The Crypto Sublimation Process

Amidst great fanfare Tether released a breakdown of its reserves on Friday, revealing that amongst its $45bn in reserves (it has since added a further $10bn since the report date on additional Tether issuances) they only had $2.1bn in identifiable cash reserves. Notionally the remaining reserves are spread across highly quality sounding ‘assets’ like ‘Commercial Paper’ or ‘Reverse Repo Notes’…. which are obviously a recent development, as having worked in the Treasury space of large commercial banks for many years while I’ve heard of Repos and Reverse Repo’s, I’ve never actually heard of a ‘Reverse Repo Note’:

While some people might be comforted by these two pie charts, and in an open and transparent company it might provide a little assurance, I can’t help remembering that even this paltry amount of information was only forth coming as a result of the settlement with the NY Attorney General’s investigation. If it were not for the NY AG’s action Tether’s website would still be saying they were one for one backed with USD dollars. Consequently while it remains to be seen whether the NY AG will be satisfied with the break down of Tether’s supposed reserves, I for one remain skeptical.

Here is my breakdown of Tether’s reserves:

Or in keeping with the pie chart theme:

So while I will begrudgingly give Tether the benefit of the doubt that they do actually have $2.1bn in cash, against their considerable Tether liabilities, it is still considerably larger than the actual cash position of most other crypto exchanges – recently floated Coinbase for instance only has $1.1bn in cash. Personally I doubt that there is more than $10bn in real liquidity across all the crypto exchanges against the $2 Trillion ‘market cap’ of the entire crypto complex.

Now if real USD liquidity is $10bn, all that is required to crash the entire crypto complex would be for half of one percent, 0.5%, of the “$2 Trillion” market Capitalization seeking to exit the system. What could possibly cause someone to think of ‘have fun staying poor’ by removing some of their crypto wealth from the crypto complex? Well paying real world obligations like tax on their capital gains would be a start. BTC alone is up 1567% since March last year, so I’m suspecting that there are probably some sizeable realised capital gains out there that have tax obligations falling due on them.

The IRS (and most other national tax agencies) is far more prepared for this boom – they have honed their investigative techniques considerably since the last boom in 2017 and they are no empowered by Global Financial Regulations, CRS and FACTA, to ensure tax compliance:

Court Greenlights IRS Access to Kraken’s Customer Data After gaining access to Circle users’ data.

The IRS is now looking for Kraken customers who have failed to comply with internal revenue laws.

https://decrypt.co/70022/court-greenlights-irs-access-to-krakens-customer-data

For those not up to speed on Global Taxation reform, both FACTA (the US) and CRS (the rest of the world) basically require any Financial Institution that has funds belonging to a non-resident, to report the details of that resident and the nature of the funds being held, to their local tax authority like the IRS or ATO, who will then compile that information and exchange it with the tax authority who the non-resident claims to be administered by. If you are an Australian citizen with a US bank account, the IRS will report your bank account and details to the ATO, who are then able to check whether you have been declaring all your income. While the rules and regulations associated with these two pieces of regulation have gradually been being applied since around 2016, the big bang, in terms of them being universally applied and reported commenced in 2020.

No Govt wants the blood on its hand for killing a $2Trillion dollar market by enforcing the sort of Regulation that would kill the crypto industry stone dead. They will prosecute obvious maleficence and laundering, and demand that tax obligations are paid, but all they have to do is wait until the remaining real liquidity evaporates, like so much dry ice, after which the market will implode.

The point is, regulations won’t destroy this bubble, the law of large numbers and ratios to real liquidity will. Regulation will come way after, TrollyMcTrollface’s chart shows the time sequence for how regulations will be applied and their impact on the crypto market better than any other:

As I have repeatedly mentioned, the entire $2trillion crypto space is a series of liquidity constrained markets, where participants are increasingly encouraged to stake (HODL) crypto in dubious financial ‘businesses’ via DeFi and Yield Farming, which further reduces available liquidity, all of which is further inflated by at least $55bn of fake liquidity in UST alone. All of this $2trillion dollar market is IMHO floating on barely $10bn of genuine liquidity, and which has a slow leak of $55m dollars a day in the form of mining costs that HAVE to be paid in hard currency.

