Celsius Appears insolvent, and it's taking the whole crypto market with it(twitter.com)
twitter.com
Celsius Appears insolvent, and it's taking the whole crypto market with it
https://twitter.com/jonwu_/status/1536476104986267648
106 comments
Seems like the common thread in these failures is outsized “guaranteed” returns. Are there other large systems or companies still paying out double digit rates now?
Yes:
Bitfinex, Crypto.com. Nexo, BlockFi, Ledn.
I predict that they will all eventually collapse. It is a bit delayed with them because there is a locking period for most of them, this means that they will be in trouble in the coming days/weeks as they will have to honour massive withdrawals.
I predict that they will all eventually collapse. It is a bit delayed with them because there is a locking period for most of them, this means that they will be in trouble in the coming days/weeks as they will have to honour massive withdrawals.
A friend warned me about them back a year ago:
https://www.coindesk.com/business/2021/06/24/custodian-prime...
Good work!
Reddit thread warning about this 2 weeks ago. Not everyone agreed.
https://old.reddit.com/r/CryptoCurrency/comments/v29t59/cels...
https://old.reddit.com/r/CryptoCurrency/comments/v29t59/cels...
you could be talking about the sky being blue during the day and not everyone would agree on reddit.
But crypto discussions on Reddit are just ridiculous. You do get some good nugets like OP's but for the most part it's a group of cryto bros pushing their own exposure.
But crypto discussions on Reddit are just ridiculous. You do get some good nugets like OP's but for the most part it's a group of cryto bros pushing their own exposure.
Moderators seem to deleting all new comments on this Reddit post
It was linked on the Dramaverse and got brigaded. The thread was a couple of days old so it was easy to tell who got linked from outside.
WTF is the Dramaverse? My search engine isn't helping.
So this is how Reddit manufactures consent, fun.
Even the subredditdrama (SRD) subreddit has drama, so there are posts on subredditdramadrama (SRDD) about how one of the mods of SRD is also a mod of r/food who permabanned someone because they said "Chicken Sandwich" to a post where someone called a piece of boneless fried chicken on a bun a "chicken burger".
The mod of r/food is also a mod of SRD and started banning people for talking about the drama on SRD, so they moved the conversation to SRDD as that mod wasn't a mod there so they could talk freely about it.
You can't escape the pettiness or drama anywhere, no matter how small the group is there will be infighting and manipulation.
The mod of r/food is also a mod of SRD and started banning people for talking about the drama on SRD, so they moved the conversation to SRDD as that mod wasn't a mod there so they could talk freely about it.
You can't escape the pettiness or drama anywhere, no matter how small the group is there will be infighting and manipulation.
I bet parent is grouping a lose coalition of joker, gawkers and trolls on and off reddit (r/buttcoin, rdrama, Farms, etc.) under the moniker of Dramaverse.
Random tip: replace "reddit.com" with "reveddit.com" to read them.
My favorite part of this is that because their reserves are illiquid, Celsius is forced to take out loans from other exchanges in order to pay out withdrawals. Each of these transactions/bailouts was visible on the blockchain and immediately called out on Twitter, accelerating withdrawals. A run on the exchange.
If one major exchange goes bust and people learn that they have no recourse to recover funds, expect to see people pulling money out of other exchanges.
If one major exchange goes bust and people learn that they have no recourse to recover funds, expect to see people pulling money out of other exchanges.
It is so amusing to see crypto redoing 100 years of financial scandals at accelerated pace: mass money laundering, ponzi schemes, non separation of client and firm money by brokers, market manipulation, inability to sustain a “bank”run, misleading marketing material sold to retail investors. This is something fascinating for a finance professional.
The paradox being that crypto is proving the benefits of heavy financial regulation by showing us a world without financial regulation (and I am talking as someone who has to deal with banking regulation and think the current massive amount of regulations is ridiculous and kills competition).
