMO blockchains should be designed to be inflationary. On one hand it just makes sense that as more compute is added transactions should be able to process faster and tokens should be minted more rapidly, such that by "mining" you are producing real value (allowing the chain to process more transactions per second and more people to acquire tokens), on the other very few people use crypto for anything besides speculation so such a coin would never be widely adopted.
  - wonnage 4y ago
    I think this is why the fiat system is inflationary (low level inflation is seen as healthy). Assuming that productive projects exist, you never want lack of capital to be the reason that they're not done. The free market is never going to perfectly allocate capital, therefore there should be some extra money in the system to allow for errors. The errors would cause inflation (money supply increased, but productive output did not), but this is better than being overly cautious. Incidentally this is why austerity in debt-laden countries is kind of a terrible idea. You're taking a broken economy and removing what little slack remains in the system. And if the economy was broken due to corruption or incompetent government, you're kind of just betting on regime change at this point, which (apart from the human toll) won't be great economically either.
- mgfist 4y ago
  Well it's actually a pretty bad transactional currency because it costs so much to transfer btc. So it's kinda the opposite, where people mostly hold it instead of transacting. The argument for a store of value is that of gold but easier to store and transfer, better security etc.. Whether it's a good one is for you to judge.
  - mrb 4y ago
    "costs so much to transfer btc" That's not true. The typical credit card processing fee ranges from about 1.3% to 3.5%. Average international remittance fees are about 7%. For comparison the average Bitcoin fee is about $1 right now, so 1% on a $100 transaction. So Bitcoin compares favorably to its competitors.
    - mdorazio 4y ago
      1) why are you comparing to credit cards? The average ACH transfer costs zero dollars. 2) why did you pick $100 as your basis? If I try to buy a $5 sandwich in Bitcoin and have to pay 20% transaction fee that is not a good platform for transactions. I like some parts of crypto, but transaction fees on most coins right now are not one of those parts.
      - louloulou 4y ago
        > 1) why are you comparing to credit cards? The average ACH transfer costs zero dollars. As far as I understand ACH doesn't work globally > 2) why did you pick $100 as your basis? If I try to buy a $5 sandwich in Bitcoin and have to pay 20% transaction fee that is not a good platform for transactions. Or use lightning and pay a fraction of a cent transaction fee
        FireBeyond 4y ago
        Ahh, Lightning. The network that is simultaneously "here and available and usable, right now" when convenient, and "still a few years away", when that argument is convenient.
- lbotos 4y ago
  > If everyone’s just converting back to fiat anyway, only keeping enough BTC transiently to settle transactions, why hold it long term? People aren't doing this now though. They are buying bitcoin and holding (hodl) or they are trading that bitcoin for other crypto. I think most people aren't using it as a currency, more so speculation
- Terry_Roll 4y ago
  > I never understood the argument why crypto was a good store of value. Its digital gold thats it, its no more a store of value than antique's, rare cars, fine arts etc etc and unsurprisingly those markets can also see the bottom drop out of them for decades. Ultimately its people en masse who decide what something is worth, but big players can manipulate those markets with resources, laws, taxation, media sentiment and its easy to spook people when they value something, so dont get attached to anything if you dont want to be manipulated. The other thing to note is, it only takes a few hundred million £ on the Asian market to get the GBP to drop against the USD in time for European markets. So there are very few entities who can cause the crypto market to fall like this. Think about that.
  - ttfkam 4y ago
    Gold can be used for corrosion-resistant electrical contacts, infrared reflectors for space telescopes, decoration in gaudy penthouses, and more even if everyone decided it was useless as a currency. An antique desk that loses all value in the open market can still be used as a desk or at least firewood. A rare car can still be used to transport yourself, as a prop in a movie, or scrap for other projects. A "worthless" painting can still inspire, liven up a room, or gifted as a gag. Crypto that loses its value has no other underlying utility over and above the output of /dev/random. That's a MASSIVE difference and more clearly demarcates BTC as a money laundering/Ponzi scheme rather than "digital gold" or a viable currency.
    - Terry_Roll 4y ago
      > Crypto that loses its value has no other underlying utility over and above the output of /dev/random. That's a MASSIVE difference and more clearly demarcates BTC as a money laundering/Ponzi scheme rather than "digital gold" or a viable currency. Its a decentralised currency, its not backed up by a country and their nuclear arsenal rammed down people's throats as we will possibly be seeing with Ukraine. Notes/currency only has value where the threat of violence extends to prevent any counterfeiting attempts, so just like you see matches or cigarettes used as currency in a prison, it still has value. Its value went up when the Greeks had their financial crisis because the Greek banks stopped money leaving the country and this is the important thing, crypto is the thing that helps people move money out of a country fast across borders in a crisis. If you tried to move gold in or out of Switzerland you'll get stopped at the border, they are hot on that sort of stuff but it also shows their level of intelligence in world affairs. Crypto if done properly has a level of privacy affordable to anyone, not just the super rich but also a level of transparency to maintain its integrity from counterfeiting by criminals or the central bank.
- jjtheblunt 4y ago
  > mostly frictionless isn't the prohibitive electric bill to reconcile the distributed ledger the ultimate showstopping friction?
caffeine 4y ago
> The fact that crypto is correlated with tech stock valuations should be raising eyebrows Because fiat volatility in inflation/rate hikes respectively (ie the NPV of a USD) completely dominates the other factors. The volatile leg here is the fiat dollar, and everything denominated in it is whipsawing around as its value changes.
- mdoms 4y ago
  Unlike volatility in crypto markets?
  - simonh 4y ago
    Yes, unlike crypto markets which don't move anything else no matter how volatile they are, because they are economically irrelevant.
ascendantlogic 4y ago
You mean flash back a few years to the pre-pandemic era? I think its safe to say the ripples of that particular boulder hitting global financial markets will be felt for decades to come.
throwaway743 4y ago
Likely due in part to many people thinking crypto markets trade only between 9-4 on weekdays and crypto being tech related.
mstipetic 4y ago
What else should it be correlated to? It’s not like there’s anything to support it’s underlying value
dstroot 4y ago
Eyebrows raised. What this is showing is that both tech stocks and crypto were being propped up by the same investors/behavior (speculation) and are highly correlated. I thought this was a good test regarding crypto being a “store or value” since inflation devalues fiat currency, one hypothesis was crypto would rise with market turmoil and high inflation as “digital gold”. I guess that hypothesis was incorrect.
- twox2 4y ago
  IMO, this hypothesis hasn't been adequately tested. By all accounts inflation is bad, but not THAT bad. However, I'm sure Bitcoin and most Cryptocurrency is looking pretty stable with respect to Venezuela's 2,00,00% inflation. Bitcoin as a hedge against economic turmoil requires real economic turmoil.
  - lumost 4y ago
    A Venezuelan could also own dollar/euro denominated assets or commodities. BTC would need to be better and more stable than those for someone to view it as an effective hedge. If US or EU inflation hit 2000% there would be global consequences. There is no reserve asset currently large enough to redenominate US denominated assets, aid payments would collapse, and currencies pegged to the dollar would collapse. Betting on BTC for such a world is reasonable, as there would be a reasonable chance your gold reserves would be become inaccessible, seized, or both. However ammunition might be a more effective financial hedge in this situation.
    - FabHK 4y ago
      > A Venezuelan could also own dollar/euro denominated assets or commodities. If they're allowed to. Which underscores that the true innovation of Bitcoin is to circumvent rules and regulations.
      - vkou 4y ago
        Why would they be allowed to own BTC but not USD? How are they going to buy groceries with their BTC? Pay rent? Taxes? Go to the local black market and exchange it for local currency? You can do that just fine with USD, too. Does doing black-market deals in BTC somehow make you immune to arrest, prosecution, and execution?