Not that it will actually require the $10bn to be totally gone before it collapses. Once the real liquidity starts to drain market making exchanges own hard currency reserves, they will essentially stop making a market in order to prevent their own cash reserves from being drained. Otherwise they would otherwise be forced to continue to buy BTC and sell hard USD cash until they have no cash left and are effectively insolvent.

When real liquidity inflows/outflows swing materially negative the entire crypto market will implode in a matter of days.

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bjw678

What does implode mean?
Revert back to the the mean from 6 months ago?
go to 0 never to recover?

bjw678

Personally I expect a return back to around the value from 6 months ago and to resume the steady climb until the next bubble event when we can all get rich again in a few months/weeks.
I’m not sure on the exact timing but it’s starting to look like now at the moment.
As you say a turn in sentiment will kick of a fall.

robert2013

I sold my crypto today in response to accellerating falls. Perhaps this is the trigger. It’ll be interesting to see what happens as London and NY open.

MB Fanboi

Paper hands!

robert2013

Looks like decent timing now!

LSWCHP

A True Manly Man with Huge Brass Balls would’ve HODL’d.

Freddy

Someone like Noel Cleal?

Bad joke.

robert2013

Given how every cycle is accelerated at the moment, this may be it. There’s so much money washing around though it’s not clear what’s next. Chinese anti Bitcoin news is damaging, but crypto’s always recovered in the past. Lots of bad news stories around stock prices ATM too. Something I read about US banks being unable to digest any more QE. It’s starting to feel 2007ish, end gamish, to me. Not settled on what to do with my money. If things go tits up will EMs buy into crypto like Venezuela? Buy gold? Rural bolthole looking real good but I’m probably not fit enough to handle it on my own, and not good enough to survive solely on investments. Not yet panic stations, but storm clouds gathering. I’m not discounting bcnich yet. See what happens in H2.

Sacha

Thanks for that clear explanation Stewie.
You make it understandable even for someone like myself that has been getting high on welding fumes his whole life (which might even help to see things more clearly, you never know).

If I get your drift correctly, I believe you could make a comparison to the regular banking system where there is only about 2% in physical cash (bills and coins) or liquidity, which would still make it 4x the crypto complex.

When people lose confidence in the bank and start emptying their account by demanding cash it doesn’t take much for the banks to get in trouble. This is called a bank run, which of course you know. The banks would have to close up shop and call a bank holiday, it has happened many times.

So comparing it to the crypto sphere, a drain on ‘real’ money would cause something similar to happen. This would result in crypto exchanges having to close down at least temporarily.
And in the case of crypto only .5% needs to be converted into ‘real’ money for it to falter. Wow!

But if you were a crypto whale and knowing about this, wouldn’t you start getting out slowly? Some of these people have billions (in profits on paper), I would for sure try to convert say 20-50 million a month.
Damn the taxes, just pay it. Better than the whole shebang freezing up and being stuck in no mans land.
Or is that not even possible without the price taking a dump?
So that would be about 500 million in a year which is 5% of 10 billion.

Last edited 5 months ago by Sacha
bjw678

That description applies to tether, not necessarily the non stable coins, but the value will fall if people don’t want to buy, exactly the same as any other market.

Sacha

I understand. But the liquidity is very light in the overall crypto market if Stewie’s guesstimate is near enough. Which makes it fluctuate so much. A little inflow or outflow can have a big effect. It almost reminds of penny stocks. I’ve seen drops of 20% in seconds. Is that someone taking some money off the table? If you want to trade this you have to wait for a massive drop and then get in. But where do you set your stop? Or you don’t use a stop and just watch it all the time?
That’s another thing I don’t like about crypto, it goes 24/7. I was thinking about trying to trade it but I like to have at least the weekend off.

I’m just saying knowing how feeble the market really is, I would start taking profits.

