
Worries Grow That the Price of Bitcoin Is Being Propped Up - ganlad
https://www.nytimes.com/2018/01/31/technology/bitfinex-bitcoin-price.html?dlbk
======
simias
The somewhat ironic part is that one of the core concepts of Bitcoin is that
you can't counterfeit it. You can mathematically prove how many coins you own,
if somebody sends you 3 BTC then once it's been validated on the blockchain
you _know_ that the money is now yours, they can't have lied, it can't bounce
like a cheque

Except this Bitfinex thing shows that while an amount of bitcoin can't be
manipulated or counterfeited, their actual value is relatively easy to
influence _because_ it's mostly unregulated. I mean think about it, _if_
Bitfinex is lying about their dollar reserves this might be one of the
simplest and most efficient scams of all time. They're literally making up
money as they see fit. Hundreds of millions at a time. Just like that.

Now of course maybe they're not actually crooks and they do have the money,
it's kind of a schrodinger's cat scenario at the moment. Still, the fact that
nobody manages to know for sure the truth of the matter shows that they
_could_ be doing it and we'd be none the wiser. People are buying and selling
for million of dollars of these things, not knowing if they're trading digital
dollar bills or monopoly money.

~~~
conanbatt
The most interesting thought to me right now is how the situation will develop
if or bitfinex/tether crashes the market hard.

I am not a fan of the SEC getting involved. Taking crypto as an experiment, I
think it is better for the market to take a hit and then find organic
solutions. If the SEC gets involved and busts bitfinex/tether, the community
loses the opportunity to become 'unbailable'. Yes , people will lose the
money, but if you create the expectation that the sec will protect you as a
consumer from the scams, then we will not be sophisticated to actually
organically ignore scams.

What will happen next, FDIC and too big to fail institutions?

~~~
monktastic1
You could say that humanity has repeatedly and organically come to a solution
broadly known as government and regulation.

~~~
acct1771
Worked great in 2008.

~~~
jzymbaluk
It actually did. The market was on it's way to crashing harder than the great
depression, but it didn't, probably thanks in some part to government being
able to intervene and control monetary policy

~~~
sixQuarks
Have you ever heard of the phrase "kicking the can down the road"?

~~~
stouset
You can play this argument ad infinitum without actually adding anything of
value to this conversation.

Central banking is not perfect, but it has a better track record of stability
and growth than any other system that’s been tried at a large scale. Try and
remember that the alternatives aren’t optimal economic systems that are immune
to bubbles, recessions, depressions, hyperinflation, corruption and
manipulation.

If anything the Bitcoin experiment is reinforcing why we have existing
regulations in place.

~~~
tooltalk
How do you know that it has a better track record of "stability" and "growth"
than any other system at a large scale? Much of America's growth in the late
19th happened without any central banks in 1913. Most of "depressions"
happened prior to that -- and there were 4 such major ones in the 19th century
and many of them were directly caused by the govt policy changes -- were
nowhere as severe as the Great Depression occurred after the creation of the
central banking in the US.

------
jandrese

      “It’s a signal to the market of what those who have
      scrutinized the situation already believe: There is a 
      problem here,” said Jill Carlson, a former trader at Goldman
      Sachs who now consults with a variety of virtual currency 
      companies. “The dissolution of a relationship between an 
      auditor and a company is very rarely a good sign that the
      company is behaving in accordance with market best practices.”
    

When you're getting dunked on by Goldman Sachs for being unethical, you know
you have a problem.

~~~
mtgx
And yet they were able to print like 800 million USDT a month _after_ being
subpoenaed by the US government.

Strange, no?

~~~
dharma1
This is what I thought about too. So either they just thought screw it, let's
make hay while the sun shines, the feds will never get us - or they are legit

------
JulianMorrison
Bitcoin is a system where you can have reasonably strong trust in the ledger
and absolutely no trust in any other part of the market at all. It's a
demonstration in practise that pure unregulated trade in the digital
equivalent of used unmarked bills leads to a broken market where literally
everything is a scam, crime pays, and meaningful business cannot be
transacted.

Its value is being propped up beyond this technical tinkering, by poorly
informed optimism, ideological dreamers and a lot of people hoping to make hay
while the sun shines, sometimes by knifing you first. It is going to bust all
the way down to $0 and probably get internationally banned as an attractive
nuisance.