Enginerrrd 4y ago

>I mean everything is a bit oversold right now on negative emotions, both in the crypto space and in the stock markets. ...Things have corrected SLIGHTLY from an absolutely historic bubble and you think it's OVER sold? Meanwhile, we have significant inflation, rising interest rates, supply shocks that still haven't been sorted out and signs of economic slowdown. Prices have been out of touch with reality for a long time. We aint anywhere near a bottom yet IMO.

izzydata 4y ago
Stock prices are back around where they were before the pandemic. It may have already been overvalued at that time, but perhaps it is a level of overvalue that people are comfortable with as we were already there before the system got flooded with money.
- actionablefiber 4y ago
  > Stock prices are back around where they were before the pandemic. This is not true, at least not for the U.S. stock market. Market indices are still up 20-30% over pre-pandemic levels.
  - arcticbull 4y ago
    Cool, and that was 2 years ago, during which many index components grew 20-30% year over year. Folks lose perspective on just how good these companies are at growing their revenues. GOOG for instance, was making a trailing $160B per year going into COVID. Now it's making a trailing $270B per year. [1] The S&P 500 P/E ratio is down to 20 from 25 on January 1, 2020, so the S&P 500 at least is 17% cheaper now than before COVID. [2] And looking at mid-cap tech? Shopify is trading at a lower ticker price than at the bottom of the COVID drop on March 19, 2020 - despite having tripled their revenue since then. A lot of companies are really cheap right now. [1] https://www.macrotrends.net/stocks/charts/GOOG/alphabet/revenue https://www.macrotrends.net/stocks/charts/GOOG/alphabet/reve... [2] https://www.multpl.com/s-p-500-pe-ratio/table/by-year https://www.multpl.com/s-p-500-pe-ratio/table/by-year
- mcguire 4y ago
  Wilshire 5000 / US GDP: https://fred.stlouisfed.org/graph/?g=qLC https://fred.stlouisfed.org/graph/?g=qLC That is normalized to 1 in late 2007. At the end of 2021, it was 2.53; at the end of the first quarter of this year it's at 2.37. In 1Q 2020, it was 1.80. Stock prices have been increasingly disconnected from the economy 2014-2015.
  - deleted 4y ago
    [deleted]

Jabbles 4y ago

> There's probably going to be a positive bounce just because markets don't move in straight lines. To emphasize the uncertainty in your "probably", I will point out that Luna didn't bounce: https://coinmarketcap.com/currencies/terra-luna/ https://coinmarketcap.com/currencies/terra-luna/

everfree 4y ago
Luna's supply hyperinflated (from 100 million Luna to 6 trillion Luna) to try to save UST's backing, as designed. That's why its price got rammed irreversibly into the ground. Cryptocurrencies in general, and shares of stocks, do not hyperinflate.
pcthrowaway 4y ago
Oh, it absolutely did, it crashed down to 4 zeros, then bounced back up to 3, roughly a +300%-1000% price movement over the course of a day. Of course, liquidity may have been incredibly low, but there were reports of people turning $40 into $400 in the aftermath of all this. Obviously, it crashed so much, the "bottom" was anyone's guess (well.. zero is the only one that makes sense now). But there are bounces all the way down. If you drop a bouncy ball down an infinite staircase it doesn't take a straight line down.
- throwaway743 4y ago
  Saw 6 decimal places for several candles (a close, open, and lows) on 1h timeframe the other day on one exchange. Then back up to 3-4 places.
lamontcg 4y ago
That's why I said probably. I think it would take something like Russia launching nukes at NATO to cause the stock market to tank in a straight line though. Maybe less extremely, Russian nat gas going to Germany being shut off overnight might do it as well. Stocks/securities/crypto usually never go straight down unless it has become apparent that they're fundamentally worthless. I don't see that becoming common sentiment with the US economy. More likely we're going to see a short squeeze start around now though. WSB on reddit is likely piling into the SPY heavily short, expecting the market to drop line a stone like it did at the start of the pandemic and they're dreaming of chicken tendies. They'll likely get blown out in a squeeze. Likely, likely, probably though. I can also predict the winner of the premiere league today based on the odds, but they still gotta play the games.