Sacha

Indeed! What a quagmire.
I think there are some very smart people involved at the top of crypto that know exactly what they are doing, creating the biggest Ponzi scheme ever. There are a lot of interesting developments in crypto also but I think the people working on that can only hope to sell the tech into a regulated market one day.

I would only trade cryptos with play money, i.e. money you are willing to lose and which won’t hurt you financially.

I also remember Bitfinex’ed. He was already talking about Tether in 2017 and showing how dodgy the company was and the people behind it. Bitfinex’ed had to make his account invite only as he was getting so much abuse from the Bitcoiners (I just checked it seems to be public again.)
So here we are 4 years later and only now has he been vindicated.

Sacha

Yah. We’ll have to see what the ripple effects are of this latest Tether expose. I wouldn’t be surprised if most people invested in crypto wouldn’t even understand what this actually means.

So the smart money is slowly heading for the exit and there could be plenty of bag holders left soon.

“What I believe will occur is that rather than risk their real USD liquidity, exchanges will be forced to let prices fall to the point where real fiat leaving the system started to equal real fiat entering the system – wherever that point lies.”

And then you will get fair market pricing right?

Sacha

Holy cow!
I was just thinking about what I said before.
If one whale starts liquidating 500 million in a year, and your estimation of 10 billion liquidity is correct,
You only need 19 other people to get the same idea and in one year all liquidity would be gone.
This of course only ceteris paribus, which will never happen. Because if the price starts to drop a lot you get the fear factor and try to get out sooner with more money and the whole market could collapse into a smouldering heap when you’re sound asleep at 2am.

Sacha

I still see parallels to the fiat system where people think they have money but these are mostly digits on a screen. A central bank can provide liquidity when needed. Tether is also providing liquidity in a sence. But as Coming stated below, at least you can go to the bank and under normal circumstances you can convert to fiat cash. With Tether no such thing.

There must be people working on this that have a financial background on Wall Street or London.
They saw the possibilities of crypto and have taken over the market. They know exactly what they are doing and how to rig the system. While this would come with legal liability in regulated markets, (yeah right! Unless you’re too big to fail or part of the ‘insiders’ and can fleece the muppets unhampered) this whole crypto undertaking is like the Wild West where they can scam to their hearts desire.
I also wonder if Tether are trying to avoid any connection to USD or other fiat to avoid any legal consequences that might flow from this.
  
They can use Tether to inflate and deflate the whole market, they then also know when to get in and out. Inflate to create liquidity which will set off trading between cryptos probably involving wash trading and spoofing as well. People see the market going up and enter with fiat. Wait for the boom, when you think the maximum number of suckers are in, exit at the top with the fiat of the suckers and deflate the market by stopping to create Tether. Wait for the crash and bottom and start inflating again. Rinse and repeat.
And as long as there are people willing to enter and play this game it could go on for a while yet, as Coming also said. 

It’s brilliant in its deviousness really.

bjw678

Even if this is true(maybe moreso) then you can still easily trade this and make a lot of money so why not do it?

Sacha

I have looked at Bitcoin and some of the other cryptos, but I don’t like how they move.

To be comfortable trading you must find something that fits your personality. i.e. Long or short term, highly volatile or smooth, highly speculative or more fundamentally based etc.

Also as I mentioned crypto is a 24/7 market.

All in all crypto trading wouldn’t fit the trading style I’m comfortable with.

Sacha

Well, you know what to do on Monday morning:

BTFD!

In the Trump era I hardly held positions over the weekend, unless I was up substantially, just for that reason.

Sacha

Which markets did you used to trade Stewie?

Last edited 5 months ago by Sacha
Sacha

Well done!

Sacha

“…just assume they are all scammers until proven otherwise.”

This is one of my basic rules in life in general.

I’ll read your article later today Stewie.

Peachy

It’s interesting. But I really doubt if this is anything more than talk.

And if it IS more than talk – whether it will last, or if it will hit the bin like all other difficult options.

canuckdownunder

I agree, being delivered by politicians my BS detector is definitely going off.

Normally I would completely dismiss something like this but the timing is making me suspicious. It’s less than a year into Ardern’s outright majority.