~~~
jebeng
In what way is a transparent blockchain where every transaction is recorded
and fully public analogous to unmarked bills?

~~~
JulianMorrison
Way to pick out a non-central point. But the answer is that cash and bitcoins
are intrinsically self-authenticating but not owner-identified and do not rely
upon a credit card / bank-account facility which can be shut down by
authorities if it is being misused.

~~~
mrhappyunhappy
Here's a thought: if you bought Bitcoin with Fiat it is 100% identifiable to
you. Please learn about blockchains before you talk.

~~~
leereeves
Your real identity isn't in the blockchain. You can only be identified if the
identity of whoever you bought from is known, they know your identity, and
they can be induced to share it, or if the transaction can be identified and
you can be tracked from the transaction.

------
kelvin0
My question is: what is the value of a Bitcoin? It looks to me like a great
way to transfer currency and facilitate exchange of goods, but not much more
than that.

So 'investing' in this digital currency itself does not make much sense to me,
because intrinsically it has no 'real' value. I might be misinformed about the
subject, in which case I would gladly like to be shown my error.

For example, why don't I invest in Yuan or the Pound instead of Bitcoins? From
my perspective the only thing driving up the price of Bitcoin is the demand
for it by 'crypto-investors', which is completely artificial and they are not
chasing any tangible value.

Can anyone enlighten me?

~~~
conanbatt
I like to compare Bitcoin to Land. When people migrated over to america, land
was basically worthless: there was too much of it and too few people.

As the more fertile and better located land was taken, prices started to rise.
As land supply is inelastic, the price can only tend to go up as long as the
demographics expand.

Bitcoin has a limited amount and even more has a diminishing supply (as coins
get lost, stolen, broken). Its use case is less valuable than land but its
supply way more limited.

The only thing bitcoin needs to increase price is inelastic demand. IF there
is just a single use case that uses bitcoin everyday, its price will tend to
infinity.

~~~
human
I’m sorry but your point of view could not be further from the truth.

First and foremost, land has intrinsic value. You can grow food, build shelter
and have access to water. If you’re very lucky there might even be oil below
it. On the other hand, Bitcoin won’t help you survive very long.

Second, Bitcoins can be divided infinitely. Today I pay 1 BTC for a car.
Tomorrow I pay 0.5 BTC. It really does not matter how many BTCs is the
maximum.

Land, on the contrary, loses value proportionnaly as you divide it. 50% of the
land means 50% of food, water, shelter, etc.

Finally, Bitcoin price will never reach infinity because there is a physical
limit to the real value Earth and humans can produce.

~~~
conanbatt
> First and foremost, land has intrinsic value. You can grow food, build
> shelter and have access to water. If you’re very lucky there might even be
> oil below it. On the other hand, Bitcoin won’t help you survive very long.

Thats the inelastic demand I'm talking about: if bitcion finds a use case
where it shines above all else, even if it is something like sending money
overseas, the demand will be inelastic and with diminishing supply its price
will tend to be infinite.

> Second, Bitcoins can be divided infinitely. Today I pay 1 BTC for a car.
> Tomorrow I pay 0.5 BTC. It really does not matter how many BTCs is the
> maximum.

So can money and so can land...this is a Zeno's paradox reasoning.

> Land, on the contrary, loses value proportionnaly as you divide it. 50% of
> the land means 50% of food, water, shelter, etc.

That's not true for land because the value of land is determined by the
difference in fertility between lands which is something bitcoin doesnt have
as each is the same as any other. But lets assume that is true for the purpose
of argument: BTC does not have immediate transactional capacity, that is the
limit of use. So if you want to have your operation happen you need to pay for
it to happen. And moving more btc is cheaper than moving less btc. So yes,
smaller amounts of btc are less useful than bigger BTC.

> Finally, Bitcoin price will never reach infinity because there is a physical
> limit to the real value Earth and humans can produce.

Its a theoretical concept, much like saying that if there wer eonly 1 cup of
water its value would be infinite.

~~~
freeone3000
Sending money overseas with bitcoin doesn't exhaust the supply of bitcoin. The
bitcoin isn't consumed - it's converted from useful money to bitcoin at one
end, and bitcoin to useful money at the other. While a limited supply of
bitcoin would limit the throughput, the ledger calculation already does that,
and at a much lower rate. So it's not as if _any_ utility immediately lends
bitcoin value.

~~~
conanbatt
It does because transfering that money takes blocks of operations to happen,
which means you cant transfer infinite amounts of bitcoin in a finite amount
of time. You have a limit of how much btc you can move between addresses.