lkrubner 4y ago

"everything is a bit oversold right now on negative emotions" No!!! The Fed is raising rates. That is reality. That is not an emotion. That is absolute economic fact. Inflation is high and will remain high for at least a year (maybe longer). The period from 2008 to 2022 is going to be remembered as an abnormal period when we experienced abnormally low rates. The low rates fueled speculation, and bid up certain stocks and assets. The era of low rates is over. It is possible that you might live another 100 years and never again see a 14 year stretch where rates average as low as they did from 2008 to 2022. Emotions? No. These are not emotions. Rising rates are a material fact that people need to adjust to.

arcticbull 4y ago
> Inflation is high and will remain high for at least a year (maybe longer). Is it? Month over month inflation numbers are only slightly elevated, in the annualized 3% range. This isn't particularly high - the high inflation already happened, it's over. CPI and PPI numbers both came in good. PPI of particular note, services were up 0% month over month, and commodities 1.3% for a blended 0.56% (in line with expectations). Commodities of course are likely to correct hard and fast once the geopolitical situation resolves. The market is forward looking, so don't get stuck on a dead narrative! > The era of low rates is over. I'm not sure we know this either. If the hikes play out, we'll land around what, 2-3% for the fed funds rate? That's low, historically. And that's a big if, IMO, since inflation is showing signs of being quite well controlled again, and the Fed's goal isn't to achieve a specific funds rate - just low inflation and high employment. High funds rate hurts the employment goal. It's fun to speculate but important to remember, you're just speculating. So am I. There's no certainty here, and it's pretty easy to construct a compelling counter-narrative. All we know for sure right now is the Fed funds rate is 1%.
- mcguire 4y ago
  "If the hikes play out, we'll land around what, 2-3% for the fed funds rate? That's low, historically." But it's not the 0.1% that drove money out of other asset classes (i.e. bonds) because they couldn't generate any returns.
  - arcticbull 4y ago
    Do you really see folks broadly moving from risk assets to a 2-3% interest savings account in a 3.x% inflationary environment?
    - Spivak 4y ago
      I mean this sincerely if I could just park my savings in an “exactly matches inflation” account I would be over the moon. So yeah kinda, I believe it. Terrible interest rates have genuinely caused me to have to find somewhere to put my money that isn’t a bank.
      - arcticbull 4y ago
        You can! [1] Although it is slightly less liquid, if you're treating it as an emergency savings account, it's really not a big deal. [1] https://www.treasurydirect.gov/indiv/products/prod_ibonds_glance.htm https://www.treasurydirect.gov/indiv/products/prod_ibonds_gl...
    - mcguire 4y ago
      Yes. But think institutional investors of various flavors rather than personal, individual accounts. The 2-3% is the Fed funds rate; actual rates on government and commercial bonds will be somewhat higher. (A friend recently pointed out the current 6% advertised rate on lower-grade commercial bonds.) Couple that with much lower risks (on things that aren't those 6% bonds) and it becomes a good third option for anyone whose previous choice was between -3% inflationary return on cash and stock market risks.
zippergz 4y ago
The emotion is the entirely predictable market overreaction to rate changes we all knew would eventually be coming. Market swings are drastically out of proportion to the actual impact these rate changes will have on the underlying businesses. In both directions. It's ALL emotion.
echelon 4y ago
> The era of low rates is over. It is possible that you might live another 100 years and never again see a 14 year stretch where rates average as low as they did from 2008 to 2022. Goodness, I hope not. The amount of progress we've seen in these years has been astounding. Deep learning, SpaceX, smart phones. I felt like things had gotten stagnant, then we truly started hitting our stride.
- Spivak 4y ago
  It’s not relay about how much “progress” we’ve made. It’s about employment, once we hit full employment there’s no more water you can squeeze from the rock. Which is why I’m kinda shocked that the US isn’t more gung ho about immigration because as long as there’s more useful work to do, and there is, we can fuel growth with capital plus people.
ryathal 4y ago
I think there are going to be two periods remembered in 2008-2022. The 2008-2012-15 where interest rates were made low to prevent a depression and it worked. The the 2012-15-2022 period where interest rates were kept abnormally low because politicians didn't want to be blamed for hurting the stock market causing a bubble that pops when interest rates are forced to rise.
- lamontcg 4y ago
  Nope, the fed will crank up short term rates and crater the economy to tamp down wage inflation. That will invert the yield curve and long rates (>10 years) will still remain historically low and disinflationary. And they've been playing this game since the 90s and the Greenspan fed did it first a blew up the housing bubble that popped in 2008. This cycle goes beyond the memories of Millennials. It just keeps getting worse every cycle.
  - Spivak 4y ago
    This is the bit that makes me so angry. Wages lag behind commodity prices and the correction always happens because businesses complain about labor costs (“muh jobs” despite us being at near full employment) and don’t let them catch up to CoL. It’s infuriating how much the game is rigged against laborers.
spywaregorilla 4y ago
> The era of low rates is over. It is possible that you might live another 100 years and never again see a 14 year stretch where rates average as low as they did from 2008 to 2022. The interest rate is currently at 1%. In the 80s it hit 20%. I expect it'll go negative in the next 20 years.
- mcguire 4y ago
  The inflation rate also hit 13.55% in 1980 and didn't go much below 6% between 1973-1982.
  - spywaregorilla 4y ago
    You're not wrong. I just think inflation will get within comfortable numbers again, but we'll still face recession events that cause a drive to lower the interest rates.
lamontcg 4y ago
Okay, go out and buy puts on the S&P500 that are 6 months out and see how you do. I suspect the market will bounce and blow you out. Rates are rising, but the yield curve isn't inverted yet, and the stock market is unlikely to continue this losing streak straight down. It normally doesn't happen that way. Emotions right now are very negative and a lot of people are going to make bets thats are exceedingly negative and in the 3-6 month short term period other people will make money off of them. This does not feel to me like the start of the crash, possibly not even the top, although we might go sideways until the crash. And there will be low interest rates again. The point of the Fed raising interest rates on the low end is to tank the economy hard enough to eliminate wage inflation. Given the overhang of jobs over jobseekers (and likely the effects of COVID death and disability on the workforce and boomers retiring) this one is likely to be exceedingly painful. When the Fed engineers the economy tanking that means that rates will get slashed again and >10 year bonds will not budge upwards. What it will look like when long rates go up is that wage inflation will actually take hold consistently. And low rates already blew up the dot com bubble in 2001 and the housing bubble in 2008. Read up on the Greenspan Fed. They're going to jack rates up, tank the economy and then go back to ZIRP again. Short rates != Long rates. Fed doesn't control long rates.