The paradox being that crypto is proving the benefits of heavy financial regulation by showing us a world without financial regulation (and I am talking as someone who has to deal with banking regulation and think the current massive amount of regulations is ridiculous and kills competition).
and don't forget the "i lost my bitcoin password so i lost all my assets" and "my hard drive has been destroyed so i lost all my bitcoins"
All those stories were solved across 120y of crisis and financials regulations. Not all of course, but finance, as a basis of the XXI century economy is far more robust that it was
All those stories were solved across 120y of crisis and financials regulations. Not all of course, but finance, as a basis of the XXI century economy is far more robust that it was
dark markets tho
Solved mostly by applying monopolized violence.
Uh, yeah. Why do people act like this is a bad thing?
I’m a big fan of the fact that when someone is pissed off at me they’re not allowed to just punch me in the face. I’m also a big fan of the fact that someone CAN metaphorically punch me in the face if I manage to piss off a whole slew of people, elected by and comprised of my compatriots, with various systems designed to mitigate emotionality and unfairness.
Duh this is a strictly good thing, when paired with democracy.
I’m a big fan of the fact that when someone is pissed off at me they’re not allowed to just punch me in the face. I’m also a big fan of the fact that someone CAN metaphorically punch me in the face if I manage to piss off a whole slew of people, elected by and comprised of my compatriots, with various systems designed to mitigate emotionality and unfairness.
Duh this is a strictly good thing, when paired with democracy.
not sure I want to live in a world where violence is evenly distributed, look at the US right now. that is still only a small number of shootings a day. imagine when there is no monopoly on violence, you won't be able to do anything but join a militia or work as a slave to a local militia
I'm just pointing out those "120 years of evolution" are not about some clever solutions but the state forcibly preventing hustlers from parting fools and their money so the legitimacy of state parting everyone and their money isn't questioned.
Believe it or not, even with a monopoly in violence you still have to create clever solutions, even more so when you're trying to broadly preserve liberty as opposed to just being a dictator.
[deleted]
We are also experiencing record-levels of inflation due to Central Bank monetary policies, which have led to massive asset bubbles and wealth inequality due to Cantillon effect of said policies. So it's hard to think the status quo is working as intended. Cryptocurrencies are antithetical to centralized monetary policy not regulation.
Regulation can exist and probably will exist, there are some proposals currently on the table. There is currently no regulation because regulators are laggards, not because it's contrary in spirit to cryptocurrencies.
Fraud is not an intrinsic characteristic to cryptocurrencies, it's an intrinsic characteristic to human nature. Regulation simply provides tools to fight fraud, either by making it more difficult to execute or by establishing discouraging penalties.
That the alternative monetary policy proposed by cryptocurrencies is better than the status-quo is still to be seen.
Regulation can exist and probably will exist, there are some proposals currently on the table. There is currently no regulation because regulators are laggards, not because it's contrary in spirit to cryptocurrencies.
Fraud is not an intrinsic characteristic to cryptocurrencies, it's an intrinsic characteristic to human nature. Regulation simply provides tools to fight fraud, either by making it more difficult to execute or by establishing discouraging penalties.
That the alternative monetary policy proposed by cryptocurrencies is better than the status-quo is still to be seen.
> Each of these transactions/bailouts was visible on the blockchain and immediately called out on Twitter, accelerating withdrawals.
Well, they could have used Monero.
Well, they could have used Monero.
[deleted]
It seems that we need a government to provide deposit guarantee and a central bank that acts as a lender of last resort.
Welcome to the 19th century.
Welcome to the 19th century.
They're done. Even if they're not insolvent, the moment they enable withdrawals, everyone will cash out.
There's no new money entering this space anyway. Without customer deposits, they're toast as a business.
There's no new money entering this space anyway. Without customer deposits, they're toast as a business.
One of the “largest crypto gateways”, of which most people have never heard before, has almost 1B in VC funding, custodied only 3x that and somehow made themselves insolvent. Why am I not surprised?
Oh boy oh boy that thread had lots of ETH and sETH and oETH und BTC and what not.
No wonder that it's hard for some people to see the Ponzi schemes, pyramid schemes and what else those things are called.
Regulations anyone?
Or do we now just see people loosing their money?
No wonder that it's hard for some people to see the Ponzi schemes, pyramid schemes and what else those things are called.
