BTC’s Wile E Coyote moment

I was going to post this as a comment in the comments section for a weekend’s links from several weeks back, but then thought, “Why not pad it out and see where it goes?”. Unfortunately I came down with a bug before I got a chance to publish it and then went on holidays for a week. However, since the market hasn’t yet collapsed and the same forces are still at work, I thought I may as well finish it off and post it.

Anyhow, all of these thoughts and musings were triggered by Hester Peirce’s comments in this Zero Hedge Article:

Any government efforts to ban Bitcoin would be “foolish,” said Hester Peirce (aka “Crypto Mom”)….”I think we were past that point very early on because you’d have to shut down the Internet,” Peirce said, adding, “I don’t see how you could ban it. You could certainly make the effort. It would be very hard to stop people from [trading Bitcoin]. So I think it would be a foolish thing for the government to try to do that.”

– Hester Peirce aka Crypto Mom, via Zero Hedge

https://www.zerohedge.com/markets/youd-have-shut-down-internet-ban-bitcoin-says-secs-hester-peirce

First up, it wouldn’t actually be that hard to take down BTC if the Govts actually wanted to, the Chinese Govt alone could pretty much cripple the network and even trigger chain death, simply by forcing all Chinese miners to cease mining BTC.

Moonboy’s love saying how decentralised BTC is, yet if you mentioned diversification risk then they stare at you blankly – 60% of BTC mining occurs in China. Removing 60% of hash would cripple the network, result in sky rocketing transaction fees, until the next difficulty resetting which could be weeks. The network would probably survive with a 60% loss of mining capacity, but if something like 80% was suddenly removed, I imagine chain death would probably ensue.

An advantage in not publishing this post two weeks ago is that an exact example of this occurred over the weekend, when a coal mine flooded last week in China and ended up shutting down one-third of all of Bitcoin’s global computing power. For those wondering about the impact, firstly it caused the already swollen BTC mempool to double from 150k bytes worth of transactions to 300k bytes worth of transactions. While secondly it caused the fees associated with making a BTC transaction soar from $5-$20 to $110 for a regular transactions or $148 for a priority transactions… those fees are USD by the way.

But of course the main barrier to this scenario is that no Govt wants the ‘blood on their hands’ for initiating the destruction of a supposedly ‘2 Trillion’ dollar market – based on the massively inflated crypto market cap measurements. Govts would have to have a pretty good reason to execute such a crypto coup de grâce like that to bring BTC down. The reality is that they have many options at hand to destroy the cowboy crypto industry. The main one is simply ensuring that existing KYC and AML laws, that other existing financial systems are obliged to follow, are applied and enforced within the crypto industry, and sanctioning or prosecuting those that don’t. The other option, and one that I think that will actually destroy the industry quicker, is to simply do nothing. Frankly I believe the Crypto Complex is being giving enough rope to hang itself, and by that I mean, they are simply waiting for the last remaining liquidity in the system to disappear.

Every single day $50m USD of real fiat liquidity has to leave the crypto eco-system, to pay for real life mining electricity costs that have to be paid to power stations, like the one that flooded in China, in real US dollars. This outflow ignores other crypto currency mining costs (which are admittedly much smaller – I think ETH is only like $1m a day), and incidental mining costs – like new mining rigs. Trouble fresh real USD injections are starting to fade, and fade rapidly when you compare them to overall crypto market capitalization currently around $2Trillion dollars.

First up, with thanks to CryptoWhale, if the Grayscales Investment BTC Holdings Fund is indicative of wider speculative retail inflows then its flatlining in terms of new inflows , at the very least suggestive of some slackening off in speculative inflows across the wider market. The flateline in new inflows also matches the emerging flatline in BTC price at around $60k:

This flatlining of BTC price gains is unusual in terms of previous BTC blow offs – suggesting that the final explosive move is either yet to occur or that this top will play out differently.