acchow 4y ago

How does anyone determine what oversold is? S&P has only retraced to March 2021. Nasdaq to Oct 2020. A bunch of COVID plays like Zoom, Peloton, etc only back to summer 2019 levels. That's only 3 years back. If you look at the dot-com boom, S&P bottomed out in 2002 back to 1997 levels. That's a 5 year retracement. Currently S&P has barely gone back 14 months. The GFC was worse - bottomed in Dec 2008 hitting 1996 levels - a 12 year retracement. I'd say going back beyond an entire economic cycle is probably actually oversold.

lamontcg 4y ago
Depends on the timeframe and your gut. I should have specified that I'm thinking about the next 3-6 months or so, not the next 3-6 years. And there isn't any definition. And particularly in response to exogenous events the markets may decide to keep dropping even though they've dropped a lot. If markets always moved in a straight line it would be easy to make a ton of money off of them so they don't. However, if markets never moved in a straight line though it would be easy to make a ton of money off of them so every now and then they do. And mostly I'm weighing what I'm seeing, which is that the yield curve isn't inverted yet, the broader economy is healthy and job growth is good and there's way more jobs than there are job seekers, along with no signs that something of substantial size has detonated in the economy yet (CMBS or whatever). Letting the air out of the overpriced tech stocks and venture capital also just doesn't seem large enough to start to tank the economy, larger corrections have happened during mid cycle slowdowns before. And UST-Luna is barely a pimple on the broader economy. Right now I don't believe this is the start of the next recession, so the fact that COVID plays are back to summer-2019 levels suggests to me that a lot of work has actually gotten done in repricing. Show me an inverted yield curve and CMBS popping or maybe Russian gas to Germany gets abruptly turned off and then I'll start expecting those longer scale kinds of retracements.

matheusmoreira 4y ago

> There is no possible way that trillions of new bitcoins could suddenly be created. There absolutely is: fractional reserve banking. Exchanges are already operating that way. They offer loans, savings accounts and everything.