------
jorblumesea
Crypto is learning all the hard lessons that banking has learned over the past
100 years. Ironic that a currency founded on the idea of transparency (the
blockchain) is so fundamentally opaque at almost every other level.

------
dlandis
I'm curious how big the ramifications for Bitcoin will be if the majority of
Tether tokens are proven to be fraudulent and Binfinex collapses (which
doesn't seem that unlikely at this point).

~~~
Mahn
You just have to look at what happened after the MtGox collapse in 2014:
Bitcoin goes back to sleep for 2 or 3 years, afterwards everyone forgets it
ever happened and another rally takes place where cryptocurrencies "go
mainstream". Lather, rinse and repeat until the amount of people willing to
speculate on it is completely exhausted.

~~~
hbosch
I don't personally think it will be that cyclic. There is so much more
invested this time around, so many more people standing to lose so much more
money, such a brighter light on the cryptocurrency world now. A devastating
loss (e.g. Bitfinex shuts down and freezes all transfers, Tether worthless,
that type of thing) to the BTC economy would be critical to the entire future
of cryptocurrency as we know it, IMO. I don't think Bitcoin has 9 lives.

~~~
cwkoss
I don't know. Most finance people now have access to bitcoin exposure through
trusted institutions via futures. Many of these people felt a lot of FOMO at
missing the boat on Bitcoin's last big jump. I think if it drops to $5k, there
will be some big players taking a long position in hopes of another order of
magnitude movement. Certainly could get much uglier, but I think Tethers
vanishing would not be fatal.

Also, with Bitcoin becoming 'established' I bet everyone who owns more than
$1M in cash is considering Bitcoin as a method of alternate banking and
transferring funds internationally.

Bitcoin certainly isn't the safest place to store your money, but there is a
decent argument to be made that it can be safer to keep 90% cash and 10% btc
instead of just 100% cash for some risk profiles. Criminality is one obvious
use case, but people who want a plan for how they could flee their country in
the case of disaster, financial meltdown, or social unrest would also see
advantages: much easier to get a $100k private key through an airport and
customs than the equivalent in physical cash.

~~~
aml183
Most, if not all, financial institutions aren't exposed to cryptocurrencies
directly either through futures or the underlying currencies. Institutions are
defined as endowments, sovereign wealth funds, pensions and asset management
firms such as Goldman Sachs. Capital inflow into the cryptocurrency space in
aggregate is still less than $10B. If the Norwegian sovereign wealth fund
bought Bitcoin, their minimum purchase would probably be $50MM which
represents .5% capital inflow and a nice uptick in "market cap" of the
industry.

