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Peachy

Oh, coming, you’re so cruel, rubbing it in like that!

crypto is copping it in the neck pretty hard recently from the environment of climbing interest rates plus, apparently, fear of potential new regulation.

A fly in your ointment

but, but, but…

Peachy

🤣
😥😥😥😥

Last edited 10 days ago by Peachy
A fly in your ointment

so the key is to keep them light?

I think so.

my view is that crypto is here to stay. It could never be a bullion but it has its usefulness. As an investment… well, lotsa folks made money with Charles himself too!

buy hey, I was wrong on something once and statistically speaking (hypothetically) I can be wrong once more!

LSWCHP

Now is definitely the time to go balls-deep in bitcoin. There’s gold in them thar racks of GPUs.

Peachy

I’m thinking of wading back in with the proceeds of previous crypto sales…

Jimmy Saville
Peachy

Wow, those testimonies are spectacular! Love it.

hopefully Stew will do a post explaining the mechanics of the collapse!

here is the chart for those playing along at home

CE7F6DF6-7A06-45CF-A9C0-0A9DE6DC5B15.jpeg
Jimmy Saville

I just got approved for NAB Equity Builder.I’m going in. Wish me luck.

Peachy

I just got approved for NAB Equity Builder.I’m going in. Wish me luck.

are you going to go for shitcoins (which have tanked harder) or the more mainstream stuff (btc, eth, Ltc)?

Jimmy Saville

Neither. They have lists of approved investments, and I’m not sure crypto is there. You’d have to be a brave genius to lever into any of this mess.

T

lol that is ugly…

Stewie

I actually have half a post (“Algorithmic Rat Poison”) on Luna and Terra that I started writing in February, but got bored with and never finished.

I was basing it off a comment in an email that I made to a guy involved with a Crypto Fund, that I sent on 31st of January:

“…In terms of developments in the market place I think the biggest issue your fund will be facing will be issues with regards to the algorithmically stabilized coins and their capital buffers like UST and Luna.

We spoke briefly about IRON/TITANIUM, but reality is all Algorithmically stabilized coins suffer from the same weakness, frankly I consider them to be Rat Poison. I really recommend you having a read of this blog as the same weakness applies to Luna:

https://medium.com/geekculture/crash-of-the-titan-truth-about-stable-coins-5dc6cc2056bf

Luna has now fallen below $50. If the price declines much below $30, then the buffer capital (in effect a CDO tranche) for UST will approximately equal the remaining market capitalisation of UST issued, both being around $10bn. Once that occurs then I imagine the UST peg will start to break and you will commence to see volatility entering the UST price, which I imagine will start causing payment problems back up the stream due to the amount of leverage used in the system vs the available genuine liquidity (especially in regards to Anchor):

https://www.coindesk.com/markets/2022/01/28/anchor-protocol-reserves-slide-as-money-markets-founder-talks-down-concerns/

The peg broke once before back in June that required a $70m or $300m recapitalization (I can’t remember which – something for you to look up 🙂 however the total capitalisation of Luna and the rest of the Terra system back then was only a fraction of what it is now.  

BTW – Luna was the main vehicle…. they were heavily involved with Celcius, whose CFO was arrested in Israel for an unrelated crypto ponzi fraud and who the SEC has just announced they are investigating:

https://www.bloomberg.com/news/articles/2022-01-26/crypto-lending-firms-celsius-network-gemini-face-sec-scrutiny

Luna was $70 in November, it climbed to just over $100 December, but is now at $45. I fully expect it to go to zero like all the other algo coins, Titanium, Olympus, $TIME (aka $wMEMO), MIM/Spell, etc.”

…and so it did.

I wrote that in January, and in the meantime it did a round trip back to $120. It ultimately was brought down by some other trigger, which is often the case, these things are inherently unstable and accurately predicting what will set it off and collapse, is as hard to guess as when it will be set off and collapse. The only certainty is that they WILL eventually be set off and collapse.

The main trigger for the collapse was a hubris filled Korean, Do Kwon, who as the founder of the “Terra eco system”, decided to use Luna’s reserves to buy BTC as a ‘stablisation fund’. Thereby inadvertently swallowing a poison pill.

There are even suggestions that Do was offered the BTC at a discount, which was effectively bait offered up for him to swallow – which he did.

“hopefully Stew will do a post explaining the mechanics of the collapse!”

One of the best summaries of what happened subsequent to that is on the following twitter thread, which I recommend reading.

It was an elegant, yet brutal financial trading play:

https://twitter.com/OnChainWizard/status/1524123935570382851

I could not improve upon the above thread, so I simply recommend you read it.