eric_cc 4y ago
> There absolutely is Banks and/or exchanges cannot create more bitcoin.
- matheusmoreira 4y ago
  Sure they can. You deposit 1 BTC, they loan it out to someone else. Boom, 2 BTC.
  - eric_cc 4y ago
    No. There is still 1 BTC in this scenerio. When you choose to deposit your 1 BTC you've lost custody of it and somebody else has gained possession of it. All you have is a promise that you'll get it back - which is not === BTC.
    - NovemberWhiskey 4y ago
      You'll have to explain how that's usefully different from the fiat context.
      - eric_cc 4y ago
        First you'll have to explain to me why you would give somebody your bitcoin and allow them to give it to somebody else!
        NovemberWhiskey 4y ago
        ... because they promise to give you back one BTC plus something else of value?
        matheusmoreira 4y ago
        Interest. Right now Binance is offering 5% APY for BTC savings. If you give them your BTC, you'll stack sats automatically.
        alecbz 4y ago
        You really don't need to explain why; it's enough to observe that people do it.
        TomSwirly 4y ago
        https://www.bankrate.com/glossary/r/repurchase-agreement-repo-loan/ https://www.bankrate.com/glossary/r/repurchase-agreement-rep... Every single day it's Economics 101 here.
      - Karunamon 4y ago
        Because there's no such thing as unbacked BTC. You either have the UTXOs pointing at an address you hold the keys for, or you do not. If someone loans you BTC, the supply of BTC has not increased.
        NovemberWhiskey 4y ago
        All bitcoin is "unbacked". There's no intrinsically useful asset behind bitcoin. Your private key is just a bundle of bits. Bits are so abundant as to be worthless.
        eric_cc 4y ago
        Same with paper fiat currency.
        NovemberWhiskey 4y ago
        I know? The point is: neither bitcoin nor fiat currencies are asset-backed. In both cases, there are commercial entities that offer accounts where you can deposit the "thing", and the "thing" is then loaned to someone else, and this is done for some kind of valuable inducement. The question is: why is one called fractional reserve banking, a behavior that is acknowledged to increase the money supply, and the other one called "oh no this is definitely not increase of the money supply, it's just you relinquishing custody of your bitcoin and why would you do that, there's no reason you'd ever do that".
        snovv_crash 4y ago
        Actually paper fiat currency is accepted by a government to pay property tax. In this way you need it to keep possession of land, so the entire land value of the linked country, and all the infrastructure built on it, is the backing for 'fiat' currency.
        junofan 4y ago
        I think I responded to your other comment, but I don’t think this is true. Do you have any further reading? A currency is not backed by land value. It’s usually “backed” by a combination of sovereign debt obligations and its status as legal tender.
    - matheusmoreira 4y ago
      You said what happened to Luna can't happen to BTC because the BTC supply is capped. It's not. The inability to mine new BTC doesn't actually matter. The pseudobanks we call exchanges are still able to introduce numberless BTC into circulation through loans. The result is inflation and possibly market crashes in case of defaults. Really no different from what Tether and every other bank is doing. I've written more detailed posts about this: https://news.ycombinator.com/item?id=31375366 https://news.ycombinator.com/item?id=31375366
      - eric_cc 4y ago
        > BTC supply is capped. It's not. Yes, it is. They are not introducing BTC into circulation. This is verifiable via the blockchain. Banks creating IOU's or derivatives or whatever other abstraction they can come up with never generates new BTC. You'd hope that people foolish enough to work with such financial institutions would know the risk of possessing nothing but an instrument created by the bank. If you're unwilling to take custody of your own bitcoin, you better damn well do some good research on third party custodians.
        matheusmoreira 4y ago
        How much BTC exists in the blockchain is ultimately irrelevant. What matters is the amount of BTC actively circulating. If you deposit 1 BTC on Binance, then I can get your BTC in the form of a loan. I can even withdraw your BTC. Meanwhile, Binance records still say you have 1 BTC, they even allow you to trade with it. So there's really 2 BTC in circulation. That BTC is duplicated, it's in multiple places simultaneously.
        snovv_crash 4y ago
        And of course, the music keeps playing as long as Binance has liquidity.
        codehalo 4y ago
        Still doesn't have anything to do with Bitcoin, or the bitcoin supply.
    - TomSwirly 4y ago
      > There is still 1 BTC in this scenerio. You simply do not understand finance. Consider Eurodollars as another example: https://www.investopedia.com/terms/e/eurodollar.asp https://www.investopedia.com/terms/e/eurodollar.asp
      - gardenhedge 4y ago
        > You deposit 1 BTC, they loan it out to someone else. Boom, 2 BTC. Do you mean "they" purchase a second bitcoin with the second person's loan money? if not, where does the second bitcoin come from? (Hint: think about the blockchain)
        kemotep 4y ago
        Bitcoin is fungible. That Bitcoin doesn’t have to be *exactly* yours but they update their ledger and loan 1 BTC to someone after you deposit your 1 BTC into the bank account. Based on the interest rate of that loan, the bank is giving you a cut in Satoshis. If you choose to withdraw the 1 BTC before the other person’s loan is pid back, they must provide you 1 BTC. They can choose to take that 1 BTC from someone else’s account or use the profits they make in loans and other financial transactions to provide you that 1 BTC. On the blockchain, there only exists the 1 you deposited, the 1 that was loaned, and the 1 that was generated as profit by the bank. The blockchain tracks these transactions. The bank only has to settle these transactions when someone withdraws and when someone is depositing. Internally, there can be as many or as little transactions are as necessary.
    - winkeltripel 4y ago
      If it is close enough for a real bank in USD, it's probably okay for an exchange in bitcoins, right? If the bank/exchange maintains a 5% reserve, every unit of currency can produce a multiplier/velocity of 20. Bank loans substantially increase the ability of businesses to fund activity.
chaostheory 4y ago
Not a fan of Bitcoin, but you’re confusing Robinhood synthetic IOUs with Bitcoin. They are not the same thing.

snovv_crash 4y ago

Luna crashed because people lost trust in it. The only reason people have trust in BTC is because other people have trust in it. If that ever changed, there is no actual use for a BTC, and they are thus intrinsically worthless. Fiat currency has the backing of a government. The government demands certain payments of this currency in order to own land, and also for some extra rights like mineral extraction, fishing licenses etc. Thus, as long as the government is viable and can confiscate the land of those who don't pay, there will be demand for the currency, and it will be proportional to the value the government assigns to the property and the rate of tax. Thus, the currency is stable, because you know at the end of the day, there will always be a buyer who needs to pay their taxes.

