
The Cryptocurrency Industry Is 'On the Brink of an Implosion', Research Says - nopacience
https://www.bloomberg.com/news/articles/2018-10-09/bitcoin-on-the-brink-of-an-implosion-researcher-juniper-says
======
pavlov
An important harbinger of trouble to come is that the Tether (USDT) coin,
which is supposed to be pegged 1:1 to USD, is now trading substantially below
$1:

[https://www.bloomberg.com/news/articles/2018-10-15/dollar-
pe...](https://www.bloomberg.com/news/articles/2018-10-15/dollar-peg-that-
underpins-20-of-crypto-trades-is-under-pressure)

Billions of Tethers were printed seemingly out of thin air and used to
purchase Bitcoin. It's part of the foundation of the house of cards that keeps
Bitcoin at its current price:

 _" Despite their modest total market value of about $2.4 billion, Tether’s
coins play an outsized role on cryptocurrency exchanges. They were the second-
most traded among all digital currencies after Bitcoin as of Oct. 15,
according to data compiled by CoinMarketCap.com."_
[https://www.bloomberg.com/news/articles/2018-10-14/why-
crypt...](https://www.bloomberg.com/news/articles/2018-10-14/why-crypto-
traders-are-so-worried-about-tether-quicktake-q-a)

~~~
decentralised
I saw a couple of comments today about the price of USDT so I think it's worth
while explaining how it works just in case anyone is interested in knowing
more.

USDT is a pegged-currency. It's often described as a stablecoin but that's not
correct because it doesn't have an inbuilt stabilisation mechanism unlike
Maker's DAI for instance.

The way it works is purely based on well known legal mechanisms that have no
cryptoeconomic properties on its own. The issuer holds a USD balance at a
bank, then commissions a receipt that proves their balance and issues an equal
number of USDT. 1 USD = 1 USDT at issuance time and the trustworthiness of
both the issuer, the auditor and banks involved.

The token itself is used to facilitate trading and many investors 'park' their
gains in USDT while waiting for the market to reach a certain point or just in
between trades, but that means that the token's FX value is set by the open
market itself so if there are more buy orders than available USDT the price
goes up and if there are more sell orders than demand the price goes down.
Where this gets interesting is that some exchanges list assets based on the
USDT fx and not USD which opens some arbitrage opportunities like we are
seeing today.

For more info:

[https://github.com/jpantunes/awesome-
cryptoeconomics#stablec...](https://github.com/jpantunes/awesome-
cryptoeconomics#stablecoins)

[https://stablecoinindex.com/](https://stablecoinindex.com/)

~~~
vkou
> The token itself is used to facilitate trading and many investors 'park'
> their gains in USDT while waiting for the market to reach a certain point or
> just in between trades, but that means that the token's FX value is set by
> the open market itself so if there are more buy orders than available USDT
> the price goes up and if there are more sell orders than demand the price
> goes down.

If the USDT to USD ratio fluctuates so much, what is the point of 'parking'
your money in USDT?

~~~
roywiggins
In theory you could just redeem your money from the Tether issuer, if it's
actually backed by USD and they deign to let you redeem them.

~~~
vkou
In theory, cows are spherical. In practice, you can't actually do this.

------
decentralised
In general, if you pick the all time high as a starting point for your
"research" it's all the way down from there. Bitcoin's daily transaction
volume is moving to second layer so the metric used is not very useful.

More importantly, and I can't stress this enough, the FX value of a
cryptocurrency is not directly related to the project's status (developer
activity or security track record, etc) but it is correlated to public
perception of its value, which is why these sort of article pops up every now
and again at regular intervals.

[https://www.reddit.com/r/Bitcoin/comments/9niw8x/lightning_n...](https://www.reddit.com/r/Bitcoin/comments/9niw8x/lightning_network_at_the_senate_counterargument/)

~~~
pkulak
By "second layer" do you mean lightning? Is that project off the ground yet?
It's been a while since I paid attention.