Bitcoin is by no means established because these institutions aren't
investing. If and when the day comes that this happens then Bitcoin will be
established and increase one or two magnitudes. Many of the above institutions
legally can't invest because they are restricted by their mandates. Bitcoin is
a terrible use case for criminals because it's transparent. Monero would be
better because it's anonymous.

~~~
cwkoss
You are correct. No major institutions have publicly disclosed an investment
in Bitcoin, and many are legally restricted from doing so.

However, I think that market speculators, particularly hedge funds, would
strongly consider opening positions in Bitcoin below $5k in hopes of a many-
fold return on investment. It is high risk, but in a diversified portfolio
Bitcoin may be attractive in our current market climate where the market is so
overbought.

------
JumpCrisscross
Bitfinex/Tether follow the classic investment fraud story arc. The big frauds
don't start with bad intentions. A self-proclaimed genius seeds an operation,
gets traction, attracts money, hits a snag, fudges the numbers and keeps
doubling down, intending to pay it back, and then (a) collapses, (b) gets
caught or (c) rolls the scheme over until (a) or (b). The terminal phase is
inevitable given the non-linear difficulty of scaling a fraud and their need
to scale to maintain credibility.

The set-up: Tether was, to a layman, a decent idea. The build-up: As creation
and redemption was demonstrated, Tether attracted buyers. The snag: Tether got
hacked [1] and released an IOU to affected customers [2]. Wells Fargo got
spooked and froze Tether/Bitfinex [3].

The fudge: Tether has a hole to plug. They also have nowhere to put incoming
U.S. dollars. Someone suggests they buy Bitcoin with the incoming dollars. The
stupid figure it's a temporary measure until they find a new correspondent
bank, the evil smell a scam and the lazy don't think about it. Bitcoin
ascends. This move becomes very profitable. (It also increases the size of
their balance sheet, which makes finding a new correspondent bank more
difficult.)

Doubling down: Bitcoin descends. The firm becomes, or comes close to becoming,
insolvent. Tethers are issued to bring the balance sheet back into line. The
stupid figure they can unwind when Bitcoin recovers; the evil and lazy agree
to not think about it. The frequency and magnitude of this "support" keeps
growing.

The collapse: At each development, the smart and ethical decamp. That leaves
everyone on board too incompetent, distracted or lazy to properly address a
journalist's investigation [4]. That, in turn, attracts regulatory attention
[5].

[1] [https://www.theverge.com/2017/11/21/16684296/tether-
cryptocu...](https://www.theverge.com/2017/11/21/16684296/tether-
cryptocurrency-stolen-30-million-hack)

[2] [https://www.coindesk.com/bitfinex-disperses-unique-token-
to-...](https://www.coindesk.com/bitfinex-disperses-unique-token-to-
compensate-for-60m-theft/)

[3] [https://www.coindesk.com/bitcoin-exchange-bitfinex-sues-
well...](https://www.coindesk.com/bitcoin-exchange-bitfinex-sues-wells-fargo-
over-bank-transfer-freeze/)

[4]
[https://www.bloomberg.com/news/articles/2017-12-05/mystery-s...](https://www.bloomberg.com/news/articles/2017-12-05/mystery-
shrouds-tether-and-its-links-to-biggest-bitcoin-exchange)

[5] [https://www.bloomberg.com/news/articles/2018-01-30/crypto-
ex...](https://www.bloomberg.com/news/articles/2018-01-30/crypto-exchange-
bitfinex-tether-said-to-get-subpoenaed-by-cftc)

~~~
Vraxx
Hmmm.. I think your first link is to the wrong hack. If everything were as you
claim, the hack would need to precede the bank freeze in order for it to be in
any way causal. I was originally writing this reply to refute your claim on
that basis, but while investigating it I found that there was indeed another
hack where bitcoin was stolen from bitfinex rather than Tether being stolen by
Tether. Your article 2 cites the bitfinex hack as well. Furthermore, the IOU
issued wasn't Tether, but rather some other token "worth" $1 called BFX. The
rest of the story seems plausible, but it seems you have a mixup in your
buildup and snag phases of the hypothesis (I'm not saying that it is outright
wrong because of this though)

------
Nursie
It looks, on the surface, to be a sort of massive fraud on the issuance of
tether, which also propped up the price of Bitcoin and a lot of other coins,
as a couple of billion in fake liquidity was pumped into the market.

It's too early to tell what the exact story is, but it's certainly the case
that the tether company's promises that they get frequent, professional audits
are an out-and-out lie. I, personally, don't believe they have billions of
dollars in the bank to back up their tokens, either.

Various authorities are starting to take interest, as are more mainstream
media sources (like the NY Times).

I think if Tether and Bitfinex are above board, now is the time to release a
statement and some pretty compelling evidence.

------
misja111
"Hundreds of millions of dollars worth of new Tether were created; almost
always when the prices of other virtual currencies were heading down."

Doesn't this simply mean that when people were selling their virtual
currencies, they chose to stall their money in Tether?

~~~
cm2187
Perhaps I don't understand it correctly but I assumed that wouldn't result in
Tether being created. A holder of Tether would exchange his Tether for BTC.
Only a transaction of Tether for cash would result in Tether being created.

~~~
LargeWu
One of the claims here is that Bitfinex was somehow creating new Tether
without a USD deposit. In other words, out of thin air. This Tether would then
be exchanged for Bitcoin or other crypto, causing an artificial increase in
demand for those coins, and causing their price to rise.

------
marcandre
I'm wondering how many people are shorting USDT on Kraken? The potential
downside is having to pay interest. The upside is 100% win. With enough short
position, Tether will run out of funds and the price will have to crash.
Disclosure: I'm short USDT.

~~~
bhouston
I have a theory that some of the market crash in December was because of
selling Bitcoin (originally gotten from USDT) for USD in order to fill their
reserves of backing USD. I think that USDT could be moderately sophisticated
in that they could have fulfilled their coffers via market manipulation.

If they were smart and brazen, I think they could have possibly pulled it off.
One would have to study the market inflows and outflows.

This type of pump and dump would show up in their books, so a thorough audit
would find it. But it may mean that they have a lot of USD now. Thus I am
unsure if USDT will technically crash.