Last edited 10 days ago by Stewie
Peachy

Thanks Stew. I’ve read through that thread and some of the other related items on twitter.

I obviously don’t know about the architecture and workings of the 3pool and 4pool and Curve and other bits and pieces, but I get the general sense of how someone who does know the structure and mechanism intimately could’ve set up this sort of exploit.

however, what doesn’t quite make sense to me is the size of positions that were needed to pull this off ($hundreds of millions in tokens; supposedly a $1b OTC position??? ), together with the short time window in which to do it (ie while they were transitioning from 3pool to 4pool).

This is not within the domain of cryptokiddies.
If half the stuff in that thread is right , then to me this seems like an inside job or outright rugpull. Alternatively, perhaps there was no attack at all and what I folded was a series of unfortunate events.

Stewie

To me the size of the trade suggests it was institutional i.e. a rea; world hedgie or some other institution. There have been suggestions that it was Citadel and Ken Griffiths but that’s not confirmed yet.

I would suspect there will be more weakness in coming days as the rumored $800m in profit is taken out as fiat (real hedgies don’t Hodl) or they might be getting set up for phase 2 – being ‘The Doomsday Machine in the heart of crypto‘ that I wrote about last year i.e Michael Saylor’s Microstrategy’s 120,000 or so leveraged BTC.

Markets love known weaknesses – that’s how UST was exploited, and I’m sure there are guys plotting to make an even bigger fortune by forcing Microstrategy to puke up its holdings.

Last edited 9 days ago by Stewie
Peachy

Lols… those who though 99% down is about limit and bought at $0.75 have since lost 96% of their money!

now, the important question is – is it a buy at $0.03? Maybe it’ll catch a bounce to $0.10?

Peachy

better stick with bricks and mortar, for sure, hey 🤗

Ramjet

Just don’t get your investment advice from EmBee. Bear porn central over there at the moment.

Peachy

Bcnich has returned there, I saw. I hope he drops by here as well – he is good fun.

and here we could have a constructive technical discussion about how he sees the interest rate spike dynamic playing out.

T

Well, we are in Mercury retrograde until early June so…

Peachy

what can I do with imaginary internet tokens ?

its web 4.0, man – haven’t you heard? A super-valuable use is about to be discovered 😀

T

the imaginary internet tokens used to be good for the bbq circuit.

a mate of mine used them to score on the side. his missus didn’t take kindly to same, and now he has fewer internet tokens, but hey ho i guess.

Peachy

mate of mine used them to score on the side. his missus didn’t take kindly to same, and now he has fewer internet tokens, but hey ho i guess.

are you saying that working girls accept tokens these days?

T

? No idea. He was stepping out. Not that surprised tbh.

Ramjet

You’ll forced to soon once our Central Bank enforces CBDC (Central Bank Digital Currency) under the WEF’s instructions

Peachy

You’ll forced to soon once our Central Bank enforces CBDC (Central Bank Digital Currency) under the WEF’s instructions

speaking of this, did you watch that Steve Keen interview with Martin North?

it was remarkable – Keen is 1000% behind a CBDC. His reasoning seems to be that it would be a very good way to deliver “QE for the people”, rather than the traditional “QE for the banks”. Probably sees it as a way to transition from the debt economy to productive endeavours. (a bit like our pfh007?)

but – fuck me – while he bangs on about other academics in ivory towers how ironically naive and out of touch does he have to be to not realise that changing the nature of the tool wielded by the central banks won’t change the outcome!

It’s all in the vested interest and power structures. that’s what dictates the outcomes, not whether central banks must use debt or CBDC or something else when plying their trade.

Agent 47

Leith admitted on Martin Not the stream the other night that he doesn’t believe in a globally coordinated elite pulling the strings.

I mean we’ve just had two years of globally co ordinated COVID tyranny. The level of cope and or dumb I would expect from DLS but Leith? Disappointing.

Jam

Yeah I don’t like the idea of that. Our pissant leaders would be bumping into each other waiting to download instructions.

One thing this covid BS has shown is how very little control, Australians have over there own destiny.

Ramjet

QE will never been for the people and will never ever be. The elite will manipulate CBDC. They will track all transactions and feed into social credit scores. If certain industries need support you CBDC will have to be spent there.

BTW, I don’t watch Martin North, his models are nonsense and predict the opposite to reality.