Freddy

A skilled migration program to raise wages and reduce pressure on housing. It sounds like the EZFKA strategy.

Coming

The thing I find most staggeringly retarded about all of this is that Tether is EXPLICITLY not redeemable for USD

All this fuss about what assets the company has backing the tether they mint is completely irrelevant – they have told everyone they will not exchange tether for USD

that’s how absurdly stupid this “market” is

it is clearly and entirely a scam , on which a pyramid scheme has been built of idiots who think they are incredibly clever using real investment terminology to present their deep analysis of prices which are entirely fabricated

the most hilarious are of course the TA attempts

it’s so stupid that even the coiners joke about it (“Chinese new year”)

a giant world of Warcraft MMORPG of people pretending to be traders

having said all that, stupidity and illogical behaviour is not in short supply globally

so this could carry on for a long time, possibly forever

I mean, if reading on the company’s own website that tether is not redeemable is not enough to make people understand that the tokens are actually worthless , then why should a dodgy statement that they are 3% backed move the needle ?

for sure there are enough idiots worldwide to put in $50 million a day to keep the miners running

Peachy

I actually think TA might be the most valid in crypto-sphere.

Especially if we accept that there are no fundamentals (or earnings), then all we have is group behaviour mediated by price movements (or price movements mediated by group behaviour?), which is what TA is about.

bjw678

at a fundamental level TA can’t work to reliably generate profits and predictions, because if everybody starts using TA then everybody is making money and nobody is losing money, so there is no one on the losing side of the trades so they don’t exist.
Of course this is based on the supposition that TA is objective and everyone comes up with the same answer. Take that away and then TA is voodoo by definition regardless of anything else though.

Peachy

comment image

haha. I understand what you’re saying, but we don’t have a world where EVERYONE uses TA, right?

If everybody did, there might be a TA arms race and competition between different schools of TA, etc. As it is, I reckon TA might have some utility in very skilled hands (and none-to-negative for 95%+ of people).

Anyway, the point is that crypto really just has price action and not much besides, so what is there to do apart from TA?

Last edited 5 months ago by Peachy
Peachy

certainly whatever fundamentals are there are not going to explain 15% daily movements, are they.

Although now that I think about it, if you look at stocks, it is also quite true that for most stocks on most days – there is absolutely no news or “fundamental developments”…. and yet the prices move….

hmmmmm

Sacha

HFT (High Frequency Trading) and algo bots (i.e. computer trading) make up 90% of ‘trading’ on the US ’market’.
All they use is TA and reading/interpreting the news in milliseconds or even micro seconds now.

I started dipping my toe in trading in 2015 when I had time off from work.
I only traded the most liquid US markets S&P and Nasdaq because it had the narrowest spread, and all I used was Moving Averages and Fibonacci. I was doing ok, could pull out a couple hundred most trades I put on (I used CFDs on IG broker which is highly leveraged at 200x, so you can win big with little money down, but of course you can also lose very quickly).
In 2015 the market moves were so nice and smooth and if you used the right timeframe, price would bounce off the MA. You could try to get on and ride this wave and that’s what I did.

Then after Trump was elected, slowly the market started to change. The moves became more erratic and jittery, big spikes up and down etc. just ugly really. I would get knocked out of my position all the time. This got worse when the trade war with China started and he would put out these Tweets at any time of day or night and the market would either make a moon shot or drop its guts.

I suspect there is not enough liquidity and volume left in index trading. The market is not robust enough against the quick HFTs and algos to smooth out the moves. Or maybe the machines are really taking over.

Now similar to crypto you have to wait for a decent pull back, 5-6% at least, and then try to enter the run up. There is still a trend up or down but how it gets there is with these crazy moves in between, which you have to sit out. And if you don’t get in as close as possible to the bottom you will get knocked out every time.
Of course all this is only applicable to the trading I’m doing. There are still thousands of other ways of trading and pulling money out of the market.

