
Bitcoin Exchanges Are Buckling While the Price Surges Past 16,000 - pdog
https://www.bloomberg.com/news/articles/2017-12-07/bitcoin-soars-through-14-000-mark-up-more-than-40-this-month
======
cs702
Many are scratching their heads: "WTF? Bubble!? When will Bitcoin come
crashing down?"

The thing is, individuals and institutions worldwide currently own around $300
trillion in financial assets.[a] If as a group they decide to hold, say, 2% of
their financial wealth in Bitcoin, say, to diversify away from all nations on
earth, then Bitcoin's market capitalization would go up 30x, from around $0.2
trillion to $6 trillion. The number of bitcoins is fixed, so the price would
go up by the same multiple. In short, all it takes is for the world to want a
tiny exposure to Bitcoin.

Note that before Bitcoin it was _impossible_ to diversify away from all
nation-specific risks.

[a] [http://money.visualcapitalist.com/worlds-money-markets-
one-v...](http://money.visualcapitalist.com/worlds-money-markets-one-
visualization-2017/)

~~~
beamatronic
Why is gold being ignored then?

~~~
vinceguidry
You either have to hold gold, which is dangerous and again contingent on
avoiding nation-state failure risk, or you have to trust someone else to hold
gold, which is perhaps as risky but the risks have a different profile.

~~~
bradleyjg
A) How is holding gold contingent on avoiding nation-state failure risk, or at
least how is the relevant risk to gold as opposed to say your person?

B) It's pellucidly clear that holding bitcoin is dangerous in the same way
that holding gold is -- i.e. it can be stolen. In fact, it looks like the
carrying costs may actually be higher.

~~~
vinceguidry
A) If your nation state fails and you have to flee the country, how are you
going to take your gold with you? That's the real risk, not local vault
security.

B) You can take your bitcoin, encrypt it, and put it anywhere on the Internet
in plain sight, and then hold the encryption key in your pocket, or in your
head. Totally safe, especially against the real threat, border security.
Bitcoin is far easier to physically secure than gold is. What's difficult is
securing it in a manner that also makes it easy to do business with it.

~~~
bradleyjg
If your nation state fails and you die in the resulting chaos what good will
the encryption key in your head do anyone? Saying that bitcoin is a better
gold because it solves the nation-state failure risk is missing the forest for
the bacteria in the ants crawling on the leaves of the trees.

> You can take your bitcoin ...

Perhaps you could, but people generally don't. So in terms of actual risk and
carrying costs and how that relates to potential market cap, your foolproof
system is rather irrelevant.

~~~
vinceguidry
You seem to be dealing in absurd hypotheticals here. In most countries in the
world, having your nation state fail on you is a very real risk. It doesn't
fail all at once, so it's something you can plan for. Having wealth outside of
the banking and financial sectors that's not also in physical form is
something that's very valuable for this purpose.

------
jjxw
"As long as the music is playing, you’ve got to get up and dance." -Charles
Prince, Ex-Citibank CEO 2007

This is one of my favorite modern finance quotes on bubbles because it
encapsulates so well why there is still momentum in this crypto bubble even
after an even casual reading of the news will tell you that everyone and their
grandparents believes it's a bubble.

My bet is that heavy regulation in a market where there is heavy trading (e.g.
USA, Japan, Korea) will be the blow that bursts this, but as with everything
in public markets, who knows?

------
lawlessone
This is stupid, i'm saying that as someone that holds a small amount. People
are just speculating ,instead of adopting ,and undermining it's utility.

~~~
wereHamster
I really hope that the lightning network (which had its first successful test
a day ago) will end this speculation bubble (by enabling fast
microtransactions). Currently BTC is not suitable for general trading, the
transaction fees are too high. But I really would like to be able to pay for
things using BTC, online or in stores.