~~~
marcandre
Interesting theory. If they indeed hold the USD, they could still run away
with it. The 2.3B$ worth of Tether represents more than 75 years worth of
gross profit of Bitfinex (see
[https://www.reddit.com/r/BitcoinMarkets/comments/68wlre/some...](https://www.reddit.com/r/BitcoinMarkets/comments/68wlre/some_numbers_about_bitfinex/)
).

------
wastedhours
If it becomes unprofitable to continue mining, and miners physically stop
(selling gear etc...), will the change in Target just re-inflate the bubble
again further down? Or have I misunderstood in difficulty/incentive structure?

From here it looks like the flood of market actors with an unsustainable price
have created a crash, the flakes will get out of the game (pushing the price
south), and then it might begin to get more profitable again?

Not sure what the outcome will be, but looks like a grass-burning point for
those with skin in the game.

~~~
roywiggins
If nobody wants to buy Bitcoin, it doesn't really matter what the difficulty
is to the price.

~~~
wastedhours
But don't the same market forces come back into play? Shortened transaction
times, "brand name" for speculative buyers, more attractive price. It'll burn
a lot of people, but another one born every minute...

~~~
Zamicol
Yes. A price drop will result in hardware going offline, meaning the
difficulty should drop.

------
cgyulay
Genuine question: whether or not Tether is fraudulent, how much can a currency
with a market cap of ~$2B affect the greater ecosystem, or even just Bitcoin
with a purported market cap of ~$150B? Obviously a scandal of this magnitude
in a major cryptocurrency is bad for the whole environment for a host of
reasons...but if Tether is really just a ~$2B fabricated cash injection, how
much could it really prop up BTC?

~~~
tim333
It's hard to say because so much depends on investor psychology. But if they
act to prop things up on the dips it looks like it just goes up and then other
dumb speculators like me pile in.

Some academics studied manipulation at MtGox and "the paper demonstrates that
the suspicious trading activity likely caused the unprecedented spike in the
USD-BTC exchange rate in late 2013, when the rate jumped from around $150 to
more than $1,000 in two months." Not sure how much actual cash was involved
there but "bitcoins (BTC) valued at $188 million were fraudulently acquired."

------
rebuilder
Watch for a premium on the BTCUSD rate on Bitfinex. That'll be the market
believing there's a significant risk of insolvency.

I'm surprised there's no premium yet.

~~~
amluto
If Bitfinex or its sister company is engaging in outright fraud, I see no
reason to believe its market data.

~~~
rebuilder
How would they fake the price while allowing trades and BTC withdrawals?

~~~
cma
[https://en.wikipedia.org/wiki/Mt._Gox](https://en.wikipedia.org/wiki/Mt._Gox)

~~~
rebuilder
I remember mt. gox very well. They started having withdrawal delays, and then
halted withdrawals of BTC as well as USD altogether, precisely because keeping
withdrawals open would have been so expensive as to be impossible. I'm saying
Bitfinex has no magic way around that, either.

~~~
cma
That was the end-game. They didn't have enough reserves to cover liabilities
long before there were outward signs.

~~~
rebuilder
That's true, but I don't recall any indication of them faking ticker data.

------
paulgb
I find it weird that people assume this is intentional market manipulation. If
they are in fact fraudulent (I think they are), being able to print money is a
business model in itself; you don't need to intentionally manipulate the
market (but could end up doing so accidentally)

~~~
mahemm
Not true. In order to make sure there isn't a run on their fake currency, they
need to ensure that the balance tips towards buying bitcoin rather than
cashing out holdings. If the price goes too low, people will start trying to
convert tethers to real money, triggering a crash.

~~~
gnode
Or (assuming they're legitimate) they just buy back tether with their
holdings, raising the price back to roughly $1. Which is the whole point of it
supposedly being backed 1-1 in the first place.

------
thisisit
Discussed earlier:

[https://news.ycombinator.com/item?id=16279300](https://news.ycombinator.com/item?id=16279300)

------
mattbeckman
My hope is that there isn't a complete crash before some of the most unique
and important ideas being built on blockchain technology have a chance to come
to light.

It might _need_ a 2014 reset before it happens, but there are plenty of ideas
not yet able to be executed because the crypto community at large are waiting
for the technology to catch up.