Last edited 5 months ago by Sacha
Peachy

course all this is only applicable to the trading I’m doing. There are still thousands of other ways of trading and pulling money out of the market.

hehhe that’s exactly what I was thinking when reading your post – your particular strategy might not work well for crypto (or US equities post-Trump) – but other people might be trading other patterns… You got to this yourself so you’re clearly self-aware 😉👍🏿

I subscribe to the HODL school myself. Acquire the assets that you like and hodl them until you no longer like them.

Last edited 5 months ago by Peachy
Sacha

Yah very good.

As I mentioned above to bjw678 everyone has to find a strategy/style that fits their personality.

If you find that something that fits your personality and you keep improving by learning from the mistakes, then one should come out alright eventually.

I myself HODL physical gold and silver using the same strategy as yourself.

So one can have different strategies/styles for different investment/trading products.

The options in markets are myriad, and that is one thing I like about them: you can always keep learning if you want. And when the market changes and your strategy no longer works, you have to modify or try something completely new.

Like Linda Raschke says:

“The minute you think you’ve found the key to trading,

I promise you the markets will change the lock.”

The market always keeps you on your toes.
And you also have to be self aware, because the market is just the market and does whatever it wants.
Instead of blaming the market for trades gone wrong, one should just look inward first and see if there is something faulty in our approach to the market.

Last edited 5 months ago by Sacha
Coming

How the fuck can you have TA on something that is a centrally organised scam of wash trading and tape painting ?

are you all really this gullible ?

Why is everyone simply ignoring my pointing out that tether is self admittedly not backed by anything since it’s not redeemable

Last edited 5 months ago by Coming
Peachy

Coming, don’t feel ignored. I get your point – Tether isn’t redeemable into USD (or anything). But so what? USD isn’t redeemable into gold (or anything) either.

People can still choose to have a market for it or treat it as a medium of exchange. maybe they’re dumb to do so, but that doesn’t stop them acting in the way that they do. Perhaps indefinitely.

Last edited 5 months ago by Peachy
Coming

This reflects how poor your understanding of money is

USD is redeemable to extinguish tax obligations

These tax obligations are enforced by by an organisation that has the most powerful military in the world, a sophisticated tax collection system , and an unrelenting judicial system and police force

USDT is issued by some guy in the Bahamas from his keyboard

he has no police force , army , tax collection service
he has literally nothing except a computer

why can’t I issue my own Tether2 tokens and use them ?
you could issue Tether3 tokens
Stewie could issue Tether 4 token tokens

are you starting to realise what a retarded con game this is ?

that digital tokens are completely worthless and useless ?

I think you must all surely realise , but it’s a little too difficult to admit

Peachy

Using USD to pay tax isn’t the same as being redeemable. It’s more a matter of there being a certain base level of demand for USD.

beyond that, the USD could be thought of as tokens that circulate. They circulate in lots of countries where the US military and police will never do jack shit in support of them (eg Russia).

As we have discussed earlier – the military/police/etc can be thought of as an element that MAY be used to limit the SUPPLY of USD (ie prevent me running off a couple of billion on my Xerox). But with enough supply – the USD can certainly be made worthless (imagine Yellen prints up One Thousand Trillion USD and pushes them into circulation).

there are digital tokens that don’t have the same supply flexibility (vulnerability). But yes, they suffer from poorer demand profiles – can’t be used directly to pay taxes, buy labour, groceries, etc. this may be solved in time, or not (personally – I think yes).

Coming

Using USD to pay tax is exactly how they are redeemed

a USD is quite literally a tax credit

the USD is extinguished when used to close a tax debt

the US government can create more demand for USD any time it wishes , by creating taxation obligations

Last edited 5 months ago by Coming
bjw678

So issue those tether 2 3 and 4 tokens an d tell us how it goes.

Much like you can make amazon2 and facebook 2 as there is no technical barrier to doing so it doesn’t tend to work out all that well.

https://www.investopedia.com/terms/n/network-effect.asp#:~:text=The%20network%20effect%20is%20a,military%20and%20some%20research%20scientists.

Edit:
And by the way, little rectangles of paper with currency printed on em have about the same value as toilet paper and little rectangles of plastic even less… You can’t even wipe with em.

