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Kinda lost me at the first excerpt “A lucrative arbitrage opportunity formed the foundation of much of the cryptocurrency industry. When it turned bad, it broug

Kinda lost me at the first excerpt “A lucrative arbitrage opportunity formed the foundation of much of the cryptocurrency industry. When it turned bad, it brought the whole house of cards down with it.” Total btc market cap still 450bn and total crypto market cap still 1 trillion. And it would be really myopic to say financial arb formed the foundations of “much” of the crypto industry.

bruce511 4y ago
I am not that into crypto, so forgive me for being naive, but I think there's a distinction being made here between crypto the technology and crypto the industry. So Bitcoin is the tech. You mine it, buy it, sell it, spend it, whatever. The Bitcoin price is what it is, it goes up and down. The industry are the financial instruments - derivatives if you like - of the tech. So no longer nitcoin, but rather shares in a company holding Bitcoin. Or exchanges where you deposit your Bitcoin etc. Most of industry offers a service, providing things not easily done with your Bitcoin sitting in your wallet at home. For this service they take a fee. This is the arbitrage in question, and since pretty much all financial companies, not just crypto, leverage this "Access for a Fee" (AfaF) approach, in a sense arbitrage is the root of the "financial industry" (not just crypto) Not surprisingly riles and regulations happened to traditional finance companies. An effort has been made to protect the investor, or at least allow them some expectation of honesty. By contrast the crypto world is a mix of honesty and dishonesty, and its hard right now to tell one from the other. The various implosions over the last year or so, some clearly dishonest, does the industry as a whole no favours. I say this as an outsider looking in.
- herodoturtle 4y ago
  Thanks for taking the time to share this. I'm not an expert on crypto, and found your comment particularly insightful.
acdha 4y ago
Remember that “market cap” doesn’t mean liquidity exists. The price of bitcoin has been kept up by a small number of large holders buying when it sags, but they’ll only do that to the extent that it’s profitable for them. It doesn’t mean that there’s $450B available when you’re trying to exit.
- WXLCKNO 4y ago
  Same as with any asset or stock, to a lesser extent obviously given higher liquidity in regular markets.
  - acdha 4y ago
    Technically true but Bitcoin is a very weak fiat currency with no innate demand so the comparison would be something like penny stocks rather than assets like property which have at least some innate value or stocks representing some portion of revenue from an ongoing business. Random hashes have no demand other than their future resale value, which means demand can fluctuate wildly and it’s highly correlated.

bruce511 4y ago

I am not that into crypto, so forgive me for being naive, but I think there's a distinction being made here between crypto the technology and crypto the industry. So Bitcoin is the tech. You mine it, buy it, sell it, spend it, whatever. The Bitcoin price is what it is, it goes up and down. The industry are the financial instruments - derivatives if you like - of the tech. So no longer nitcoin, but rather shares in a company holding Bitcoin. Or exchanges where you deposit your Bitcoin etc. Most of industry offers a service, providing things not easily done with your Bitcoin sitting in your wallet at home. For this service they take a fee. This is the arbitrage in question, and since pretty much all financial companies, not just crypto, leverage this "Access for a Fee" (AfaF) approach, in a sense arbitrage is the root of the "financial industry" (not just crypto) Not surprisingly riles and regulations happened to traditional finance companies. An effort has been made to protect the investor, or at least allow them some expectation of honesty. By contrast the crypto world is a mix of honesty and dishonesty, and its hard right now to tell one from the other. The various implosions over the last year or so, some clearly dishonest, does the industry as a whole no favours. I say this as an outsider looking in.

herodoturtle 4y ago
Thanks for taking the time to share this. I'm not an expert on crypto, and found your comment particularly insightful.

acdha 4y ago

Remember that “market cap” doesn’t mean liquidity exists. The price of bitcoin has been kept up by a small number of large holders buying when it sags, but they’ll only do that to the extent that it’s profitable for them. It doesn’t mean that there’s $450B available when you’re trying to exit.

WXLCKNO 4y ago
Same as with any asset or stock, to a lesser extent obviously given higher liquidity in regular markets.
- acdha 4y ago
  Technically true but Bitcoin is a very weak fiat currency with no innate demand so the comparison would be something like penny stocks rather than assets like property which have at least some innate value or stocks representing some portion of revenue from an ongoing business. Random hashes have no demand other than their future resale value, which means demand can fluctuate wildly and it’s highly correlated.