I have a business plan in the works on a nonprofit that would benefit the
world as a whole. I don't want investors or an ICO or whatever. I just want
crypto to still be exciting by the time I build it, otherwise it'll be that
much harder to onboard anyone who would benefit from such a system.

------
granaldo
Is Tether highly exposed only to bitcoin and not ethereum? Bitcoin price seems
to be taking a heavier hit than Ether
[https://www.coingecko.com/en](https://www.coingecko.com/en)

~~~
cptskippy
I was noticing that the other day. I wonder if that's because Ethereum has
contract functionality and thus as some intrinsic value to it.

~~~
duskwuff
On the other hand, the main application for those contracts is ICOs -- which
are themselves primarily a speculative instrument. It's turtles all the way
down.

------
jnordwick
Here a possible explanation on what Tether is doing and the economics behind
why there is such an incentive behind pump and dump BTC. I think they are
running a currency board pegging USDT to USD, and then using the BTC gained to
push up BTC even further.

Part of the idea of a currency is a stable value, that means supply and demand
need to be matched. With a fixed quantity such as all the common cryptos, when
demand rises (either organic or from manipulation) there is no way to keep the
value stable so the value of the currency will be constantly whipped around as
demand is constantly changing.

This is the general problem with floating currencies. They are difficult to
keep stable. Fiat tries to solve that by putting someone in change of money
creation (in the Feds case until recently this was mostly in the form of
manipulating the overnight rate banks charge each other).

Another way to do it is through pegging the price to something believed to
have a stable value itself. Various precious metals have been used in the
past, but commodity baskets are also thoght of (look at the chart of the CRB
index vs gold and they are almost the same). Baskets of floating currencies
have also been used but they arent nearly as stable and still rely on central
bank decisions.

A currency peggged to an underlying doesnt mean you need to hold all the
underlying. You just need to intervene in the market when your target price
rises or falls too much. This could be what Bitfixex/Tether is doing. They
aren't holding dollar reserves, but they are keeping the exchange rate
constant with other traders by stepping in when necessary. That's why they
don't have a conversion window.

If you had a crypto that was stable, pumping might not be nearly as effective
since the currency you are pumping isn't going to increase in value, just more
will be created to cover the demand.

So now we have a situation where BTC is easily manipulated up on artificial
demand pressure, but that will also cause a rise in BTC/USDT sales as there
are now just more trades. This pulls the value and price of USDT up, but to
keep it at 1 USD, more USDT need to be printed and sold. And this is exactly
what we see.

So they can sell either USDT for USD directly, or they can sell USDT/BTC. But
now they have a bunch of BTC, so they can go sell that too pushing BTC even
higher. The party stops when demand for USDT starts falling and the price
needs to be defended.

I think if we ever get a good crypto currency it will be pegged to a commodity
basket or gold or something. I'm working on the idea of how to control supply
algorithmically and fairly though a combination of systems and bonds.

~~~
roywiggins
> A currency peggged to an underlying doesnt mean you need to hold all the
> underlying. You just need to intervene in the market when your target price
> rises or falls to much

Which works great until it doesn't, and then it gets costly:
[https://en.wikipedia.org/wiki/Black_Wednesday](https://en.wikipedia.org/wiki/Black_Wednesday)

Tether claims to avoid the problem by literally holding a dollar in cash for
every tether it has minted, so it can't be attacked- no matter how many people
try to sell Tether, it can always buy up all the outstanding Tether with
dollars and maintain it at parity.

It's hard to tell the difference until the company runs out of money, and then
the currency collapses all at once.

~~~
jnordwick
Exactly. I was updating my comment as you posted this. The party stops when
usdt needs to be defended. And they need to use either their usd reserves or
any btc they have from selling usdt/btc to hold the peg.

Or they can defend it by selling bonds. We mat see bitfixes tying to write
loans in cryptos. Or literally just steal from people. They have a lot of
customer accounts they can raid "temporarily".

------
1123581321
What’s the difference between legitimate technical trading and propping up a
market? Is it just volume?

~~~
ulrikrasmussen
This article talks about suspicions that Bitfinex has "printed" large amounts
of Tether (a so-called stable token which is supposed to be backed 1-1 to a
supply of real USD) to buy up Bitcoin and artificially inflate the price.