Regulations anyone?
Or do we now just see people loosing their money?
My inability to understand these financial instruments without hours of study is why I never put money into anything other than a couple of major currencies for funsies. Vanguard ETFs, mortgages, and bank accounts make sense. So I keep serious money in those.
> bank accounts
I'd argue it's hard to understand the higher-order effects of fractional reserve banking. The accounts are at least backed by a government and have over 100 years of lessons baked into them, so that's something.
I'd argue it's hard to understand the higher-order effects of fractional reserve banking. The accounts are at least backed by a government and have over 100 years of lessons baked into them, so that's something.
Crypto has become a gacha game. So many currencies that you lose contact with how much money you put in in the first place.
With regulations people will be loosing their money anyway, but with confidence, because they will have a sense of some legitimacy.
The only regulations crypto needs is how to call things. Just like whatever Tesla has should not be called Autopilot, crypto prophets should not be allowed to call it investment. Call it gambling and off you go.
The only regulations crypto needs is how to call things. Just like whatever Tesla has should not be called Autopilot, crypto prophets should not be allowed to call it investment. Call it gambling and off you go.
it was never really 'money', or even 'theirs' - just a consensual delusion that's falling apart
Well, at some level people paid fiat to get in and they are losing that.
> No wonder that it's hard for some people to see the Ponzi schemes, pyramid schemes and what else those things are called.
On the other hand, it's quite easy. After the third flavor of ETH and nested contracts, I thought to myself "fuck, that's complicated." Then just follow Buffett's advice of not investing in things you don't understand.
On the other hand, it's quite easy. After the third flavor of ETH and nested contracts, I thought to myself "fuck, that's complicated." Then just follow Buffett's advice of not investing in things you don't understand.
I always thought that for something meant as a currency, it sure is hard to understand, even for a passively interested, financially literate computer scientist.
A currency is only useful if you can actually buy things you need with it, and that means (among other things) you need its value to be relatively stable.
Everyone (or almost everyone) pushing cryptocurrency is, in one way or another, a speculator, so their incentives are not aligned at all with people who might actually want to use it as a currency.
Everyone (or almost everyone) pushing cryptocurrency is, in one way or another, a speculator, so their incentives are not aligned at all with people who might actually want to use it as a currency.
Even if you could do that, the barriers are insane compared to cash and cards.
Just the security practices required to avoid fraud are absurd, but since scammers can irreversibly empty your wallet, they're required. There's no credit card company to call, no fraud detection, no withdrawal limits, no way to lock your stolen card.
The same applies to personal information. Lose your key, lose your money. It requires the sort of data security and redundancy discipline that few people outside of tech are capable of.
Just the security practices required to avoid fraud are absurd, but since scammers can irreversibly empty your wallet, they're required. There's no credit card company to call, no fraud detection, no withdrawal limits, no way to lock your stolen card.
The same applies to personal information. Lose your key, lose your money. It requires the sort of data security and redundancy discipline that few people outside of tech are capable of.
Few inside are capable of it for years on end without a mistake.
Who said doublespent is impossible? Innovating your way out of such a limitation :
"$stETH is a product by @LidoFinance.
It stands for (liquid) staked $ETH and it's one of the most innovative DeFi products to be released in the last few years.
$stETH can also be used to earn MORE yield than otherwise possible with vanilla $ETH.
Why?
Because while $stETH already earns staking yield, it can also be lent out or liquidity provisioned."
"$stETH is a product by @LidoFinance.
It stands for (liquid) staked $ETH and it's one of the most innovative DeFi products to be released in the last few years.
$stETH can also be used to earn MORE yield than otherwise possible with vanilla $ETH.
Why?
Because while $stETH already earns staking yield, it can also be lent out or liquidity provisioned."
it's the derivative bubble all again
or more precisely
using collateral that's already beind used for collateral for something else.
see also rehypothecation
or more precisely
using collateral that's already beind used for collateral for something else.
see also rehypothecation
This is not double-spend. You are spending your ETH to buy a token. This token can be converted back to ETH (plus some interest) at a later date. In the meanwhile, you can do anything you want with this token: trade it, spend it, stake it on another platform, etc.