eric_cc 4y ago
> Luna crashed because people lost trust in it. No. It crashed because trillions of tokens were created rendering each token worthless.
- snovv_crash 4y ago
  Then why did the total Luna market cap go down? Surely if people still had trust it should have just diluted the token values?
  - orangepurple 4y ago
    Both can be true
    - kristopolous 4y ago
      That's not the point here. It's behaviorist. Prices stay changed because the beliefs change. If people had thought this was a sane and reasonable move that didn't really affect things the price would quickly return despite the quantity increasing. The believed durability of the token changed No matter what strategy is to be used to try to repeg it, it will only work if there's faith in the price. Price isn't a thing it's a relationship between people about a thing
      - orangepurple 4y ago
        Price is the expected resale value of a good or service
- namdnay 4y ago
  You have the chronology wrong. The tokens were created because the price kept slipping, and the more the price slipped the more tokens were printed, the more people panicked etc
- seoaeu 4y ago
  You have it backwards. The trillions of tokens were created because people lost trust in it. Specifically, the loss of trust instigated the price drop from $1 to ~98¢. That's what started the collapse. Only afterwards did the "death spiral" of minting of more tokens, which degraded trust, which decreased the price, which drove more minting, etc. happen
  - stickfigure 4y ago
    There were two coins involved; the overprinting of Luna corresponded with lost confidence in UST. The obvious conclusion is that "algorithmic" stablecoins are bullshit. Whatever fate lies ahead for Bitcoin, it doesn't have this particular weakness. It's not "leveraged" in the same way as Luna/UST.
  - lfmunoz4 4y ago
  - nwiswell 4y ago
    It's chicken and egg. People lost trust because they knew people losing trust would cause a death spiral, and they wanted to get out before everyone else. It was a fire in a crowded theater. Bitcoin depends on trust, yes, but there's no Damoclean sword like there was for Luna. Some people losing confidence does not necessarily lead to others losing confidence.
    - _carbyau_ 4y ago
      Like toilet paper in a COVID pandemic... people were acting not because of the item itself, but because they knew how "the crowd" would react - a self-fulfilling prophecy.
- asimjalis 4y ago
  Why were these trillions of tokens created? Wouldn’t that naturally lead to the token’s devaluation?
junofan 4y ago
I don’t understand your argument. What happens during hyperinflationary periods or other currency collapses? The government stops demanding payments?
- snovv_crash 4y ago
  Monetary supply outstrips the government's ability to collect on it. It is usually done on purpose to benefit some ruling individuals or for strategic reasons to zero the value of a country's debt. But I challenge you to find any example where the hyperinflation didn't make sense to pursue to the people in charge of the money supply.
Strom 4y ago
Bitcoin also has the backing of a government - El Salvador. I would rather argue though that even government backed currencies are fully dependant on trust, not government usage of it. Just check out any government currency hyperinflation event.
- dmitrygr 4y ago
  yup... https://www.datacenterdynamics.com/en/news/el-salvador-risks-defaulting-on-debt-amid-bitcoin-crash/ https://www.datacenterdynamics.com/en/news/el-salvador-risks...
  - jimmydorry 4y ago
    From the article, El Salvador has been cut off from financial markets by two of the ratings agencies that played a pivotal role in the corruption that caused the 2008 GFC to happen. Their reason for cutting El Salvador off is because their debt to GDP is approaching 87% (a fraction of what other countries have run up, especially due to COVID). The IMF (International Monetary Fund) which typically steps in to offer predatory financing terms, already outlined their demands: drop Bitcoin support. So El Salvador really must have gone all into Bitcoin, right? Yes, somewhere between 25million to 73million dollars worth (in contrast to their 800million dollar bond or the ~6billion dollars they raise in taxes each year [1]). Oh the horror. There is definitely no geopolitical maneuverings here. /s [1] Government Revenues in El Salvador increased to 6037.70 USD Million in 2021 from 4894.30 USD Million in 2020 https://tradingeconomics.com/el-salvador/government-revenues#:~:text=Government%20Revenues%20in%20El%20Salvador%20averaged%202709.54%20USD%20Million%20from,583.80%20USD%20Million%20in%201990 https://tradingeconomics.com/el-salvador/government-revenues....
    - ImPostingOnHN 4y ago
      if bitcoin constitutes an insignificant portion of their activities, why would they oppose such a term?
      - jimmydorry 4y ago
samatman 4y ago
To be perfectly clear, you're claiming with a straight face that government issued currencies are stable because there will always be a buyer who needs to pay taxes? Any reasonable definition of stability precludes hyperinflation, we agree on that right?
- iaw 4y ago
  Historically government backed currencies are are stable because they have two underlying components: an economy denominated in the currency and an implicit threat of force (e.g. standing militaries). It's one of the reasons the US dollar is the chief reserve currency around the world as well as the denomination in which oil is traded in. You need dollars not because people have faith in them but because people have faith in the underlying institutions they represent. It's fine to claim you back bitcoin because you don't have faith in the traditional institutions but pretending that those institutions don't support dollars in a way that crypto/bitcoin isn't seems a little near-sighted.
- imtringued 4y ago
  Yes it would preclude hyperinflation. Of course, now we should ask ourselves what kind of situation results in the government having to spend more money into the economy than it is receiving back. Oh right, by not taxing those who have money. Money that doesn't circulate doesn't pay taxes. If you keep money in your bank account forever that money will never be taxed, the government will never see that money again. It must run a deficit, not because it is stupid, it must run a deficit because it is actively subsidizing an influential part of the economy and any refusal to pay the subsidy is harshly rejected not just by the rich but also by the poor. The fact that inflation is the escape hatch for loss aversion psychology tells you that everyone on this planet is actively choosing for there to be inflation or even hyperinflation instead of a negative interest rate. People will argue how immoral it is for a bank to tell you that your physical capital is slowly depreciating and thus even a 0% interest rate would be too high to offer to you. No, that would violate the principle of private property, private property of coupons that represent the time of other people, who are slowly aging and paying opportunity costs. People think they deserve to own the time of other people as if they were cattle or slaves. After all, their freedom to not be a debt slave violates your right to private property which is a far more pressing matter, after all the psychological bias of loss aversion justifies any hideous act (note how I didn't refer to immoral acts, as many hideous acts are considered moral).
rubyfan 4y ago
A better argument might be fiat currency is stable because governments hold a monopoly on violence. But governments can be poorly run so I suppose “stable” is not the right word.
- cma 4y ago
  An ad-hoc system of local warlords who take power isn't more stable, even with a blockchain.
  - imtringued 4y ago
    What people refuse to believe is that a currency is actually a reflection of the real world. Yes there is some filtering going on and time lags can be huge but any well managed currency is only going to perform as well as the real economy.
- chii 4y ago
  > But governments can be poorly run so I suppose “stable” is not the right word. no, but the currency belonging to a particular gov't is as stable as the gov't itself, so your statement is still true; vis a vis the Zimbabwe currency vs the US dollar.
- deleted 4y ago
  [deleted]
whatshisface 4y ago
Fiat currency does not actually have the backing of a government. What could the UK do when the pound peg broke? Nothing but lose enormous amounts of money trying to hold it.
- squidbeak 4y ago
  It could leave the Exchange Rate Mechanism which created the conditions for the run. And it did. Fiat currency always has the backing of a government, as 'fiat' suggests.
  - whatshisface 4y ago
    When the UK ended the ERM, they stopped backing the currency. The UK does not back the pound, the pound does whatever the market wants it to do.
    - lottin 4y ago
      Not entirely. Central banks try to ensure price stability via monetary policy.
- neltnerb 4y ago
  What scenario involves the UK losing an enormous amount of money would be one where they are attempting to "hold a peg"? I'm confused. Countries manipulate their currency supply in various ways in order to make their money cheaper or more expensive, I get that. But I thought the main goal was to keep exports or imports to a good balance to avoid wrecking a real economy. Like, actual people's lifestyles and jobs and well-being, beyond just the value of an investment instrument I'm not sure I see the metaphor holding up here, isn't the issue that came up an arbitrage opportunity caused by a peg that in the real world doesn't really exist or which is easy for actual human beings to intervene in? Are you describing what Russia did? Did they "lose money" with the actions they actually took? It seemed more about adding rules and changing contracts than by spending money on anything in particular, I'm not sure how one would calculate how much money they lost doing it. Or if that's a useful way to think about it really even, nations just have so many other priorities and their money policy is not at all algorithmic...
BurningFrog 4y ago
There are plenty of fiat currencies, backed by stable governments, that have become completely worthless. The Zimbabwean Dollar is the most famous one this century. There are plenty others. This fully disproves your argument, as far as I can see.