~~~
Cthulhu_
You'd think that if they really did link 1:1 to the dollar, they'd encode some
kind of proof in the tokens themselves - like idk, the registration number of
banknotes, or a transaction number in a publicly viewable bank account
(supported by a real, trusted bank). You need some way to verify the claim
that "1 tether == 1 real USD" instead of just trust.

~~~
petre
Money in a bank account doesn't have serial numbers. In fact, less than 10% of
money in circulation is cash.

------
nopinsight
I don’t think the price dynamics looks great for Bitcoin, even if one wishes
to think of it as a long-term investment. Since a lot of, perhaps most, people
buy it for speculation but the price has gone sideways for a number of
reasons. If it stays sideways for a while and then it drops, some speculators
will start to panic which might cause further drops.

Also, some people who made handsome profits from early speculation have got
out, and new money who might have less faith came in. These people are likely
more sensitive to bad news.

Maintaining the prices or increasing it a bit might be possible but to get it
to rise stratospherically like last year is unlikely because of the amount of
money required to balance with those who cash out for other coins and other
investments.

This is unless there is a huge change in regulatory landscape and popular
mindset—-that is, Bitcoin becomes widely thought of as a good long-term store
of value—which are unlikely.

The analysis above is mostly about Bitcoin, although it will likely have side
effects on most other cryptocurrencies as well.

That is, the upside for a well diversified crypto portfolio is limited now
(Feb 2018), almost certainly much less upside in percentage terms than in
2017. Although one could beat the market by picking the right horses, as in
other markets.

... and the downside could be quite an abyss.

------
throwaway30yo
Could be the best buying opportunity of the year.

As someone involved in bitcoin since 2012, these cycles are pretty standard.
It went from $1000 to around $250 iirc at one point and recovered. No reason
it cant go from $20000 to $5000 and recover. It may take many years, but its
not as if all crypto will die overnight.

I see crypto being big in the more distant future, 15-20 years away when many
of the problems are sorted out. Everyone is focused on the extreme short term.

~~~
JonnyNova
> No reason it cant go from $20000 to $5000 and recover.

There are plenty of reasons why it could never recover. The previous cycles
happened with a very different environment and context for bitcoin. This time
Bitcoin has just hit mainstream. This cycle will very likely crush the
mainstream's faith in Bitcoin to where it will never recover.

~~~
FiveSquared
That’s true, but however, what if Bitcoin goes on like the Video Game Crash of
1983, the Second AI Winter, etc.

[https://en.m.wikipedia.org/wiki/AI_winter](https://en.m.wikipedia.org/wiki/AI_winter)
[https://en.m.wikipedia.org/wiki/Video_game_crash_of_1983](https://en.m.wikipedia.org/wiki/Video_game_crash_of_1983)

~~~
JonnyNova
Apples to oranges, Bitcoin isn't cryptos as a whole. Future cryptos will
absolutely succeed Bitcoin.

~~~
lloyd-christmas
Their comment is based on historical facts, making it apples and oranges. Your
speculation has no substance, but is 'absolutely' true? I'm not sure I follow
that logic.

~~~
JonnyNova
The apples to oranges is in reference to comparing Bitcoin to the AI's as a
whole. AI as a whole survived the winter but a random implementation from 1985
did not. My comment was comparing Bitcoin as an implementation of a
cryptocurrency to previous implementations of AI that have generated hype and
then became either irrelevant or obsolete.

~~~
lloyd-christmas
Correct me if I'm wrong, but wasn't back-propagation one of the major
techniques in the AI of the 80s? It's 90% of mainstream AI today. Activision
was one of the major publishers prior to the video game crash. Today it has
the largest share of the market. Just because some things fall out of favor
doesn't mean all of them do, especially the most popular ones.

------
seppel
I asked this before and I still don't understand it: Who is holding the
Tethers? I can see that "someone" wants to artificially increase the BTC price
by buying BTC using USDT. But for this scheme to work, someone needs to sell
BTC for USDT (and hold the USDT!).

Who would do that and why? We are talking of about 2 billion USDT that have to
be somewhere.

------
berbec
In other news, water determined to be wet.

------
wslh
The regulators were extremely slow in this case. Bitfinex is/was a major
exchange and not performing a proof-of-reserves is not a red flag but a motive
for immediate action.

------
paganel
> In recent months, however, many investors have been raising alarm bells
> about Tether. Hundreds of millions of dollars worth of new Tether were
> created; almost always when the prices of other virtual currencies were
> heading down. The Tether were used on the Bitfinex exchange to make big
> purchases of Bitcoin and other tokens, helping push their prices back up,
> according to multiple analyses of data from Bitfinex.

Surely this is illegal? (if confirmed true, of course)

~~~
inputcoffee
That is an interesting question.