~~~
kurtisc
It's very close, the only thing left to do is solve the Travelling Salesman
problem in polynomial time.

~~~
sp332
This is funny, but solving TSP for most real-life networks is not super
difficult. Anyway it's not exactly TSP because you don't have to find an
optimal route, just any route will do.

------
root_axis
I doubt it. There is nothing to implode. Most of the activity in the
"industry" is shuffling around tokens between the various blockchains as their
respective cheerleaders hype their chosen coin and spread FUD about competing
ones. All of the "real" economic activity surrounding cryptocurrencies (e.g.
darknet commerce) will continue regardless of the price since darknet prices
are pegged against the value of government currency anyway. The cryptocurrency
world will continue to churn with activity indefinitely because creating the
appearance of activity _is_ what the industry does

~~~
ttul
... and that economic value is tiny when compared with the speculative value.
The untethering of tether portends a crash, IMHO.

~~~
root_axis
Well, it depends on your definition of crash. We know that large price
fluctuations are not uncommon in cryptotoken land so it's important to be
clear about exactly what we mean. Personally, I'd consider a definitive crash
to be a sub 1k BTC/USD price. I don't see that happening any time soon because
the "speculative value" is very cheap to maintain with lots of enthusiasts
broadcasting hype across every popular tech platform and the various exchanges
generating superficial traffic and trading activity with very little cost.

------
superkuh
Bloomberg absolutely loves writing these "Anything not a central bank is on
the brink of implosion" scare articles. They must generate a tons of views.

Unfortunately Bloomberg as a whole doesn't know anything about cryptocurrency
beyond the speculation side which is similar to their existing competencies.
But that's all they see.

We have a blind man feeling an elephant's ass and telling us it's shitty.
While true, it only describes a tiny part of what cryptocurrencies are or do.

~~~
atomical
> Unfortunately Bloomberg as a whole doesn't know anything about
> cryptocurrency beyond the speculation side which is similar to their
> existing competencies. But that's all they see.

They don't know anything? Even though they partnered with Mike Novogratz to
create an index?

[https://www.bloomberg.com/professional/product/indices/bloom...](https://www.bloomberg.com/professional/product/indices/bloomberg-
galaxy-crypto-index/)

~~~
superkuh
I never said they don't know anything about finance or speculation markets.
But if you (and they) think that's all cryptocurrency is then you're missing
90% of what's up.

Bloomberg keeps trying to predict crypto's behavior based entirely on the most
traditional looking speculation markets. Speculation markets aren't really a
part of cryptocurency at all (they aren't on the blockchain(s)) but they are
the only part of the concept that traditional finance people can (or will try
to) understand.

~~~
atomical
I'm sure Bloomberg has a huge archive of speculative articles on stocks.

Why are blockchain advocates so emotional? They should understand these
articles because speculation is a core feature of the ICO boom and
cryptocurrency in general.

~~~
JAlexoid
Sounds like "no true Scottsman" fallacy.

No one really cares about bitcoin and etherium, after their wild value swings.

Let alone - it's way too complicated for any layperson to grasp. Money is
easy... but think about the distrust that many elderly people have with simple
debit cards! Cryptocurrency will definitely be our nerdy wet dream

------
labbyz
Thanks Bloomberg for this advertorial summary of a 1250$ research .pdf. Saves
me some money to invest (in crypto or otherwise).

Would you believe that the author of this research was harping about
blockchain adoption by large companies less than a year ago? A lot has changed
in 11 months, such as a slow price drop from the 2017 December insanity.

Isn't it a bit rich to first make companies anxious to join in on the
bandwagon, then to turn around and say they are investing into something that
is on the very brink of destruction? Based on pretending that Bitcoin was
invented at its height in December 2017?

Heck, I did not sell any of my market research, I gave it away for free (silly
me). Sure, sure, I made a few million here and there, but nothing like
charging 0.5 BTC to tell you the financial world is collapsing, because John
McAffee is so irrationally bullish.

This time it is real though. I can feel it too. Bitcoin is over! I hope you
made out like a bandit, because soon, the only way to make money is to sell
research about the impending bounce-back of crypto.

Of course the early adopters of Bitcoin are critical about its demise. They
have a vested financial interest in seeing it succeed. Unlike these
researchers, who only stumbled upon Bitcoin when they realized that people are
willing to pay for their objective expert opinion on something they themselves
missed the boat on.

~~~
rstuart4133
> Heck, I did not sell any of my market research, I gave it away for free

Don't work for Bloomberg, eg?

Bloomberg News Pays Reporters More If Their Stories Move Markets:
[https://news.ycombinator.com/item?id=18162440](https://news.ycombinator.com/item?id=18162440)

------
coliveira
Bitcoin and similars are the biggest waste of computing power and energy in
the history of the planet. It will be nice for the environment when this is
all over.

~~~
fastball
Quite the claim.

Obviously you haven't heard of the NSA or the US Military.