While people look at TA charts and expect similar patterns to unfold as prior periods of BTC price moves and suspected periods of price manipulation, what makes this event different is the law of large numbers starts to kick – sourcing liquidity for a $2 trillion dollar ‘market’, is a whole different kettle of fish in terms of difference to a $12bn market or even a $50bn market.

At the moment there are 3 main stable coin providers, USDT, USDC and BUSD, which are respectively Tether, Circle Coin and Binance Dollar. Binance is affiliated with the Chinese exchange whose CEO spends most of his time scampering around the world hiding out in different locations, while Circle Coin is affiliated with DCG who also have investments in Coinbase and many of the other US exchanges.

Currently around $1.2bn in USDT is being pumped into the crypto complex every week, which is doing little more than allowing it to treat water around $60k. But this is imho is just 100% fake liquidity (feel free to disagree in the comments) that has been manufactured out of, and is backed by, other crypto currencies, which will eventually lead to an inevitable daisy chain of default.

So leaving aside Tether, this just leaves Circle Coin and Binance Coin as proxies for real USD inflow. Both are supposedly USD based funds and so for argument’s sake I’ll assume are 100% backed by Cash, effectively they represent actual hard currency entering the system. Anyhow, because I was both bored and curious about the liquidity question I went back through all the twitter notifications produced by the @usdcoinprinter bot of printing events since the start of April and put them into a chart:

This chart shows the daily minting of USDT (Blue), USDC (Yellow), BUSD (Green) and daily mining costs (Red). As you can see the daily mining costs already exceed the real USD liquidity inflow from USDC and will shortly exceed the daily inflow from BUSD too. You will also note that since around the 14th of April – the day of the Coinbase float, there has been virtually no additional USDC or BUSD printed.

If this trend continues, then by this time next month mining costs alone will have drained most of the real USD liquidity that entered the crypto complex in April (based on the limited analysis of using the stable coin flows as a proxy).

Now the above analysis is by no means complete, there are still many other inflows and outflows or real USD, but again, as with the Grayscales example, it is suggestive that the rate of real hard currency entering the system has at best flatlined.

So why does all of this matter? Because when crunch time eventually comes and real bills or real taxes have to be paid in real dollars, there will come a point when the available real USD liquidity in the system won’t be able to meet the outflows associated with simple mining, let alone these other hard currency outflows/spends. That will be the moment that Wile E. Coyote realises that there is nothing but air between him and the ground, which is a long, long way down.

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Peachy

Stewie, explain to me, like I’m a stupid little girl, exactly what this means:

Every single day $50m USD of real fiat liquidity has to leave the crypto eco-system, to pay for real life by mining electricity costs that have to be paid to power stations, like the one that flooded in China, in real US dollars

and the importance of it.

bjw678

But that is the beauty of the design, miners will leave difficulty and costs will fall, and the network continues on as it is now.
The mining cost is a direct reflection of the “value” of btc.

Peachy

Matey

Obviously a hypothetical discussion, as there could be other factors motivating miners to mine massively uneconomic blocks for three weeks 

Just because something is cashflow negative for a short time doesn’t mean you pack it in, scrap your plant and surrender your lease.

If you’re really an accountant like Thundercock says, you should know that 🤗

Peachy

I think that you’re being too pessimistic Stewie.

Winning@Failing

This was a good read. Had no idea China holds 60% of miners.

Coming

 USDT (and USDC and BUSD) have never appreciably declined in volume/cap

That means that “liquidity” has never been net withdrawn from the system

Probably because its likely all fake (or at least the 90% that is USDT which is basically all of it)

Its mind boggling to me that cryptards don’t even seem to notice this, let alone worry about it

But anyway, I think it will continue on forever. Why shouldn’t it?

If nobody has cared to this point, then why would they care next month or the month after?

If tether never bothered to make it even half realistic and reduce their net position, then why would they next month or the month after?