But if you don’t bring it back, you are not getting back that ETH that you originally spent.
Doesn't that token represent staked ETH, ie. ETH which nothing can be done with, ie. no "trade it, spend it, stake it on another platform, etc. " ?
Now, you take that new token, exchange into new ETH, stake that new ETH, and get again that new token, ad infinitum, every time increasing your staked ETH amount and thus accruing stake yield of that multiplied staked ETH ... One would naturally expect that a system allowing for such things to happen simply must undergo "Rapid Unplanned Disassembly" at some point.
Now, you take that new token, exchange into new ETH, stake that new ETH, and get again that new token, ad infinitum, every time increasing your staked ETH amount and thus accruing stake yield of that multiplied staked ETH ... One would naturally expect that a system allowing for such things to happen simply must undergo "Rapid Unplanned Disassembly" at some point.
> Now, you take that new token, exchange into new ETH
You can only exchange it back into ETH after the lock period is over. Sure, you can buy ETH from someone else in exchange for this token, but you will pay a premium for that: obviously, people prefer ETH to some token that can be exchanged for ETH in the future and there is not an infinite supply of ETH available to be sold for this token.
So no, you can’t just increase your ETH ad infinitum. At each iteration of the loop, your amount of tokens will decrease until you have none left.
You can only exchange it back into ETH after the lock period is over. Sure, you can buy ETH from someone else in exchange for this token, but you will pay a premium for that: obviously, people prefer ETH to some token that can be exchanged for ETH in the future and there is not an infinite supply of ETH available to be sold for this token.
So no, you can’t just increase your ETH ad infinitum. At each iteration of the loop, your amount of tokens will decrease until you have none left.
That's just a different way to say you can leverage yourself close to infinity if you want.
(How close depends on how much sETH trades to ETH on the dollar - if I understand the article correctly, it used to be pretty close.)
(How close depends on how much sETH trades to ETH on the dollar - if I understand the article correctly, it used to be pretty close.)
You can certainly leverage yourself, but not anywhere close to infinity. How much sETH trades to ETH depends on the supply and demand on each side. The more sETH tokens you bring to trade, the higher the price of ETH will be.
Does anyone have any inkling about Voyager? I only ask because when I was looking into it last year, seemed everyone said 'use Celsius or Voyager', so I assume they are somewhat similar. I used Voyager to get 9% APY on USDC just to test it, but chickened out and withdrew it all because I basically envisioned something like this happening.
what was the the business model of these platforms? did they lend out the staked money, or how did they generate these yields?
The business model of Celsius was loan USD to people and earn interest.
The loans were overcollateralised with the users Bitcoin.
The problem is Celsius wasn’t content with just earning interest from loaning money so they invested their users Bitcoin in crypto projects that ended up going pear shaped.
The loans were overcollateralised with the users Bitcoin.
The problem is Celsius wasn’t content with just earning interest from loaning money so they invested their users Bitcoin in crypto projects that ended up going pear shaped.
I have zero idea. I did get the correct APY for one month before withdrawing, paid no fee, and was left with the same question.
They may have a whitepaper or something, but the simplest way to generate higher returns in a bull market is just to use leverage. I can sell you an ETF that returns 2x the NASDAQ, and use the money to buy a 3x and pocket the difference. It looks like I'm giving you a better return than the NASDAQ, but when the market goes down everything obviously collapses because it's only designed to work in one direction.
Of course, that sounds stupid as hell and you'd certainly hope that someone thought of something better, but this is exactly what happened with Terra/LUNA, except with more financial engineering to obfuscate the "if it goes down 25% we're fucked".
Of course, that sounds stupid as hell and you'd certainly hope that someone thought of something better, but this is exactly what happened with Terra/LUNA, except with more financial engineering to obfuscate the "if it goes down 25% we're fucked".
> use the money to buy a 3x
What's a 3x?
What's a 3x?
