
If Bitcoin Looks Like It Isn’t Trading, It’s Because It Isn’t - dpflan
https://www.wsj.com/articles/if-bitcoin-looks-like-it-isnt-trading-its-because-it-isnt-11575637204
======
account73466
Bitcoin has about $133 bil marketcap.

NYSE symbols with the twice (2X) this marketcaps according to Yahoo Finance:

UNH (UnitedHealth Group) mcap: $262 bil, trading volume: $1.2 bil

KO (COCA-COLA) mcap: $231 bil, trading volume: $0.6 bil

MRK (MERCK) mcap: $225 bil trading volume: $0.7 bil

Therefore, for Bitcoin to be tradeable as similar stocks it has to show
$0.25-0.5 bil for $133 bil mcap or $0.5-1.0 bil for $250 bil mcap.

Binance alone showed $0.3 bil today but the volume is usually $0.5-1 bil. I
don't think that Binance is wash-trading, so all this FUD is mostly due to a
lack of understanding.

~~~
shepardrtc
I have a hard time believe its anything other than market makers providing the
illusion of trades. Have you seen the price swings? If there was real volume
and real transactions asides from trades, how would such insane swings be
possible?

~~~
account73466
I don't have a crystal ball to claim I know what happens but swings are often
due to futures trades and exchanges interested in liquidating longs and
shorts.

I understand why exchanges are interested in wash trading but I don't know why
market makers would provide any illusion since each transaction costs in order
of 0.075% of its value.

~~~
shepardrtc
I believe market makers are paid by exchanges to provide liquidity.

~~~
account73466
What you are referring to exists in regular stocks markets but not in
cryptomarkets (at least, when we talk about relatively reputable exchanges).

Take Binance as the largest crypto-exchange. Market makers are the ones who
put buy or less limit orders. Market takers are the ones who put market order
to "eat" limit orders. Market markers are not paid to provide liquidity.
However, their fees decrease from, e.g., 0.075% per trade to say 0.030% per
trade if they trade millions $ per month.

------
rwmj
Many reasons to be dubious about bitcoin and its liquidity and how much wash
trading goes on, but it seems a bit odd to judge it by the amount of
outstanding coin being traded. How much gold that exists is actively traded?
Or even the same question for a typical company stock?

~~~
scrooched_moose
Because Bitcoin is (at least theoretically) a currency. You're comparing it to
a commodity or store of value.

The power of a currency is the ability to trade it for goods and services. If
that is no longer happening with Bitcoin it has morphed into something else
entirely.

~~~
rwmj
I've never owned or traded bitcoin, but as I understand it the main attraction
is that it's like the gold standard (of course for people who don't understand
why the gold standard was a bad idea).

~~~
bduerst
Bitcoin attracts three different niche markets:

\- Crypto enthusiasts who are infatuated with the technology or the math
involved

\- Anti-Fed Libertarian types who want to use something that isn't controlled
by a government

\- HFTs and speculators who either use it in part of their models or as a pump
and dump vehicle

Some people also use it to buy illegal stuff, but most of them have moved onto
Monero as the primary privacy-based cryptocurrency.

~~~
dehrmann
> Crypto enthusiasts who are infatuated with the technology or the math
> involved

I agree that it attracts these people, but I can't figure out how they make
the leap from "clever math" to "this has monetary value and I want in."

------
aazaa
> About 9.1 million bitcoins, representing about 51% of those outstanding,
> haven’t changed hands in at least six months, according to Flipside. About
> two million of those bitcoin haven’t moved in more than two years.

Transaction volume has always been a difficult metric. For one thing, most
transactions are likely to happen off-chain. That can occur in a centralized
system like Coinbase. This has always been a possibility dating back to the
first exchanges like Mt. Gox.

More recently, Lightning Network means that decentralized off-chain
transactions can play a bigger role in Bitcoin's total transaction volume.
Lightning involves two parties setting up a contract (Bitcoin has supported
them from day one). This contract defines rules that allow the parties to
update a private transaction (without counterparty risk) until settlement on
the block chain is required. At that point a transaction is published. That
transaction may represent one, a handful, or hundreds of thousands of
intermediate transactions. There aren't very good ways to determine how many,
and this will tend to make Bitcoin's transaction volume ever more opaque over
time.

Exchanges are starting to support Lightning as a method to move bitcoin in and
out.