Who do they honestly believe is happily holding $50 billion in tether?
People who are sold out of actual crypto currencies, but happy to leave their $50 billion dollars of gains in unbacked tether rather than just withdrawing it into actual cash?

Maybe it’s the miners and exchanges themselves because they need to keep the scam going as much as anyone

Its full-retard at this point

The situation just becomes more and more absurd every week, and the cryptards don’t care

Last edited 3 months ago by Coming
Coming

What I’m asking is : who is casually holding 50 billion in tether

an “asset” that pays no dividends, has no potential for capital growth, is directly tied to the value of a filthy fiat , and is “backed” by a shady company in the Bahamas

it surely isn’t retail crypto investors “on the sidelines”

So who is it ?

that will determine when and how the bank run / liquidity event starts

Coming

I think the other interesting thing to consider is what happens to real markets if / when this implodes

previously I would have said not much given it was mostly just virgin edge lords in their mums basement with no actual real assets and no cross collateralisation or debts if they get wiped out

now there are various listed companies who stand to lose all of their value or a great deal of it (Tesla)

could someone like Elon musk or others invested or holding debt in his or other companies have a vested interest in preventing this ?

maybe some banks ? And by implication the central bank

Coming

I’m pretty sure saylors company had a large debt raising recently which they piled into Bitcoin with

Tesla also have converted in a roundabout fashion debt into Bitcoin (since they’ve never made actual profits)

someone was buying those corporate bonds and I’m guessing it was banks

Coming

One more thing to post on this topic

i always felt that the latest crypto pump was completely artificial

the last pump and dump everyone was talking about crypto, it was all over the msm, and every man and his dog was piling in

this time no one seems to care, and I don’t know anyone in real life who is actually buying at $USD50k+ prices

also , there’s no one trying to shoe horn “blockchain” into every possible industry and application like there was in 2017

Google trends bears it out too
(see attached image)

amusingly the doge pump is probably more organic as there are still plenty of retards putting their $5000 life savings into it

so I think it’s just become so patently and sublimely absurd, I’m not sure that anyone deep down believes it’s real anymore and paradoxically have stopped even questioning it

8DA8A84A-1073-42DC-9FB6-B64862D78389.png
DjenkA

Every single day $50m USD of real fiat liquidity has to leave the crypto eco-system, to pay for real life mining electricity costs that have to be paid to power stations

As I understand it, this is equivalent to the cost of printing paper fiat. Sure, more costly than printing press but once all the BTC are mined, this costing should finish.
Now unlike paper currency where only a small number of notes have to be reprinted and there is virtually zero cost of operating/using/storing (to simplify), BTC has a cost for all 3.
By all this metric, the real drain will be the perpetual running cost which has to come from somewhere. This means the BTC is self inflationary (or equivalent to this)
But then again, if the value of BTC doubles every 7 years, and the crash is always 18 months from now, this becomes petty cost.

Actually a very interesting view Stewie, it is thought stimulating .

Last edited 3 months ago by DjenkA
Coming

As well as the USDT scam , I’m pretty certain a large amount of crypto volume is wash trading

https://mailchi.mp/brianlivingston.com/034-2#free1

see this article

NFT was bought and sold by the same person

-have some worthless blockchain which you create for nothing
-sell it to yourself for $1 million dollars (pay the transaction fee)
-you now have an asset “worth” $900,000 for free

pretty certain the exchanges do the same thing as they’re likely to be the primary crypto bag holders (called “whales” by these retards)

and they get to keep the transaction fees

all of this conducted without any regulatory oversight, and all of it with no permanent record (all exchange transactions are off blockchain )

I think USDT is just the mechanism to transmit these fake trade changes in value to exchanges that are semi-regulated like coin base

Last edited 3 months ago by Coming
Niko

I can’t take this article seriously as it misses the main ingredient why BTC is about to collapse. Someone called it to go to da moon while gold is entering bear territory. lol

Niko

nice read btw.