Is Bitcoin the Next Big Thing?

[ausername]

I don't know for sure, but ultimately Tether is traded like any other crypto currency, so the market cap is how much is in circulation versus traded.

No.... every Tether is worth $1, and is always worth $1. There was supposed to be $1 for every Tether in a bank account. The price did not fluctuate. The Green bar is the price, fixed at $1.

So there should be $2 billion in a bank account somewhere, for "full convertibility". There probably isn't.

This is absolutely massive news. If you currently own Bitcoin I would suggest that you do some reading about Tether to understand the significance, and then consider whether this may be a time to convert to fiat.

If this is as bad as suspected.... then its very bad news.

 

[Edwin]

Yes, that’s why Tether is called Tether! Because it’s (allegedly) tethered 1:1 to the US dollar.

So that makes it unique amongst cryptocurrencies (not surprisingly... that is its USP, after all) but also uniquely dangerous.

 

[Edwin]

Wow. BTC under $7,000 for the first time since early November last year, and down 18% in the last 24 hours.

Somewhere out there, there are futures traders partying like it’s the end of the world.

 

[ausername]

Ian,

This explains okay in laymans terms....

https://arstechnica.com/tech-policy...ency-is-worth-2-billion-but-its-audit-failed/

Ultimately, they've probably been creating 'Tether' out of thin air, when it should have been worth $1, and purchasing Bitcoin with it.

Various exchanges accepted that each Tether had $1 behind it.

So the Bitcoin price had previously been massively inflated by fake Tether, created without a $1 behind it.... just 'printed' out of thin air, and exchanged for bitcoin. Tether accounts for about 20% of the estimated amount of USD held in marketplaces.

A Tether was supposed to be convertible back into $1.... now it is believed that they don't have anywhere near enough money to actually cover this.

This also makes a mockery of the argument that Bitcoin can't be inflated because its limited in supply. Turns out that you just manipulate the price by creating a different currency out of thin air, and claiming that its backed by something when its not.

They've basically done the equivalent of counterfeiting £50 notes and then exchanging them for real Euros. Lots of people have Tethers which they've been using to purchase Bitcoin on a 1-$1 basis, which may prove to be worthless.

 

[Sound]

Be careful what you wish for....

Bitcoin and Crypto currency have helped fuel the rise in one word premium dot com domains over the last few months as people cash in part of their profit and reinvest in quality domains

 

[Edwin]

Ian,

This explains okay in laymans terms....

https://arstechnica.com/tech-policy...ency-is-worth-2-billion-but-its-audit-failed/

Ultimately, they've probably been creating 'Tether' out of thin air, when it should have been worth $1, and purchasing Bitcoin with it.

Various exchanges accepted that each Tether had $1 behind it.

So the Bitcoin price had previously been massively inflated by fake Tether, created without a $1 behind it.... just 'printed' out of thin air, and exchanged for bitcoin. Tether accounts for about 20% of the estimated amount of USD held in marketplaces.

A Tether was supposed to be convertible back into $1.... now it is believed that they don't have anywhere near enough money to actually cover this.

This also makes a mockery of the argument that Bitcoin can't be inflated because its limited in supply. Turns out that you just manipulate the price by creating a different currency out of thin air, and claiming that its backed by something when its not.

They've basically done the equivalent of counterfeiting £50 notes and then exchanging them for real Euros. Lots of people have Tethers which they've been using to purchase Bitcoin on a 1-$1 basis, which may prove to be worthless.

You could also argue that mining other cryptocurrencies then always converting them straight into BTC (e.g. because BTC is too hard to mine at home) is also inflating BTC. Although that's a much more transparent inflation, not an out-and-out scam like Tether looks more and more likely to be.

 

[ian]

I understand the logic, but ultimately all Crypto is the same; unlike shares, the market cap is not backed value in a company, just an idea (at the moment). The only difference is the promise/pledge by Tether to offer a 1:1 ratio of actual fiat.

I suppose in the short term you could ask the same of any bank. If all their customers were to withdraw, the bank wouldn't have enough to cover it. This and many other things are the reason why crypto was created; it is just a shame that it has to go through the same exploits as any other evolution in its infancy.

 

[Edwin]

There is an odd circularity, btw.

The value of BTC holds up the other cryptocurrencies. But people can't mine BTC (only large commercial mining outfits can) so they mine 2,000 other currencies instead, then dump the result into BTC, which lifts the value of BTC further, which lifts all the other cryptocurrencies, which makes mining them even more attractive, etc.

It would be a bit like IF the value of the pound, the euro, the yen and every other world currency was wholly dependent on the value of the US dollar, but people couldn't actually afford to earn US dollars (even though they wanted to). So they earned pounds, euro, yen etc then immediately ran out to buy dollars with them.