~~~
s73ver_
The price of BTC went up by $2k USD in 2 hours this morning. Why would anyone
want to use it to buy something when there's a good chance it'll be worth more
in a day or so?

~~~
mikeash
And conversely, it just fell by $3,000 in 20 minutes. Why would anyone accept
it for a purchase when there's a good chance it'll be worth substantially less
not long after?

------
Slartie
From what I've seen I came to this conclusion (further input from HN readers
gladly accepted, maybe I got something wrong):

It seems that yesterday at around 01:00 UTC, someone with a huge amount of
cash on GDAX started a buying bot, which bought BTC in small increments every
second or so at market price. Judging by the GDAX volume in comparison to
normal volume and an estimated average price, I'd say this person bought about
50-60k BTC for around 800-900 million dollars. Shortly after this buying
activity started, the Bitcoin network mempool got clogged by transactions -
and it doesn't seem like spam, but more like legitimate transactions with fees
attached that would normally go through in an acceptable timeframe. I'm pretty
sure this is people realizing that GDAX is the place to sell right now, thus
they're trying to move BTC from other exchanges and from cold storage onto
that exchange. However, most of them likely didn't get there in time, but the
buying bot apparently had no upper price limit and just continued buying its
way through the order books, until finally arriving at 19,6k$, when someone
apparently hit CTRL-C.

During that time, the price on GDAX and all other exchanges decoupled, as
arbers probably gave up on arbing (guess they ran out of coins or cash
respectively and weren't able to interchange the funds between the exchanges,
just like all the sellers). Even the Koreans, which usually are paying a large
premium with regard to Western exchanges, almost lost all of their premium
over GDAX for a few minutes.

I have only one idea who could have caused this: a single person or entity
trying to load up on huge amounts of coins, planning to use them with
corresponding orders on the upcoming futures markets. They probably got
surprised with the CBOE announcement of starting futures even a week earlier
than CME and thus had to speed up the buying plans a little, regardless of the
premium they'd have to pay this way. The tricky question that remains however
is: are they going to use these coins as a hedge, or are they planning on
dumping them to do the inverse of what they just did (artifically lowering the
market price, so their shorts on the futures markets earn them way more than
they lose on the BTC exchanges)?

And of course: is this over now? GDAX went down and up again, and the
mysterious and frequent buys at ridiculously high prices have returned as
well, although the blockchain had practically no time to re-stock GDAX with
coins. This person definitely doesn't care at all about the price and just
wants to load up on any coins it can get really, really quick.

~~~
desuvader
Time to short some futures ᕕ( ᐛ )ᕗ /s

In all seriousness, I wouldn't be surprised if a group of high-net-worth
individuals go short (exactly how you described) in order to shake out all the
inexperienced traders/investors in the space for a nice profit.

Also, could it not just be CME preparing the underlyings?

------
yongjik
I frequent several Korean websites (that used to have nothing to do with
cryptocurrencies) and the number of bitcoin-related posts in the past few days
has reached an insane level.

Half of them are saying it's a bubble. The other half say they're getting
rich. Nobody's talking about blockchains, fiat currency, built-in deflation,
monetary policies of nations, or any of that stuff, because nobody's
interested in these topics. To these people, it's a get-rich-quick scheme,
pure and simple. The only difference in viewpoint is whether they're in the
scheme or not.

I don't know how far it will go, but a new economic order it is not. The
players themselves (who are pumping up the price) don't give a damn about
economic orders.

~~~
niyikiza
I live in Korea (and run a small cryptocurrency related service) and I
couldn't agree with you more. Koreans are looking at BTC as a pure get rich
quick scheme. Even those chasing out altcoins, they are not hooked by, you
know, PoS or more privacy or any other features that the coins evangelists are
talking about. They are just looking for "the next Bitcoin" haha. Even when
you try to go to these "Blockchain meetups": most of them are discussing
nothing but the latest price of bitcoin.

------
api
Biosphere failure forensic report by agent 359348349 in outer galactic sector
17:

"The third planet began its ascent to technological singularity but became
terminally fixated upon the repeated calculation of an obscure cryptographic
mathematical function. Nearly all geologically sequestered carbon was rapidly
oxidized to provide energy for the computation of this function, triggering a
runaway greenhouse effect and transforming the planet's climate to one
resembling that of the second planet in this solar system."

~~~
benjaminjackman
"And as was the case with the second planet in the solar system, before its
runaway greenhouse gas death, we expect to see the process repeat itself on
the 4th as probes sent from the 3rd again contained micro-organisms which have
managed to adapt to climate there and have begun replicating. This time the
period should be considerably shorter then the previous 2 billion years as
cells with a nucleus have successfully adapted to the 4th, whereas from the
2nd's probes to the 3rd only non-nucleus possessing cells managed to initiate
a replication cascade until this terminating event."

------
aaavl2821
i don't have anything of real value to add here, and have never owned bitcoin
(and probably never will), but this is an incredibly fascinating phenomenon to
watch as a disintereted, underinformed party. i laughed out loud in amazement
(not sarcastically or scornfully, just in amazement) when i saw it passed $16K

it is unlike anything most people in the world have probably ever seen

~~~
elsewhen
It is reminiscent of the tech stock boom in the late 90s

------
joshbaptiste
Wonder if they'll be a consulting market for IT engineers from the stock
market exchanges for the cryptocurrency exchanges since they have experience
handling a large volume of transactions etc.. All the current crypto exchanges
seize when high volume, stop losses etc.. are triggered at the moment.

