The whole space levered up. When Terra Luna and UST blew, it exposed holes in other companines’ balance sheets. These holes are slowly getting exposed and then a new company blows up, triggering ongoing liquidations
Leverage sent it up on the way up, now leverage knocks it down as it unwinds
If it gets so bad that Tether crumbles then expect an astonishing collapse. Tether’s money printing caused both recent crypto bubbles. They’re the crypto money printer
All these money creating schemes highlight the need for a kind of money which nobody can create. I wonder if anybody has come up with a solution to this yet?
Does it incorporate microdistributed PoV (Proof of value) that can only be obtained through QHC (quantum hash cryptography), offering the best path to FEV (fiat escape velocity)? /s
This is such a fundamental misunderstanding of what money is.
Money is an IOU (it also ends up having other uses, but fundamentally that’s what it is). That’s fundamentally all it is. And it’s also a unit. It’s a technology that allows me to determine that if 5 chickens are worth 1 sheep, and 3 sheep are worth 1 cow, then 1 cow is worth 15 chickens, without ever having to spend a second to do any math. This is essential in a complex economy where there may be millions if not billions such conversions.
Money that is useful for the purpose of smoothening the running of an economy has a few properties.
1) It’s value stays fairly stable. This means that people are confident spending money and receiving money that the value they agreed upon now will basically be the value tomorrow, so they don’t have to do additional work to figure out when they should make the transaction for optimal value (and since the optimal time is the opposite for both parties, it’s very difficult to find such a time and it always results in a win-lose situation).
2) It’s slightly inflationary. Money sitting under a mattress represents work that could be done that isn’t. This is a real waste of human output, because time is limited. So you want a slightly inflationary money to encourage spending and investment.
3) Money supply reflects the productive capacity of the economy. If the capacity of the economy grows, either due to more workers, or due to better productivity, the money supply needs to grow. Otherwise there will not be enough dollars to enable work to be done and we will waste human time and output simply because we don’t have enough of the means of exchange.
All of this is a difficult balance to strike, which is why you need people controlling the flow of money. We may eventually come up with algorithms that could measure a variety of real world inputs, such as the prices of goods, working population, productivity, etc. that can do that without human input, but it’s not possible yet because we don’t know the economic rules of how things work, so it becomes a matter of almost trial and error guided by some basic economic rules.
Yes, money is a technology which allows you to determine the exchange rate of commodities, but money itself is also a commodity and is also subject to the forces of supply and demand. Big increases in the supply of money cause it to decline in value. If one coin is worth 15 chickens now, one coin is only worth 13 chickens in <12 months.
Savings are necessary for a rainy day. Without adequate savings, you are one natural (or man-made) disaster away from starving. It is absolutely not a "waste of human output," to keep some aside, but is being responsible for oneself. Saving is not possible under high inflation, as the savings lose purchasing power too rapidly. Someone who wishes to save is forced to make risky investments just to maintain the purchasing power of what they previously laboured for.
The issue isn’t simply all creation of money being bad, it’s when these schemes get out of control.
Thus, the issue is solved via currency reserve requirements. Crypto on the other hand can’t solve the problem because they can’t set laws so anyone can set up a Bank using on chain wallet(s) and then issue loans and offer interest on deposits etc.
Precious metals. Of course financial institutions often falsify their reserves. The real problem isn’t that no solution exists. The problem is that market makers only want to deal with exchange media that they can use for their own fraud.
I'll never understand these arbitrary numbers people come up with to write news articles. As if $20k is any more special than $20.313k. Liquidity isn't even concentrated at round numbers.
The only key threshold is zero. Like, you know, the thing Tether hopefully converges to.
This one is a little less arbitrary. The community put a lot of stock in the fact that while volatile, bitcoin had never crashed below a major previous peak.
As of this morning, that’s no longer true. Still “just” psychology, sure, but the collective impact of that psychology makes the market.
Does anyone seriously studying economics seriously make a distinction between market behavior and psychology anymore? It seems like the Homo Economicus rational optimizer idea is dead to all but those ideologically committed.
Aside from psychology, a lot of people set triggers to sell if it drops below these round numbers. So once it "breaks a barrier" it's likely to go done further than if it breached $20.313k
Reasons are journalistic. People need explanations and stories. The complexity that real world offers doesn't make a good story, but sounds just boring and doesn't collect clicks.
Sure, but not unregulated fraud, not fraud at all, eh?
I've met "normals" that introduced themselves as "in tech" and then revealed that they meant some NFT/crypto scam BS.
That's embarrassing. The transistor and the Universal Turing Machine and the Internet were not invented so people could sell each other imaginary pet rocks.