 

[ian]

You could also argue that mining other cryptocurrencies then always converting them straight into BTC (e.g. because BTC is too hard to mine at home) is also inflating BTC. Although that's a much more transparent inflation, not an out-and-out scam like Tether looks more and more likely to be.

And that in part is why Bitcoin shouldn't (shouldn't!) drop below around $5k, because that is the average energy cost in the USA to mine a single bitcoin. Cheaper elsewhere of course, but given the importance of the USA outside of China and South Korea, if it falls below this level, then it is in real trouble and the blockchain concept falls apart.

 

[ian]

There is an odd circularity, btw.

The value of BTC holds up the other cryptocurrencies. But people can't mine BTC (only large commercial mining outfits can) so they mine 2,000 other currencies instead, then dump the result into BTC, which lifts the value of BTC further, which lifts all the other cryptocurrencies, which makes mining them even more attractive, etc.

Can't back it up with facts, but I don't believe that most GPU mining is then converted to BTC. Most is either held in the small coins being mined, or converted to Ethereum or ZCash.

 

[Edwin]

And that in part is why Bitcoin shouldn't (shouldn't!) drop below around $5k, because that is the average energy cost in the USA to mine a single bitcoin. Cheaper elsewhere of course, but given the importance of the USA outside of China and South Korea, if it falls below this level, then it is in real trouble and the blockchain concept falls apart.

That's a slightly odd assumption. Just because it would no longer be profitable to mine doesn't mean that the price has to stop there. If everyone panics - truly panics - including the big Bitcoin position holders, and there's a dash to get whatever they can out of the market before the gravy train dries up for good, there's no real limit to how low it could go. Yes, some mining outfits might stop mining (or go bust if they've been built on borrowed money) but that doesn't stop the price dropping. It will only stop falling when enough buyers present themselves to take the "other side" of the transactions - which might be never...

 

[Edwin]

Can't back it up with facts, but I don't believe that most GPU mining is then converted to BTC. Most is either held in the small coins being mined, or converted to Ethereum or ZCash.

Ok, so 3 coins are being inflated, not one. Doesn't change the underlying idea.

 

[Edwin]

The thing that intrigues me most is that there's little sign of the exchanges locking up, not like a few months ago. I don't know if that's because they've reinforced their systems, or whether it's because volumes are lower, or down to other factors - but there don't seem to be a ton of horror stories of people being locked out of trading (not yet, anyway).

 

[ian]

Ok, so 3 coins are being inflated, not one. Doesn't change the underlying idea.

Well you could say hundreds of coins are, that are mined. That is the backbone of the blockchain principle, so of course it has an impact on price!

 

[ian]

The thing that intrigues me most is that there's little sign of the exchanges locking up, not like a few months ago. I don't know if that's because they've reinforced their systems, or whether it's because volumes are lower, or down to other factors - but there don't seem to be a ton of horror stories of people being locked out of trading (not yet, anyway).

They (mainly Coinbase) ground to a halt because they weren't prepared for the increase in trades that came about in November/December; I'm sure they've taken measures since, but in part, many feel that Coinbase were using it as an excuse for halting trading during the extreme volatility; a similar (legal) process used in regulated markets. Coinbase take months to answer customer support enquiries, they like the rest just haven't scaled to meet the demand, as they didn't know when it would. The last 3 months have been extreme.

 

[ian]

I get this sense that the crypto markets are being sold by the whales ready for regulator announcements in the USA tomorrow.

 

[Edwin]

I get this sense that the crypto markets are being sold by the whales ready for regulator announcements in the USA tomorrow.

Maybe. They're hitting new (recent) lows every few minutes, and none of the rallies are sticking, so that might explain it.

Mind you, the volumes are so thin overall that a single whale could be driving the collapse.

 

[Edwin]

Cheaper elsewhere of course, but given the importance of the USA outside of China and South Korea, if it falls below this level, then it is in real trouble and the blockchain concept falls apart.

Speaking of China, there have been suggestions in the past 72 hours that they may be about to ban all exchanges within the country, along with other crypto related businesses, and clamp down much much harder on Chinese access to exchanges overseas. If they go through with this threat and succeed, then it's bye bye to Chinese money. That's a hefty chunk of change!

 

[ausername]

I get this sense that the crypto markets are being sold by the whales ready for regulator announcements in the USA tomorrow.

And its no coincide that the Commodity Futures Trading Commission has filed a subpoena on Tether a few days ahead of their meeting tomorrow.

It goes to the crux of the matter.

Ironically regulatory oversight will probably save cryptocurrency, so perhaps the price should be rising.

With no regulation crypto will kill itself if it continues to go down its current path.... with all the pump and dumps and scams like Bitconnect and Tether.

If you want people to stop getting burnt, and new money into the markets.

 

[markb]

Is anyone on here buying crypto currency at the moment, or are you waiting for it to stabilise? Interested to see if people think it’s going to go back up or carry on decreasing.