Someone who is willing to enter a "NASDAQ will go up" bet with you, where they pay you 3x the amount it went up when it does, and you pay them 3x (or some other number you agree on) the amount it went down when it does.
So, someone predicting a sudden downturn in a bull market?
QQQ is security that tracks the NASDAQ (NASDAQ 1% up = QQQ 1% up). TQQQ is a security that tracks the NASDAQ x3. (NASDAQ 1% up = TQQQ 3% up). SQQQ is a security that tracks the NASDAQ Inverse x3. (NASDAQ 1% up = SQQQ 3% down).
In the context of "using leverage to provide better than expected returns in a Bull market", someone can buy TQQQ, securitize/create derivative (this is exclusively what crypto does) that returns 1.5 times the NASDAQ, sell you that derivative, and if the NASDAQ goes up 5% (TQQQ 15%) you get 7.5% and they get 7.5% (and your money).
If it goes down, you lose everything and they keep the money you gave them.
In the context of "using leverage to provide better than expected returns in a Bull market", someone can buy TQQQ, securitize/create derivative (this is exclusively what crypto does) that returns 1.5 times the NASDAQ, sell you that derivative, and if the NASDAQ goes up 5% (TQQQ 15%) you get 7.5% and they get 7.5% (and your money).
If it goes down, you lose everything and they keep the money you gave them.
Step 1: get lots of venture capital (860 million)
Step 2: give away money
Step 3: somehow start making money
Like most companies you'll see on HN, they are currently on step 2.
The discerning reader may note that this sounds like a terrible use for $860 million - and if that's the case, how much of the other $642 billion last year was properly allocated?
Step 2: give away money
Step 3: somehow start making money
Like most companies you'll see on HN, they are currently on step 2.
The discerning reader may note that this sounds like a terrible use for $860 million - and if that's the case, how much of the other $642 billion last year was properly allocated?
Latest Coffeezilla video's about it recaps it very nicely: https://www.youtube.com/watch?v=d5ll3ByaoHE
They were assuring customers of their stability, let’s see, six days ago: https://blog.celsius.network/damn-the-torpedoes-full-speed-a...
Surely there are going to be criminal charges forthcoming. Doing everything they can to prevent people withdrawing up to and including blatantly lying.
If history is any guide this isn’t close to over yet.
Surely there are going to be criminal charges forthcoming. Doing everything they can to prevent people withdrawing up to and including blatantly lying.
If history is any guide this isn’t close to over yet.
One day before the halting of the withdrawals the CEO of Celsius was bragging that they were "winning".
https://twitter.com/ClarityToast/status/1536185339643105280
Regarding the investment part (not the marketing or insurances obv.) how is that different from what an investment bank does when it invest in long term products? If the funds are in e.g. long term bonds, real estate, mortgages... the investors can't get back all of their money all at once, it will take years to mature, also the capital they are required to hold are only a few percent, so they are also technically insolvent right? Genuinely asking.
I think it is similar in that it is possible for a fund to become insolvent, but consumers are protected by the Investment Company Act of 1940. This requires the companies that run mutual funds to rely on a custodian bank to hold their assets. This way, if the fund does go bankrupt, the company operating it cannot access them to ensure that investors are paid out instead of being rug pulled. It limits the amount of leverage the fund can have, requires them to maintain a cash buffer, and required them to report regularly on their financial condition.
Fraud is still possible, of course, but consumers have WAY more protections with fiat investments.
https://www.sec.gov/investment/laws-and-rules
Fraud is still possible, of course, but consumers have WAY more protections with fiat investments.
https://www.sec.gov/investment/laws-and-rules
Sure I understand regarding the protections. But regarding the nature of the investments by themselves in don't find the difference meaningful enough to earn the label "truly degenerate trading strategies with investor funds." compared with what we currently see in non-crypto Finance, which is equally degenerate for me in that case.
I think the major difference is that such investments are usually in substantial assets.
Something that definitely can't be said of some of those fantasy funny coins.
Something that definitely can't be said of some of those fantasy funny coins.