Last edited 5 months ago by bjw678
Coming

You are honestly too stupid to engage with , but here we go

tether2 would be literally identical to tether in every way

it would cost zero to make

it would be backed by nothing

Amazon shares are shares of a tangible business, and the value of those shares are enforceable by law , as are the assets (physical and intellectual) of the company

I cannot make these shares or the assets of the company , for this reason
even if I could, I would go to jail

try making those little rectangles of paper, and see how long you last before you get taken away in handcuffs

its time for you to realise that the only wealth you can own is the wealth you can enforce with violence, either directly or indirectly through your government

bjw678

Yeah but amazon doesn’t have an enforceable patent on selling things online.
Why can’t you make comingzon or comingbook and be a billionaire too?
For very little you can make a functionally identical shop/social media platform.
Until you understand that you are too stupid to engage with.
Amazon shares are irrelevant to the discussion as you are making a new token, so they would be comingzon shares.
Maybe you should also realise the government doesn’t give a single crap about your wealth and will happily destroy it for you…

Last edited 5 months ago by bjw678
Coming

This is double digit IQ stuff honestly

bjw678

insults, the refuge of those too stupid to actually understand the argument.
Research network effects for a while, you might learn something,

Coming

Haha networking effects

you read that on a Twitter thread by one of your spruikers?

yes, the network effect in this instance could be otherwise known as the greater fool theory – a network of fools bidding up the price of something that has no use other than selling to other fools

fools are not in short supply though, so it could go on a while

Freddy

The issue is the term TA. It is just an attempt to find non-random price movements. A statistical edge. Given the exponential price rises built into crypto (reward halving) any btfd, breakout, or any other long bias strategy would have made a nice profit.

You are right about non-redeemable for USD. It is an agreement between parties that comes with counterparty risk. It does not mean you can’t make money from it.

ps: excuse my ignorance on Tether. I know it is supposed to be a stable coin but I read something about triple halving nonsense.

Last edited 5 months ago by Freddy
Sacha

“It is just an attempt to find non-random price movements. A statistical edge.”

That’s the way I see it also.
You look for repeating patterns and this way you try to get probability on your side.

Last edited 5 months ago by Sacha
Sacha

Hi Coming,

I use a CFD (Contract For Difference) account to trade.
A CFD is a derivative. When you buy a CFD it is nothing more than a contract that derives its price from an underlying product, without owning the actual product, hence derivative. This product could be a stock, index, commodity, crypto etc.

So in essence a CFD is also not backed by anything tangible.

Conservative estimates are that the total derivative market is
USD 1 quadrillion, or USD 1,000 trillion. But world GDP is only about USD 100 trillion. So the derivative market is 10 times larger than the world’s GDP.

This you could also call a scam, because there is 10x more gambling on prices going on with derivatives than there are real physical products, goods, services in the whole world put together.

But people still trade derivatives because they think they can make money.

Same goes for crypto trading I guess.

Last edited 5 months ago by Sacha
ThePensum

I don’t think that’s the right way to look at it.

Firstly derivatives is about exchanging risk.

Secondly, you said it yourself, it is a contract. You bind yourself into a contract with a counterparty (or exchange) that is legally enforceable, in which case, some transfer of consideration (per the laws of the land) might be necessary.

I don’t seen any resemblance of this to bitcoin etc…

Sacha

I didn’t say the derivative market is comparable to the crypto market.

Coming was making the point that cryptos to him were an obvious scam, and why would people trade scams.

I pointed out that you could also see the derivative market as a scam as the market is 10x bigger than the underlying product.

So I’m not even taking into concideration that the derivative market is regulated and the crypto market un-regulated.

But in the end people will trade on anything if they think they can make money, even scams.

I trade the derivative scam, someone else trades the crypto scam.

Yes, you can use derivatives to exchanging risk.
Futures, options, ETFs, CFDs etc. can all be used to exchange risk. And for futures that was their original purpose.

But I trade index CFDs not to exchange risk, I just want to get leveraged exposure to the price of the index.

Someone else could just trade options. Again not to exchange risk but because it is a cheaper way of getting a higher exposure to the price of the underlying.