~~~
superkuh
For anyone downvoting this I'll expand what he said so you can understand it
before reflex downvoting.

Nationstate backed fiat currencies require enormous amounts of energy waste in
the form of standing armies and other tools of power. Compared to the energy
Bitcoin uses to protect itself from attack or fraud this energy is very large.

~~~
Cmerlyn
Yes, because if cryptocurrencies became the standard, armies will become
obsolete and Nation states will dissolve their Military programs. Makes sense.

~~~
statguy
Ha. That would be true if the only purpose an army was to stabilize the
currency. The army/military of any nation does far more than that.

------
clircle
Those red lines on the graph are just awful: arbitrarily drawn to make things
look worse. Fit an actual model and drawn on prediction intervals next time.

I have never owned crypto currency, I'm just easily triggered by bad graphs.

~~~
agumonkey
Welcome to crypto, land of the arbitrary graph. pro tip: never read twitter
streams from "crypto trader" your IQ will drop like that \

------
jessriedel
I'm uninformed and bearish on bitcoins, but I find it helpful to look at the
historic bitcoin price on a log scale.

[https://bitcoincharts.com/charts/bitstampUSD#tgSzm1g10zm2g25...](https://bitcoincharts.com/charts/bitstampUSD#tgSzm1g10zm2g25zl)

Bitcoin has had _relative_ declines this big and lasting this long (late 2013
to mid 2015) only to bounce back later.

~~~
CyberDildonics
That's a very simplistic way to look at it. Before the latest huge price
increase, bitcoin had very little real competition. Now it has proved that its
artificially crippled capacity of 1MB is an enormous problem and that the
limited throughput couldn't even come close to handling the last bubble
smoothly.

~~~
jessriedel
My comment is intended to speak to cryptocurrency as a whole (the OP topic)
rather than Bitcoin specifically relative to other cryptocurrencies. I welcome
links to charts that show, e.g., total crypto market cap on a log scale.

~~~
CyberDildonics
> My comment is intended to speak to cryptocurrency as a whole (the OP topic)
> rather than Bitcoin specifically

You said bitcoin twice and linked to btc's price over time, I'm not sure why
anyone would take that to mean crypto-currencies in general.

This seems like a textbook example of moving goal posts.

~~~
jessriedel
This isn't a competition. I intended my comment to make one point, you
interpreted it as another.

~~~
CyberDildonics
I interpreted you talking about bitcoin and linking to bitcoin's price graph
as referring to bitcoin.

------
mogadsheu
Wasn’t there a HackerNews post last week about Bloomberg journalists getting
paid for articles that move markets? This one seems like one of those
articles.

~~~
atomical
Because you don't agree with it?

~~~
mogadsheu
I don't disagree with it, my focus is more on it being a sensationalist piece
of news, which makes the content less trustworthy because I know their goal is
to make me move.

------
slammm
I feel like its another case of the tech bubble. The projects with real causes
and uses will come back from any implosion in the long run.

~~~
fullshark
So illegal transactions and money laundering it is.

~~~
Scoundreller
Iunno, if i were a billionaire, the idea of having $50m under nobody’s control
but my own that I can take anywhere, anytime, doesn’t exist anywhere else.

I can’t do that with gold. Bank deposits are always available until they
aren’t. But Coinbase can’t do this either.

~~~
umanwizard
Edit: I calculated this wrong, please ignore this comment

~~~
moduspol
Let us know how you get it through airport security.

~~~
xoa
> _Let us know how you get it through airport security._

How you get it through what now? Private aircraft don't deal with that. GP did
specify "billionaire", and at that level at least fractional ownership in
private long distance transportation is not a reach either.

~~~
moduspol
The point is that transporting large amounts of money that can be physically
confiscated is a problem, even if it somehow fit into a suitcase.

Debating the logistics of potentially being able to evade _some_ of those
difficulties by having even larger sums of money (to afford private airliners
or private security, even in times of unrest) and accepting larger risks
misses the point.

------
Aqueous
According to the finance industry and finance media, the cryptocurrency
industry, and cryptocurrencies in particular, have been on the brink of
collapse since 2008, when Bitcoin first surfaced and was worth $0.