In theory maybe, in practice I don't find speculation on financial products any more substantial, like stocks where they are not owned with aims regarding dividends or the governance of the company (which is the point of a stock) but only to be unloaded on someone in the future at a higher price. The nature of the token doesn't matter in that case only the sentiments of other traders.
Celsius has had a chilling effect on the crypto market.
I hear Fahrenheit is on fire though
My friend Kelvin says crypto is going to absolute zero.
There's gonna be a lot of buyer's Réaumur-se around...
I see what you did there but for me at least it's not Rankine.
Makes my blood boyle
gutness me, Ich needen ein stein of Doppelbock to get throu zis
I love it when HN occasionally reddits
Celsius plummets as crypto Winter is marching in. Tomorrow in Web3 you can expect strong headwinds, with a low of -99 Celsius. Watch out for those cold showers as liquidation cascades mount and a damp, chilly mood will be in charge. But it’s not all doom and gloom - while we may test record lows, the long term outlook remains sunny for 2023 and beyond.
Once upon a time, the emperor had no clothes.
The crypto market is crashing for the same reason real financial markets are crashing. The problems with Celsius are an irrelevant blip.
Except the real financial markets have a bottom where contrarian investors will step in and stop the free fall. What tangible value is there for a contrarian investor in crypto?
"Historical upside potential".
If it crashes 90% and then goes back to 30% of its peak a couple years later, pundits will declare bitcoin collapsed, but the people that bought around the bottom will make out like bandits.
I dont see many failure modes for crypto itself. The exchanges and all the speculative bullshit built around it are a big problem, but the network itself will survive and there is a price where people will start betting on upside again.
I say this as someone that bought my first bitcoin at $5 and sold my last one for $4500. I left a lot on the table.
If it crashes 90% and then goes back to 30% of its peak a couple years later, pundits will declare bitcoin collapsed, but the people that bought around the bottom will make out like bandits.
I dont see many failure modes for crypto itself. The exchanges and all the speculative bullshit built around it are a big problem, but the network itself will survive and there is a price where people will start betting on upside again.
I say this as someone that bought my first bitcoin at $5 and sold my last one for $4500. I left a lot on the table.
> I say this as someone that bought my first bitcoin at $5 and sold my last one for $4500. I left a lot on the table.
It's called gambling and you should consider yourself lucky. Very, very lucky. You basically whine about 90000% ROI when it could've been 900000%. Let that sink in for a moment.
Consider this: many small-scale investors entered the market right at, or very near recent peaks. What would someone say who bought in a year ago for like $50k, not $5? They'd be down over 50% at the moment and there's simply no guarantee the market will recover to the $60k+ levels seen in October and November last year.
Add on top of that people who invested by means of putting their life savings (again, not as uncommon as you might think) into shady operations like Celsius due to their dubious claims of %10 annual returns. They're completely screwed if things go sideways and Celsius closes its doors.
It's called gambling and you should consider yourself lucky. Very, very lucky. You basically whine about 90000% ROI when it could've been 900000%. Let that sink in for a moment.
Consider this: many small-scale investors entered the market right at, or very near recent peaks. What would someone say who bought in a year ago for like $50k, not $5? They'd be down over 50% at the moment and there's simply no guarantee the market will recover to the $60k+ levels seen in October and November last year.
Add on top of that people who invested by means of putting their life savings (again, not as uncommon as you might think) into shady operations like Celsius due to their dubious claims of %10 annual returns. They're completely screwed if things go sideways and Celsius closes its doors.
> What would someone say who bought in a year ago for like $50k, not $5? They'd be down over 50% at the moment and there's simply no guarantee the market will recover to the $60k+ levels seen in October and November last year.
Same thing I'd say to someone that bought Netflix stock around the same time. Gamblers beware.
Same thing I'd say to someone that bought Netflix stock around the same time. Gamblers beware.
For a regular equity the thing that causes it to "go back to 30%" would be investors recognizing that the company is a good company with real cash flows and real products and the stock now undervalued, and so they come in to buy shares.
There's no similar mechanism with crypto. There's no annual dividend that is now on sale.
More likely to simply go to $0 as everyone heads to the exits.