~~~
dx034
Most stock markets stop trading when prices change too much. If this was the
case with bitcoin, we'd be limit up each day after a minute or so. The
exchanges implementing it would lose out vs. others. So not sure they want to
implement that now.

~~~
Cthulhu_
Yeah this is just the thing - you cannot stop the bitcoin blockchain because
it's decentralized, and due to competition, individual exchanges can't call
for a stop on trading. They can but people will revoke trust in that exchange
and move to another one. If Coinbase is down more often in times like this,
they will start losing trust too and people will move to the next best
competitor. Then again I think by now Coinbase has built up such a good
reputation and whatnot that it'd take a lot for that to happen.

------
singularity2001
people thinking "Oh I just get out when the price starts falling" are utterly
mistaken:

Transactions now taking several hours might then take several days.

Already getting Error 520 on Kraken

------
SilasX
What really scares me is that there is divergence across exchanges. As of
9:30am on December 7th (PT), Gemini still shows $16,100 as the 24 hour peak.

~~~
hnarn
Why is divergence across exchanges "scary"? It just indicates a chaotic
market.

~~~
SilasX
Because it means something is stopping the arbitrage trades from happening,
like with MtGox and the throttled can't-ever-be-fulfilled withdrawals.

~~~
Cthulhu_
Yeah, a 210K+ backlog in unconfirmed transactions and soaring fees:
[https://blockchain.info/unconfirmed-
transactions](https://blockchain.info/unconfirmed-transactions)

------
samsonradu
Lets all just thank the big central banks for pumping so much liquidity into
the markets that people and companies are mostly clueless on what to do with
the money.

And now everything seems like a good investment, you see average companies
maling little to no profit acquired for billions, the housing market growing
year-on-year, the US stock market up ~20% YTD. What’s the surprise?

~~~
prostoalex
Remains to be seen how much of the trading activity is new money vs people
buying with other crypto, people buying with tethers they cannot redeem for
USD or just plain old self-trading where one can move cash from wallet A into
wallet B at arbitrary prices.

Bitcoin exchanges are not exactly offering a high degree of transparency on
their cash inflows.

------
singularity2001
Kraken Withdraw Audit Feature Disabled This feature is not currently
available.

That is the equivalent of Banks closing because of market panic.

------
yodsanklai
How can we explain this recent surge? what's the profile of people buying BTC
now? would numerous "small actors" be enough to cause this bubble?

I've also been wondering what would happen if this crashes. Could it have any
impact on the real economy?

~~~
aaavl2821
not an expert by any means, but from reading the article it looks like people
are buying in anticipation of price increases after BTC futures launch on
major exchanges (supposed to be 12/10 launch for the first one, tho i think
thats coming into doubt now)

------
nmeofthestate
I am desperate to fuel this bubble, but finding it a complete bugger to buy
bitcoins.

~~~
tostitos1979
I am very genuinely curious how people bought bitcoin before coinbase? There
was that vending machine. Or you could mine it. But how did regular folks do
it?

~~~
shawabawa3
I did a wire transfer to bitstamp from my girlfriend's French bank account.
Wouldn't work from my british bank account for whatever reason.

(This was in 2013. I bought my first bitcoin at $55 a piece, annoyingly I only
invested ~$100 at the time :/)

~~~
dingaling
I also used Bitstamp and had to shop-around UK banks until I found one that
would authorise the transaction. Most declined once they identified the
recipient as dealing in cryptocurrency.

Halifax were happy to do so though, also 2013.

------
VVayneTracker
I wonder to whatr extent BTC could be seen as an investment in a corporatist
future where nationstates are less influential than the fictitious entities
they have spawned.

------
dewiz
is it possible to buy and sell bc, as quickly as one buy and sell stocks (aka
speculating)? last time I checked there were ways but it would take some user
verification process to buy, and selling seemed to be very well hidden.

~~~
wereHamster
Sure, most exchanges have an API you can use to automate your trading. The
verification is a one-time thing, once you're past that you can trade as
quickly as you want.

------
sidcool
$19,000 now

~~~
adrr
Back at $16k. Big banks are pulling support for a futures market for bitcoin
due to volatility.

~~~
chatmasta
Shouldn’t a futures market ultimately reduce volatility by enabling
(synthetic) short selling?

~~~
placeybordeaux
Last time I checked they would only pull the price once a day. Not sure how
much that would actually help

~~~
dx034
The futures market will do the rest. Only settlement is once a day. But as the
bitcoin price moves (which indicates that the settlement price that evening
will be different), actors will buy and sell which should bring the futures
market in line with the bitcoin price. So in the end you'll end up with a
pretty close mirror. You only need 1-2 algo traders for that.

------
LeonM
Meanwhile, coinbase is down...

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thisisit
I called 16k couple of hours ago:

[https://news.ycombinator.com/item?id=15869803](https://news.ycombinator.com/item?id=15869803)

If some listened they might have made some profit. /s

That said, another fluff piece upvoted. Can we get another section like
SHow/Ask HN just for these?

~~~
npgatech
Calling $16k on a security that is amidst an explosive growth is hardly
insightful.

“If some listened they might have made some profit” - I think you’re giving
yourself too much credit here.

~~~
thisisit
Thanks for the reminder, I forgot to add the sarcasm tag. Added now.