Coming

Jesus Christ this is the dumbest thing I’ve ever read
(edit: no I take that back after replying to bjw)

may god have mercy on your soul

CONTRACT for difference

C
O
N
T
R
A
C
T

Last edited 5 months ago by Coming
bjw678

lol, you now you can use CONTRACTS with crypto, right.

CONTRACTS.

Although if you are too dumb to understand network effects then you are a lost cause, or rusted to your opinions and not worth talking to.

Last edited 5 months ago by bjw678
Coming

Contract for things that people need or use

vs

Contracts for things that people have no need or use for

I think you can see the difference , since his initial specious assertion was that crypto must be as valuable as contracts because both of them are backed by nothing (which was patently false)

yes, crypto contracts are backed by crypto , which is in turn backed by nothing

Sacha

Coming, you say a contract in the derivatives market is backed by ‘things that people need or use’, and crypto is backed by nothing.

Let’s have a look at the Futures market as an example.
This market was originally created so that farmers could lock in a price for their product in the ‘future’.
The farmer would sell his future product at an agreed to price, and a buyer would take it off his hands for that price.
Let’s keep it simple and say that these two people, the product and 1 contract are the whole Futures market.
There is 1 contract made for the value of 1 million dollar.

But as I stated the whole derivative market is 10x the underlying product, in this case that would make it 10 million dollars, or 10 contracts for 1 million dollar each.
We only had 1 contract for 1 million dollar at the start, so where do the additional 9 million dollar and 9 contracts come from?
How are these 9 extra contracts at 1 million dollar each backed by ‘things that people need or use’ if the total value of the product is just 1 million dollar?

The only REAL market for ‘things that people need or use’ consists of 1 contract to the value of 1 million dollar.
The other market of 9 million dollar and 9 contracts is created for nothing more than pure speculation.
It is a synthetically created market, i.e. NOT REAL, i.e. NOT BACKED BY ANYTHING, i.e. a scam.

That it is all legal and regulated in my opinion doesn’t change the fact that it is still a scam.

Last edited 5 months ago by Sacha
Coming

I don’t think you’re fully articulating your point

but you saw what happened during the oil contango

people were buying oil contracts for a dollar then panicking when they realised they had to take delivery and they didn’t have an oil tanker handy to accept it

so they were forced to sell it for a negative price (pay someone to take the oil)

Underlying these financial products are real products with real constraints that interact with the real world

Sacha

You come with up with an example under exceptional market conditions.

Under ‘normal’ market conditions only a small part of the futures market is about actual delivery of the underlying product.

Let’s stick to the oil futures market.
If every holder of an oil contract would stand for delivery right now, there would not be enough oil in the whole world to honour all those contracts.

How would you explain that other than there is a REAL market where a contract is exchanged for physical delivery, and built on top of that is a much bigger FAKE market of contracts for pure speculation?

Coming

It proves that these are real , and there are consequences

there’s nothing fake about it – these are people placing bets on which way prices of real assets will go

really not sure what point you are trying to make

the winner of the Melbourne cup gets a million dollars (or whatever )
many more than a million dollars are won and lost on the outcome of the race by gamblers

so what ?

Sacha

really not sure what point you are trying to make.”

Forget it. I’ll stop waisting your time.

Sacha

Yes, contract, I know.

Derivatives=regulated
Crypto=un-regulated

But again my point is:
AS LONG AS PEOPLE THINK THEY CAN MAKE MONEY THEY WILL GAMBLE/TRADE WHATEVER THE PRODUCT IS!!!

My goodness, is that so hard to understand?

Maybe I’m too long winded in my comments and people can only absorb the 140 characters of a Twitter blurb nowadays.

Last edited 5 months ago by Sacha
robert2013

Not convinced by this argument. The HKD is not redeemable for USD, but it is pegged. You can still buy USD with it though through exchanges. Presumably tether works the same way. The reserves tether has must be used to intervene in the market should the value of tether start to drift.