There's no similar mechanism with crypto. There's no annual dividend that is now on sale.
More likely to simply go to $0 as everyone heads to the exits.
Same as before - hope the price is low enough and starts rising for the same reasons it was rising years ago.
Real markets, or the companies within, make something that people need. They have equipment, customers, etc. Maybe they are important enough that the state has to bail them out. Maybe they get restructured or merged.
Anyways, there is some kind of floor to which they can fall, and which will catch them.
What kind of "floor" is there for crypto? By definition it is not tied to anything non digital? Right?
Anyways, there is some kind of floor to which they can fall, and which will catch them.
What kind of "floor" is there for crypto? By definition it is not tied to anything non digital? Right?
If you’re buying growth stocks that pay no dividends there isn’t much of a difference, and there’s no coincidence that those are also the stocks that have crashed as hard as crypto.
A company can go out of business and cease to function. What would cause the Bitcoin network to cease to function? There will always be a market price and it will fluctuate. But the end of Bitcoin? Would be like the end of BitTorrent, not gonna happen.
[EDIT: Made my argument clearer.]
Not a finance expert, but I disagree with what you're saying:
There's a feedback loop between:
1. The price of BTC, which depends on people's willingness to mine it (without which, BTC doesn't have security).
2. The willingness to mine BTC, which depends on the price. Why would you mine BTC if you're not sure whether you'll be able to sell it for more than you mined it for?
A decline in 1 can trigger a decline in 2, which can trigger a decline in 1, which can trigger a decline in 2.
BTC can have an end. Oh, and BTC is not like BitTorrent.
Not a finance expert, but I disagree with what you're saying:
There's a feedback loop between:
1. The price of BTC, which depends on people's willingness to mine it (without which, BTC doesn't have security).
2. The willingness to mine BTC, which depends on the price. Why would you mine BTC if you're not sure whether you'll be able to sell it for more than you mined it for?
A decline in 1 can trigger a decline in 2, which can trigger a decline in 1, which can trigger a decline in 2.
BTC can have an end. Oh, and BTC is not like BitTorrent.
It totally is like BitTorrent. As long as some people are willing to run the software (mining + full nodes) it will work.
The "feedback loop" you describe would reach equilibrium due to difficulty adjustment (blocks could be really slow for some time). Granted it would then become cheaper to 51% attack. Maybe one could consider Bitcoin "dead" at that point but it would still be working.
The "feedback loop" you describe would reach equilibrium due to difficulty adjustment (blocks could be really slow for some time). Granted it would then become cheaper to 51% attack. Maybe one could consider Bitcoin "dead" at that point but it would still be working.
The floor is belief in usability for transfers, for speculation, for avoiding local inflation, etc. You don't need real-world-value for that.
Under proof-of-stake, if I control some fraction of the network, perhaps statistically I’ll occasionally be able to profit from doing things the network designers didn’t think of. So I’d want to buy during a sell-off to maximize my profits.
Is there something like MEV with PoS?
The problem or benefit of crypto land though is there are no bailouts so the insolvencies will be contagious.
I see it as a benefit. No bailouts means a proper cleansing of bad parties. It empowers good projects, vs rewarding bad behavior.
So the only hangover from bad parties is that the party ends?
The biggest, baddest parties will always draw the popular crowd, and the same DJs will know better when to quietly slip out the back door with bags full.
How does a well-regulated party compete against that without calling for more regulation?
The biggest, baddest parties will always draw the popular crowd, and the same DJs will know better when to quietly slip out the back door with bags full.
How does a well-regulated party compete against that without calling for more regulation?
By operating in an open and honest manner and standing the test of time.
In the end though they will probably still call for more regulation because once they have stood the test of time they will want to cement their position.
In the end though they will probably still call for more regulation because once they have stood the test of time they will want to cement their position.
Also posted it here on HN but it did not get much traction. What really baffles me is that major VCs have put hundreds of millions into what pretty much every one who has watched one or two episodes of "American Greed", would immediately recognise as being a ponzi scheme.
I e-mailed the regulators, the VCs etc... They did nothing, and now it is too late.