Second, absolute transaction count doesn't take coin value or age into
account. For example, I can just flip the same 0.001 BTC back and forth to
myself rapidly. That would add many transactions but wouldn't reveal much of
value.

An alternative metric is "bitcoin days destroyed" (BDD). BDD equals the value
of the coin being spent multiplied by its age in days, summed over all
transactions in a given period:

[https://bitcoin.stackexchange.com/questions/845/what-are-
bit...](https://bitcoin.stackexchange.com/questions/845/what-are-bitcoin-days-
destroyed/847#847)

When BDD spikes you know that either old coins are being spent or that lots
value in younger coins is being spent. That metric might be more economically
valuable. There's a realtime chart here:

[https://blockchair.com/bitcoin/charts/coindays-
destroyed?int...](https://blockchair.com/bitcoin/charts/coindays-
destroyed?interval=full)

~~~
bduerst
Lightning network comes up just about every discussion involving bitcoin
transactions, but because it requires the bitcoin network to make
confirmations, Lightning only scales with the number of transactions, not
users. This is still a problem.

Example of the problem:

* For 2 users to make 10,000,000 transactions between each other, it would take 10 minutes on the lightning network.

* For 10,000,000 users to make just 2 transactions between each other, it would take _46 days_ on the lightning network.

This means that if the entire state of Georgia used Lightning Network as a
payment system, people wouldn't even be able to pay their monthly rent on
time. Lightning Network is an over-engineered solution to a Bitcoin problem,
which is why nobody is seriously adopting it.

~~~
pouta
Where can I read more about how you came up with those numbers? I didn't knew
that side of lightning.

~~~
bduerst
It's napkin math based on the Bitcoin network's hard limitations of 4-7
transactions/second, so assuming 5 tx/s, then there's 432K transactions/day
limit.

Since lightning requires Bitcoin to settle transactions between parties, it
means that the more users there are making transactions, the more it needs
bitcoin.

If it's just a handful of users making a million transactions, then there's no
problem since lightning will do the math and then settle on Bitcoin with a
handful of transactions. If there's a million users making a handful of
transactions, well, then lightning needs to settle a few million transactions
on Bitcoin (which takes weeks).

~~~
Acrobatic_Road
> If there's a million users making a handful of transactions, well, then
> lightning needs to settle a few million transactions on Bitcoin (which takes
> weeks).

Sorry, but you seem to be entirely ignorant of how lightning works. Lightning
does not need to settle transactions on Bitcoin. If I pay someone using
lightning then that payment is as good as good. The person who received the
funds could go on and pay someone further. Notice there was no need to make an
on-chain settlement transaction for this to work.

~~~
bduerst
> If I pay someone using lightning then that payment is as good as good.

Lightning is an I.O.U. that is not good until you settle on Bitcoin. If you
are not using Bitcoin to settle transactions, then you there is zero guarantee
of getting paid. Stop spreading these lies about the Lightning network.

Trading I.O.U.s on an obscure network is not a payment solution outside of
sending money between your friends. For businesses and other untrusted
parties, they will settle immediately on Bitcoin which is why Lightning is not
being used seriously today. The same way businesses don't trade in third party
checks today.

~~~
fghdft4t3t
Lightning isn't an IOU, its actual Bitcoin. What you are doing is trading
payment states in channels, these payment channels contain real Bitcoin,
locked in smart contracts. You can settle (and close) for your channel for
Bitcoin any time you like, and there is a punishment mechanism if you try to
cheat (steal) and replay an old channel state.

This style of network, or a higher order version of it will certainly be the
way that we further decentralize our economy and scale to every human and
system. It is nonsensical to store full transactions between everything in an
immutable ever growing data structure for all time. You can condense what
needs to be stored forever in channels, or go further smaller still and store
commitments+proofs.

We need to move past the blockchain to store all the things model. It was cool
when it was small, but we need to be thinking about how to implement higher
order payment or economic concepts rather than raw txs.