I guess they're going all-in on the whole 'stopped-clock' prediction strategy,
no?

~~~
sodafountan
It's fascinating to watch these patterns repeat themselves over and over. It's
almost like we're all investing in an algorithm and everything's playing out
according to its specifications.

\- Sincerely, a guy who's been buying bitcoin since 2013

------
PinkMilkshake
Another one for the Bitcoin Obituaries
[https://99bitcoins.com/bitcoinobituaries](https://99bitcoins.com/bitcoinobituaries)

Honestly I have no idea whats going to happen. I threw some money into Bitcoin
I was okay with loosing and check on it every few months. It's been fun.

Maybe some perfect storm of the Lightning Network, Web Payments and dodgy
banks or failing economies will bring about some crypto-utopia. Or maybe it
will implode and in the end all we have done is collectively purchased a
metric shit ton of GPU's.

Actually, that's not _all_ we would have done. It didn't work out but at least
we ran the experiment.

------
wickoff
It's interesting that an article like this pops up now. From a technical
analysis perspective the entire crypto market had been exhibiting classical
accumulation properties for two months now.

Before critics show up - technical analysis is not meant to predict the
future, but rather to pick the more probable outcome.

------
fullshark
Unless there's more analysis than what's quoted in the article, this appears
to be nothing more than trend analysis based on the last few months.

------
CyberDildonics
Here is Bitfenix's cold wallet address:

[https://bitinfocharts.com/bitcoin/address/3D2oetdNuZUqQHPJmc...](https://bitinfocharts.com/bitcoin/address/3D2oetdNuZUqQHPJmcMDDHYoqkyNVsFk9r)

They have about 934 Million in BTC, having had as little as 869 Million USD
recently. Their tether liabilities are between 2.5 and 3 Billion USD:

[https://coinmarketcap.com/currencies/tether/](https://coinmarketcap.com/currencies/tether/)

It has long been asked how a token can be pegged to 1 USD without any actual
USD.

The reality is that it can work if your balance in other currencies doesn't go
below the average price you bought them at. The more the price of btc goes
down, the more btc they have to give back when people exchange their tethers
for btc (you can't exchange them for USD).

Two dynamics work in their favor:

First, exchanging tethers for btc means buying btc, which makes the price of
btc go up. If people buy the btc so that they can exchange it at real
exchanges for USD, then this effect would be temporary and you would see a
disconnect between the price of btc at Bitfinex and real exchanges like
coinbase. Two days ago the premium on Bitfinex was about $100, now it is about
$400 higher than coinbase and bitstamp.

Second, what many think originally happened due to the stark correlation
between tether creation and btc price jumps on bitfinex, was that the creation
of tethers and subsequent transfer in bulk to bitfinex's exchange caused the
btc price to rise. Now not only do they benefit from creating tethers out of
nothing, they get the exchange commission on top AND get to create the
illusion of demand. This illusion of demand was seen to work extremely well on
unsophisticated investors during the run up to 20,000 USD per btc, helping to
create articles, fear of missing out and general hysteria that brought in more
unsophisticated investors buying in to something they did not understand.

------
drivingmenuts
Well, hopefully graphics card prices will drop then.

~~~
Scoundreller
My friend put a computer in their garbage bin last fall.

I took out its “worthless” video card and still sold it for $40.

------
fredgrott
I have a new BS rule when its a crypto currency headline just replace with
Pharm Industry..you get the same exact meaning

------
Tsubasachan
Instead of inventing bitcoin because evil banks maybe people should do some
consumer rights stuff? I have become painfully aware that using an ATM in
America costs money... Whose idea was that anyway. Why is Mastercard making
billions? A percentage based fee instead of a flat fee. As if it matters if
you use your CC to buy a carton of milk or a car.

Hocus pocus Capitol Hillus make usury illegal spell. I really don't want to
use cash anymore.

------
mindfulplay
Getting my popcorn ready...

This is the silliest human endeavor that somehow seems to attract a few smart
people too.

~~~
kickopotomus
I wouldn't call it silly. The idea behind cryptocurrency (distributed
agreement) remains a difficult problem to solve efficiently and securely. If
nothing else, it is a worthwhile thought experiment.

As for whether or not any cryptocurrency will ever be stable and widespread
enough to be usable in the western world remains to be seen.

~~~
floatboth
_Trustless_ distributed agreement.