Karunamon 4y ago

You know good and well what was meant, and that isn't it. Stop it.

NovemberWhiskey 4y ago
Actually, no, I literally have no idea what you meant - by all means, please amplify!
- CuriousCosmic 4y ago
  Not OP but I figure I'll pitch in because nobody else explained it. When referring to backed vs unbacked Bitcoin (or any other UTxO accounting model based cryptocurrency), the "backing" isn't about whether the token is backed by another asset but rather whether your proxy holding of the token is backed by the actual cryptocurrency on the ledger. If it's some wrapped Bitcoin that is backed, that means that there exists some UTxO which corresponds to the wrapped bitcoin tokens you hold. UTxO are atomic and unique so you can verify that your wrapped tokens have a 1:1 mapping to the tokens held within the UTxO on the native token's network. Non-backed bitcoin instead are just tokens that are handled through some minting mechanism where there is claimed to be a 1:1 equivalence without any actual tooling to prove that. This concept of backing can actually even be further extended via Secure Multi-Party Computation where private keys can be collectively held in such a way that no user ever can see the private key but together they can coordinate to build and sign transactions with that private key without leaking it even to themselves. This can then be used to actually hold tokens from a foreign/incompatible network and interact with that network with little to any required trust. Hopefully that helps answer what is meant. --- Also since it's often a question asked I'll answer preemptively: "What is UTxO?" I've mentioned the UTxO accounting model a few times here. Bitcoin doesn't have accounts but rather UTxO or Unspent(U) Transaction(Tx) Outputs(O). These are indivisible bundles of tokens that can only be created or consumed/destroyed atomically. There are no accounts but rather just private/public key pairs which can redeem/spend those UTxO. Additionally, all transactions are just a collection of input UTxO (that are consumed with the tx) and newly created UTxO. All Tx must uphold the rule that the sum of all inputs equal the sum of all outputs (or some equivalent of this rule as is the case for Monero's Zero Knowledge transaction proofs). A number of networks use UTxO or a UTxO extension (such as EUTxO or the cell model). Most famous is Bitcoin but Monero, Litecoin, Cardano, Ergo, Nervos, and a number of other networks also use this model. This is opposed to Ethereum and co (Polkadot, Solana, Luna...) who use the balance-account accounting model. This model works like traditional ledgers where tokens are stored as some balance in an account and transactions are just transfers from one account to another.

matheusmoreira 4y ago

> If someone loans you BTC, the supply of BTC has not increased. True when someone does it, false when a fractional reserve bank does it. When someone loans money to someone else, money physically changes hands and there is no concept of a reserve. Banks are able to maintain the illusion of full reserves even though they operate in a state of perpetual insolvency.

Karunamon 4y ago
Please explain the mechanism by which a "bank" is able to transfer to you an amount of BTC that they do not have wallet control over? This is a critical difference. A bank can loan you fiat money that they do not physically have, with the almost always correct assumption that most people won't want to convert that database entry into cash at the same time. This is not possible with bitcoin. Either the bank has the coins in wallets they control to send to a wallet you control, or they do not and can't.
- NovemberWhiskey 4y ago
  >Please explain the mechanism by which a "bank" is able to transfer to you an amount of BTC that they do not have wallet control over? BTC that's in an offline wallet is like cash under the bed; and you're right that no-one is lending money that they have under the bed. However, a significant number of BTC owners don't keep their money in their own wallets - they keep it at an exchange, which almost certainly commingles it with other owners in shared wallets. You can certainly take a maximalist position here and assert that the exchange is the real owner, because they have the private keys. The fact of the matter is that the real world includes a difference between legal and beneficial ownership; and has done since well before the existence of fiat currencies - because it's useful.
  - Karunamon 4y ago
    That still is not the same thing. Coins in an exchange can only be traded for other coins in the same exchange - it's effectively KrakenBTC or BinanceBTC or [...]. Unlike fiat money in a bank, these exchange balances exist only in their walled gardens and cannot be exchanged for goods or services, effectively decoupling them from the total supply. The total supply of bitcoin is the sum of all unspent transaction outputs on the Blockchain. Not what a bunch of exchanges tell their users they have.
    - NovemberWhiskey 4y ago
      >Unlike fiat money in a bank, these exchange balances exist only in their walled gardens and cannot be exchanged for goods or services, effectively decoupling them from the total supply. These are demand deposits with the exchanges/shadow-banks. You can (at least with some products; others look more like time deposits) withdraw your deposit at any time. This seems basically the same as a bank account where you can withdraw money at any time to buy goods or services. I visit my "bank". I deposit my "currency" in a demand deposit account. I receive regular interest payments. My "bank" lends my "currency" to other people, in exchange for interest; presumably making a profit on the net interest margin. I can return to my "bank" at any time to withdraw my "currency". How is this not credit creation? How is, e.g., Binance not operating as an unregulated shadow-bank without any kind of deposit insurance?
      - lottin 4y ago
        Note that the money supply increases simply as a result of banks not holding full reserves against deposits. Whether the bank lends or not is not important, as far as the money supply is concerned. The same applies to crypto-currency exchanges, of course, which can inflate the circulating supply of bitcoins by lowering the reserve ratio, regardless of whether they engage in lending.
      - Karunamon 4y ago
        You have to convert your Exchange!BTC into BTC to spend it on goods or services. In other words, it has to hit the blockchain. If it is not on the blockchain, then what is being transacted is BTC in name only. You need not convert your bank balance into cash to spend it on goods or services. The balance itself can be used directly.
    - lottin 4y ago
      If the bitcoins can be withdrawn at any time (i.e. without a notice of withdrawal), then these deposits are just like a current account, which means they are considered a component of the circulating supply of bitcoins (what we would call M1, if bitcoin was a currency).
- matheusmoreira 4y ago
  > Please explain the mechanism by which a "bank" is able to transfer to you an amount of BTC that they do not have wallet control over? They change a number in their database. All they have to do is edit the entry that records how many BTC you have in your account. Whether you can actually withdraw those funds is a completely different matter. They're totally available for trading though. > the almost always correct assumption that most people won't want to convert that database entry into cash at the same time > This is not possible with bitcoin It is. Most people do not withdraw bitcoin either.
NovemberWhiskey 4y ago
So is Binance a bank, when it offers 5% APY Bitcoin savings accounts? Or is it perhaps a shadow bank, which is to say an entity that creates money supply through credit without regulation?