Finally, to your point about businesses not trading in third-party checks...
Kinda! When the store takes your payment over the PCI network, the card
holders bank and the vendors bank trade some payment state between each other,
and delivery of funds can take days to clear. Its all businesses trading
slates, e-checks, e-balance sheets. In essence lightning isn't too dissimilar
to how things work now with electronic $s.

~~~
bduerst
A _commitment to pay Bitcoin_ , that is signed or unsigned, cashable at any
time, is an IOU.

It's the same as a signed check, except lightning is passing itself as a
network to spend the equivalent of third party checks. Businesses and
untrusted parties do not do this, so they settle (cash checks immediately),
which Lightning can't handle at scale with users.

If Lightning wasn't really an IOU, then it wouldn't need Bitcoin to settle
transactions, now would it?

------
KingMachiavelli
[http://archive.is/pjKoB](http://archive.is/pjKoB)

~~~
mr_woozy
thanks for this!

------
kp98
While I was working at a crypto fund I did an experiment with the ceo of one
of the largest liquidity providers at the time in crypto, we analyzed how many
trades were printing compared to the depth of market at this one particular
exchange (I forget which now because it was a while ago). We noticed there was
significant fake volume on the exchange, for example an order of 50 bitcoin
would print at some level, and the depth of market and pricee would not change
at all, even at the level of interest. This went on pretty much all day.

That being said I don’t think bitcoin’s trading volume is a majorly faked. I
think there are a few bad actors in the exchange industry, especially during
the bubble, who were trying to give the illusion of volume and popularity to
drive more clients so they could extract their fees + raise money.

If people are truly worried about this issue then just trade on a regulated
exchange like CME.

------
alcio
How many AAPL shares have not been traded for the past 2 years? And how many
BRK.A?

Bitcoin gives the opportunity to answer those questions contrarily to the
complex and somewhat opaque equities ownership rules.

------
RandomTisk
Where is the lightning network, so people can buy common, small dollar amounts
of goods and services with BTC? IMO that's going to be the next catalyst, it's
slowly fading out until it's at least technologically possible to go
mainstream.

~~~
Laforet
LN has some fundamental issues with regards to security that I don't have time
to go into there. However any L2 protocol based on BTC is going to have a hard
time getting bootstrapped for the simple reason that there isn't enough
throughout in the mainnet to transfer a sufficient amount of balance to a
second layer. With the UTXO pool fragmented as is I don't think there is much
hope of improvement.

~~~
RandomTisk
What is the alternative, wait until 500MB blocks are feasible for both
blockchain storage and PoS bandwidth?

~~~
imtringued
They pretty much are.

------
ur-whale
This article is severely misguided if it uses actual transactions on the
blockchain to measure Bitcoin trading volumes.

------
kristianp
So most bitcoin isn't moving. That's not new.

------
sevencolors
Tried to buy some on Coinbase the other day, said it would take 5 days to show
up in my account. Doesn't inspire confidence in me.

~~~
SRTP
That has nothing to do with the Bitcoin protocol, rather it's a "security"
measure by Coinbase.

A typical Bitcoin transaction, even with minimum fees, confirms in under an
hour.

~~~
BurnGpuBurn
I know a Dutch bitcoin payment provider [0] whose transactions typically
confirm within less than a second. In short: That's because the risk of a 51%
attack on the network to steal my restaurant payment is in all practicality
zero. So you don't even have to wait for a confirmation from the network, just
the transaction showing up on the network is enough, given the transaction fee
is reasonable.

[0] [https://www.bitkassa.nl/](https://www.bitkassa.nl/)

------
Findeton
Wall Street Journal hinting not to trade bitcoin. What did they say about it
in 2010?

~~~
bdcravens
The same thing your typical Bitcoin advocate in 2019 was saying: "What's
Bitcoin?"

------
glofish
Any time WSJ or Forbes writes about the bitcoin I get the feeling that their
actual frustration is that they (the Wall Stree speculators) cannot control it
the way they are used to.

Always feels like sour grapes to me - for some reason that pleases me. Bitcoin
is an equalizer in that respect.

------
vorotato
This is the way bitcoin ends, not with a bang but with a whimper.

------
alexnewman
Bitcoin is clearly Art. Not gold, not money, not cash, art.

------
sbussard
A lot of illegal business is done with bitcoin. It wouldn't be a huge surprise
if some lost their capacity to trade, in one way or another.

------
granaldo
trading escalates when it is volatile, bitcoin has been relatively well less
volatile in past days

------
seventytwo
And a million crypto Libertarians just learned why deflation is bad for an
economy.

------
omani
why do you post a paywalled article?

------
faraday2211
Bitcoin is a scam inflated by cryptography and currency illiteracy. Same
category as flat earthers and Anti vaxxers.