It's an interesting algorithm, but not actually useful. Society is literally
built on trust. So "anti-government" (or "anti-social"?) currency is the
_only_ use for it.

------
bluedevil2k
Is there even any reason the world needs more than 1 cryptocurrency? I know
there are dozens (hundreds?), but they all effectively do the same thing,
right? Allow decentralized currency that can be used for legal and illegal
transactions.

~~~
oelmekki
Just as programming languages are all (well mostly) doing the same thing.

Cryptocurrencies are tech products, various projects try various ideas. You'll
have the initial blockchain idea from bitcoin, the privacy blockchain from
monero, the programming contracts from ethereum, the decentralized exchange
from stellar, etc.

I'm perfectly fine with that, I prefer to see people create new projects to
test new ideas rather than to hear them complain bitcoin is not doing what
they want.

------
liftbigweights
Two anti-crypto stories on the same day?

"Blockchain isn't about democracy and decentralisation – it's about greed "

[https://news.ycombinator.com/item?id=18219256](https://news.ycombinator.com/item?id=18219256)

I'm not a fan of cryptos, but it's fascinating how so much of the media ( even
in different countries ) push the same narrative in almost a coordinated
fashion.

~~~
LyndsySimon
I'm a somewhat early adopter of Bitcoin, and believe in its long-term utility.
Even so, I've been bearish for some time due to the influx of people who are
buying coins or nothing more than speculation. I don't think that's "bad" per
se, but it's not a sustainable means of growth.

I'm seeing more an more of these "the end is near" articles popping up. After
witnessing a half dozen or so boom/bust cycle firsthand, my spidey sense is
beginning to tingle that we're about to enter another one. After ten months of
decreasing volatility and regression toward a mean price of $6,500 +/\- 5%,
I'm expecting a run-up any day now. It may not be another "to the moon!" run,
but it'll happen. When it does, the new value will stabilize higher than it is
right now.

~~~
LyndsySimon
Ha! After writing this comment, I checked the price history for the first time
in a month or two. There was a spike in price and volume about 12 hours ago,
that at first glance appears to be the largest in six months or so.

------
ramblerouser
>Echoing sentiments of mainstream economists

Yea, Paul Krugman has been saying "Bitcoin is doomed" since 2012. He'll always
be wrong because this is all politically motivated. The banking and political
establishment are scared shitless by alternative currencies, crypto or
otherwise. Google the "Liberty Dollar". Mouth pieces for the financial
industry like Bloomberg will attack alternatives to the petrodollar no matter
what they really think, and obviously they know Bitcoin has a future because
Goldman-Sachs has bought tons of them.

~~~
__Joker
I am not sure Paul Krugman is scared or politically motivated.

One of the strongest argument Paul Krugman makes against bitcoin is about
trust. Like, he says dollar has value because US government backs it and you
can pay taxes with it. Basically, he is questioning can bitcoin gain that
level of trust among its users to be successful. Not the current level of some
transaction around dark markets.

Personally, I don't know.

~~~
ramblerouser
>US government backs it

Yes, by putting people in jail who put forward viable alternatives to USD,
like Liberty Dollar. And making Bitcoin impossible to use legally as a
currency by applying strict capital gains tax reporting requirements.

>Can Bitcoin gain that level of trust amoung its users to be successful.

The massive public and institutional buy-in over the past 5 years suggests
that trust in its cryptographic security is not what is holding it back.

Bitcoin, from its inception, is part of a political battle, not a
technological or economic one. Read the Satoshi white paper. Paul Krugman is
saying that it wont be successful because the banks and government will fight
it, and his social status is dependant on him being part of that fight. Do you
think Krugman would keep all his exposure and prestige if he went off the
reservation and criticized the banks and the petrodollar? No way.

~~~
floatboth
> Paul Krugman is saying that it wont be successful because the banks and
> government will fight it

He's wrong.

It won't be successful because it's pretty much unusable by regular people,
difficult to secure (surprise, "be your own bank" implies "be your own
security guard" — and 99% of people want to be neither of those things),
extremely wasteful, slow and full of scams.

Most people's first encounter with buttcoins is literally RANSOMWARE. Do you
really think mass adoption is coming?

~~~
ramblerouser
Does having $100 in your pocket make you "your own bank"? Does it make you
"your own security guard"? Real banks could hold deposits in Bitcoin if the
regulators controlled by banking interests allowed it, but they dont. Why do
you think that is?