Coming

yes they will have to maintain the peg

but the only off ramp for USDT is on the kraken exchange
very small volumes

but now coinbase offers it

of course what happened during the last crypto crash was that there were “technical issues” preventing people from getting the USD off the exchange (eg getting paid out)

so I imagine you will be able to nominally exchange your USDT for USD, but then you won’t be able to get your USD in your account off the exchange (ie exit scam)

whixh is exactly what happened last time

Coming

To add to this , the majority of tether is held by exchanges – they’re in on the scam

(there are no retail cryptards with large tether holdings for obvious reasons)

it’s likely that the exchanges are fraudulent also

so rather than tether peg breaking its more likely the exchanges will be insolvent

Last edited 5 months ago by Coming
Freddy

,

Well done on getting out of BTC somewhere near the top. How low would it have to go to tempt you back in?

I read an article that puts the electricity mining cost at close to $18k USD per BTC. Last time it crashed all the way down to it’s electricity mining cost of a bit over $3k per BTC.

I hope nobody taking offence to the virtual fundamental analysis!

Last edited 5 months ago by Freddy
T

Why did the cost change?

Freddy

It is the crypto scam Reward Halving. Periodically halve the mining reward which essentially doubles the mining cost and leading to exponential price rises. It is what keeps buyers interested.

Peachy

I don’t really buy into that line of thinking, Freddy.

that might be an effect at the margins, but I don’t think that THAT is what keeps buyers interested.

Freddy

There is definitely a link to the halving cycles. Who is creating that link is kind of besides the point.

bitcoin-halving.jpg
Peachy

I’m not sure I really see a link.

if you had that chart without the halvings indicated, you’d struggle to place them, no? At least I would.

Freddy

An exponential price rise starting just before each new cycle, followed by a large (70%-80%+) selloff.

It would probably a bit clearer with an updated chart showing yet another exponential run up to $60k, and possibly the start of another large selloff.

Last edited 5 months ago by Freddy
bjw678

 Periodically halve the mining reward which essentially doubles the mining cost

Except for the minor detail that the mining difficulty is dynamic and dependent on how much mining is being done so not a static cost at all…

Peachy

Yep.

And the system has demonstrated that it can well survive significant congestion for multiple weeks on end, so shouldn’t be too hard for everyone to wait out 2 weeks for a difficulty adjustment if the cost blows out for some reason.

Peachy

I flogged some BTC near the top.

I dont have a number at which I would look to add BTC to the stash. It depends on broader dynamics at the time.

eg – assume it hits $20k. If this is a result of a flash-crash it could be good buying. If it’s the result of a slow grind into irrelevance (say, with ETH hitting $10k at the same time), then probably not the best purchase idea 😉

ThePensum

so I just read many trading accounts on crypto currencies have been blocked in the past few days amid the volatility – due to buying the cryptos on loan…
seriously, leveraging up to buy crypto? you’d have to be nuts.
or am I wrong?

by the way, the first step of these exchanges to block accounts due to volatility isn’t going to add confidence to these cryptos… it’ll just make people itchier in the future to dump earlier than later… a la a bank run.

again I have to say it…. wtf borrows to ‘invest’ in crypto?

Peachy

Stewie will be able to comment on the locking.

but my understanding is that it’s mostly not due to leverage. You’d have to be an absolute super-greedy nutbag to leverage into crypto.

I mean, shouldn’t 500% be enough? Do you really need to leverage it to 1,000 or 2,000%??

Sacha

Ripper piece by Tr0lly!

I had to laugh because he used the term ‘muppets’.
I remember after the GFC when there was an investigation into the lead up to the housing market crash, there was a bit of a stink because Goldman and/or JP Morgue trading desks were off loading their CDSs to clients just before the housing crash and called these clients ‘muppets’ in company emails. A fact no doubt known to Tr0lly.

And can confirm that leverage in CFD Index trading has been brought down to 20x, but only recently here in Australia. I forgot about this as with the trades I usually put on only a small part of my account is used on margin.
By the way CFDs have been banned in US due too many people losing money.

Last edited 5 months ago by Sacha
Sacha

Test

Sacha

Test

ThePensum

thanks.
I didn’t really understand all of that… but yeah thanks 🙂