I know why they do it: we all would like an easy way to make money using a computer! D'uh! (I count myself very fortunate that I'm good at programming, if I wasn't I'd probably be homeless.)
It's roughly what the 2017 all time high was. The meme was that it wouldn't matter at what price you bought your BTC because if you just wait long enough you would eventually be green again. But, with dipping below 20K now, folks that bought at the peak in 2017 would be in the red again.
In march 2020 it dipped as low as 4k[0] and nobody batted an eye. I thought if it stayed there for long enough it'd finally burst, but then the prices soared up to 70k.
I'm surprised everyone's acting like it hadn't been down below 20k since 2017. Sure, it wasn't for long, but it did happen in 2020.
[0] Before posting I looked it up and what I'm finding is a lowest in 2020 of $4,861.32 for March 12th. I vaguely remember lower numbers, but this is aggregated data, so it might've been lower during the day but that was the closing price or the mean or something. I'm still sticking with the 4k number for quick reference, though you can take it as 5k if you want -- it's still a lot lower than the 20k that's making the news currently.
I guess my issue might be with the wording, and there clearly are a few technical reasons why this is surprising. I think what is being told is that "since it rised in price late 2020, Bitcoin has been consistently priced over 20k, the previous ATH, and now has gone below that value", which would be clearer to those of us who aren't daily into this.
Mind you, technical analysis is a self-fulfilling prophecy. People tend to buy into “lines of resistance” and “lines of support”, and then they place orders around those milestone / psychological prices. You can literally see it on the order book. (Not to mention conditional orders)
I wonder if the effect is magnified in assets with higher retail market share (e.g. meme stocks and crypto)
Folks who bought at an all time high and didn't sell lower, aren't likely to sell now. They understand the phrase 'buy low, sell high' from experience.
Essentially: The mere symbolism of it. People ascribe a bit more meaning to such 'round' numbers, and since you are in a market with other people that do the same, it actually starts to make sense to see them as important markers at some point. (That's been my personal explanation for it, anyway.)
Emotion. BTC and others have the gold rush effect on people, so there is enough emotional energy in crypto to match the funds and electrical energy being poured into it. The ride up was an elation and the ride down will be something aswell.
In the HBO show Silicon Valley there is a joke about how it is better to be pre-revenue because your valuation is tied to an idea, nothing real. Companies with revenue have P/E ratios, tying them to reality in some way. If Bitcoin is a "store of value" and also " a hedge against inflation" the price in USD could go up to infinity as the dollar goes down in value.
Obviously at this point neither of those things are true. It is basically just a poker game. The miners are the casinos taking their percentages and the players are all colluding by talking about how much fun the game is in hopes of getting more people to buy in to the game.
It means digital money, controlled by a country's central bank the value of which is tied to the country's fiat currency. Of course it requires cryptography to make it secure, but it's not like Bitcoin which is not centrally controlled and the value of which is not tied to any fiat currency.
I would agree the value of the CCP digital currency would be more trustworthy, ie. stable, than Bitcoin but it would be easier for a government to take the CCP digital currency from you than the Bitcoin.
Edit: I was not saying gold and silver have no use, I was saying the argument that usefulness is dictated by whether you can use something to pay a mortgage is spurious.
Also, to all the people who say "what about X use of gold, crypto can't do that". Obviously that's true. However the vast majority of value in gold has little to do with its applications, it has to do with its scarcity. 9% of gold demand is driven by technology. [https://www.gold.org/about-gold/gold-demand]
You can make really good conductive devices out of gold, and silver is used for high end solder and other things. Both metals have immense industrial value.
Crypto is not precious metals, crypto is art bought at a hot auction. Have you framed your hash codes and put them on the wall yet, or do you just keep them in the basement?
I'm not a cryptocurrency fan, but I don't think this is a good argument against it, anything people ascribe value to (however dumb one thinks it is) has.. value.
If I can swap a bitcoin for $20k then a bitcoin is just as useful as $20k.
Sure, but the price of gold doesn't really follow industry trends -- it's got more to do with the fact that it's a historical store of value / object of desire for the masses.
Not if you are typing from any kind of device that uses gold in its components, or if you consider any of the uncountable ways in which you can exploit precious metals in the real world
Depending on the county, you can walk into a bank and get cash for your gold coins. In other words, governments are behind it. Good luck doing that with crypto.
Leverage sent it up on the way up, now leverage knocks it down as it unwinds
If it gets so bad that Tether crumbles then expect an astonishing collapse. Tether’s money printing caused both recent crypto bubbles. They’re the crypto money printer