nl 4y ago

In the non-blockchain space this is called "credit creation" and it absolutely is something that happens there. But this doesn't happen with Bitcoin. It's true that there are a number of DeFi apps that will loan BTC. However if you look at the loan mechanism it is different to how it is done in traditional finance. A BTC loan is done in one of two ways: 1) The original owner of the BTC is given an IOU in the form of a different token (lets call it "Wrapped BTC" or wBTC) and the original BTC token is given to the person taking the loan, OR 2) The person taking the loan is given another token ("wBTC"). This is more common. In both these cases no new BTC is actually created. It's possible to create more of this other token though. In the specific case of wBTC[1] they say it is 1:1 backed with BTC, but other tokens might not have the same backing. I don't have a strong opinion on the utility of BTC, but I think it is worth being accurate in our discussion. [1] https://wbtc.network/ https://wbtc.network/

Nursie 4y ago
> But this doesn't happen with Bitcoin. It doesn't happen on the bitcoin blockchain. Exchanges are black boxes though, we don't always know what's going on in there.
- nl 4y ago
  No, that makes no difference. If you think otherwise explain the mechanism you think is happening.
  - Nursie 4y ago
    Exchange has all customer deposits intermingled. Exchange offers crypto loans. Exchange shows positive balances across all users that exceed deposits (though may or may not balance out with negative balances). Everything keeps functioning because the exchange is a black box and not everyone wants to move their BTC at the same time. More people can 'own' BTC on paper than there is BTC in existence on the blockchain. In the same way that most BTC transactions don't involve the blockchain either, they take place entirely within exchanges.
    - nl 4y ago
      It's true this is how it would work if you are treating BTC as a traditional asset and creating dollars by loaning the same deposits out multiple times. But for BTC you can't do this. If they have 100 BTC deposited from all their users and then try to loan out 101 that 101st transaction is impossible because the bitcoin isn't there.
      - matheusmoreira 4y ago
        > that 101st transaction is impossible because the bitcoin isn't there. The exchange's BTC reserves only matter when customers try to withdraw their coins. Until then, the coins are nothing but digits in their database. They can inflate that number as much as they want.
        nl 4y ago
        This might work inside the exchange, but doesn't work if you do a loan outside of the exchange. In DeFi apps you need an actual token to use. If you don't have a the token you can't do a transaction, and apps choose which tokens they support. So an exchange can create its own token, say it is backed 1:1 by BTC and lend that. But it isn't BTC so apps have to specifically opt into it. If they loan out the actual BTC they have in the exchange they can only loan out 100% of what they have (not more) because control and use of each BTC token is dictated by the public ledger which is out of their control. You can do other things (eg use the BTC as collateral for a dollar loan), but again you aren't lending BTC.
      - Nursie 4y ago
        I'm sorry this is just nonsense, as has been pointed out many times, exchanges are not constrained by the blockchain of any particular cryptocurrency, most of their transactions don't take place on a blockchain and their customer balances are not stored on the various blockchains. You may as well talk about this being impossible with paper money, the bank can't give out more than it has! There are only so many notes! But it doesn't need to. People can trade within the bank and between banks so long as the reserves cover the activities. Quadriga CX worked this way, until it didn't and everyone discovered their cryptocurrency was fictional.
        nl 4y ago
        > I'm sorry this is just nonsense, as has been pointed out many times, exchanges are not constrained by the blockchain of any particular cryptocurrency, most of their transactions don't take place on a blockchain and their customer balances are not stored on the various blockchains. Sure, within the exchange that's true. The instance the BTC leaves the exchange as a loan or withdrawl it is no longer possible for that BTC. > Quadriga CX worked this way, until it didn't and everyone discovered their cryptocurrency was fictional. I don't think this was the case, unless you can show me otherwise. In particular, they had "BTC ATMs" where people could withdraw cash. Note that this is not loaning BTC. And when the CEO died, the BTC could not be retrieved. There was no magic second exchange-issued BTC around - it was gone because there is only one copy. Notably there is a precise accounting of the BTC that was lost because there is a public ledger of it. Quadriga CX didn't produce any more BTC - they just lost their customer's BTC.