Digital "currency" is unregulated so the question is which law is violated.

If, in purchasing a tether, there is some underlying contract that says the
tether is backed by a dollar, then you might claim a violation of the
contract. You may have to look at the fine print. Who was the counter party?
What were the terms? Who is on the hook for it? Is it an entity that is
outside the US?

However, if there isn't such a contract and someone makes the claim, you might
claim there was an implied contract. This is harder. Not being a lawyer, I
won't even venture to guess how this would play out.

In the absence of those two, I don't know if you can claim there was a
violation of the law.

Edit: There is one more law you can violate, and this is the obvious one:
Fraud!

In the US it is fraud if:

\- somebody misrepresents a material fact in order to obtain action or
forbearance by another person,

\- the other person relies upon the misrepresentation, and

\- the other person suffers injury as a result of the act or forbearance taken
in reliance upon the misrepresentation.

So now the question is where is the injury? Especially if they are able to
sell of Bitcoin and actually back up the Tether?

Now it might be a question of: the buyer took a risk they had not intended on
taking.

~~~
LargeWu
If they say Tether is backed 1:1 by USD, and it's not (allegedly by a wide
margin), then it's clearly fraud.

~~~
inputcoffee
Yes, I forgot about fraud. That's the obvious one.

------
zerostar07
why don't the other exchanges just drop their USDT pairs ?

~~~
foepys
A lot of exchanges are using Tether to avoid coming in contact with USD. Most,
if not all, of them have no banking access, so Tether is the only way they can
pretend to trade in USD and still be safe from US banking regulations.

------
sunseb
The story of Bitcoin in a fun video:

[https://www.youtube.com/watch?v=KTf5j9LDObk](https://www.youtube.com/watch?v=KTf5j9LDObk)

------
unabridged
How hard is it to audit tether? Can't they just point to a bank account or US
treasuries that add up to the total they owe?

------
kadenshep
Bitcoin: Revenge of the Beanie Babies

------
beeskneecaps
Better get in on GRLC now!

~~~
swarnie_
Is GRLC a joke/meme that just got out of hand?

~~~
foepys
Just like Dogecoin. First it was a joke, then it got serious.

But wrt Garlicoin, I think the creators know exactly what they are doing and
use the gullible masses to make money by exploiting "memes".

------
kylell
I think 90% is true, otherwise why won't they won't agree to get audited, also
investors, can you call yourself an "investors" if you give $100 and they give
you 100 of something promising you they will keep your $100, while not showing
any proof of it.

------
JohnJamesRambo
If you haven't already, I recommend getting out of Bitcoin and into Ethereum
immediately. There is a transfer of dominance rapidly happening.

Market Cap

Bitcoin $158,149,902,894

Ethereum $106,632,442,880

~~~
lawlessone
Market cap is a terrible measure. If i make a my on crypto coin mine 100 of
them and convince one person to buy one for 1000 euro, my coins market cap is
suddenly 100,000 euros.

~~~
ceejayoz
For example: [https://signalvnoise.com/posts/1941-press-
release-37signals-...](https://signalvnoise.com/posts/1941-press-
release-37signals-valuation-tops-100-billion-after-bold-vc-investment)

------
superkuh
First they ignore you, then they laugh at you, then they fight you, then you
win.

~~~
Jach
As Carl Sagan put it, "The fact that some geniuses were laughed at does not
imply that all who are laughed at are geniuses. They laughed at Columbus, they
laughed at Fulton, they laughed at the Wright brothers. But they also laughed
at Bozo the Clown."

~~~
dragonwriter
Columbus really belongs with Bozo and not Fulton and Wright. His plan was
ridiculed because it was ridiculous for reasons which were had been clear
since before the _rise_ , much less fall, of Rome, could not reasonably have
worked, and did not work.

He happened to stumble into something unrelated in the course of his crazy
plan (which is the only reason anyone on the expedition survived), which lots
of people who weren't him recognized as something new and valuable
independently of the goal Columbus had both insanely set out and, even more
insanely, insisted after the fact and to his death that he had succeeded in.

~~~
JoeAltmaier
Ok but it's possible he had a Chinese map from an earlier expedition, and
while he misinterpreted _where_ he was going, he was pretty sure that he was
going somewhere.