The90kwbeast

I love his housing stress charts that are always somehow showing people getting more stressed as prices keep rising (whilst the insinuation is it cannot go up any further)

Peachy

Problem with those charts is that they are uncalibrated.

both in an absolute and relative sense.

they measure something but

  1. nobody knows whether any particular reading is high or low – only whether it is relatively higher or lower than a previous reading.
  2. nobody knows how – or whether – particular readings on the stress-o-meter correlate to anything worth knowing (default rates, direction or rate of price change, water acidity, anything)

so what’s the point?!

Stewie

You could actually deliver Fiscal reform at the coal face of specific industries or regions in a country:

https://nchain.com/sector-specific-cashback-through-central-bank-digital-currency/

Agent 47

That will come right after the election. It won’t be compulsory until it is.

Ramjet

I think you are right. I remember going to a breakfast five years ago and they were talking about social credit scores and analytics. I was the only person in the room repulsed by the idea, but everyone else was keen. Plenty of people want this to happen like the elite, tech companies and consultancies.

Peachy

tether down to 0.9916 cents

Please let this be it

Yes, I also noticed that tether is under presssure. If Stewie is right – it had better break now. If it doesn’t come part in this downdraft, I’m going to treat the “tether scam” theory as debunked.

Peachy

Yeh, you got me – I am actually DLS. Always have been.

but if tether has admitted that it’s a scam and it doesn’t break on a -30% day (part of a -60% period)… is it really a scam?

Stewie

Tether has a completely different structure to UST – Tether is also far more stable than UST.

I don’t see how this crisis could bring down Tether. Perhaps if it metastasizes into a general default by Celcius and Blockchain and perhaps a cascade of unmet liquidations – but honestly I would just expect them to print.

IMHO the only way Tether will actually be brought down is if the regulators take action against it. As a make believe magic bean Tether actually has more systemic importance than BTC – those involved with the scam, ie the whole industry, will fight tooth and nail to ensure its survival. If they don’t then they all lose.

Ramjet

Of course the economies are not strong enough to deal with 3%+ cash rates, but they will have no choice. Most recessions are preceded by a spike in energy prices (70s, 80s, 90s, GFC). But if the war in Ukraine is a long war, then we will get stagflation and recessions with higher cash rates.

canuckdownunder

Let’s attribute inflation to Ukraine and supply chain while completely ignoring money printers go whrrrrrr….

So the MB fund actually thought that we wouldn’t see inflation without strong wage growth first and that rates wouldn’t move until 2024? You know they’ve completely lost the plot when they believe what the RBA is saying.

Reus's Large MEMBER

I see that Gunner resigned, probably before someone gunned him down anyway

A fly in your ointment

do you mean the “death by 1000 words that can be summed up in one compound sentence” guy?

Freddy

Question for Stewie. What happens if BTC falls well below the current mining cost of ~$30k USD per coin, and the miners switch off their hardware en masse?

Stewie

Not much – they would mine at a loss for a couple weeks until the difficulty algorithm reset. If it maintained that lower price you would probably see miners start throwing away their less efficient machines, like was seen following the last crash.

You would be unlikely to see chain death, where it became so uneconomic to mine that it would make no rational sense for anyone to continue mining until a difficulty reset… imho the only chance that that would be possible, would be if Regulators seized Tether and BTC collapsed straight to sub 1k.

stagmal

to this day i don’t know what a blockchain is and don’t care. maybe i’m just too stupid for any of it but whenever somebody started talking to me about bitcoin or cyptos i started falling asleep i found it that boring. “this is supposed to be revolutionary huh. what can you buy with it.” that has been my response every time.

i just wish i had bought it in 2010 and sold a few years ago, but you can say that about a lot of things.

Last edited 9 days ago by stagmal
Gouda

I’m in the same boat. Until crypto has more utility outside of El Salvador, I can’t see it as anything more than a speculative ponzi scheme.

Stewie
canuckdownunder

But the AUD is in freefall as well so it’s all a wash! 😅

Just wait until the lower AUD feeds into this “transitory” inflation. The cash rate will definitely top out at 1.25%.

robert2013

I have lost so much I not longer have any choice but to HODL. I wouldn’t be in any hurry to buy the dip either. After the 2017 peak, the lows of ~$4k weren’t reached until late 2018. Then it sat around there for ages, slowly gathering steam until the next halving in 2020 after which it shot up to >$60k. The next halving is expected in 2024. I’ll wait.

Peachy

I have lost so much I not longer have any choice but to HODL

ah man, is it that bad?!

robert2013

Nahh. I bought when I did knowing it would probably drop. I’m willing to wait.

Max Payne

Apparently Alex Saunders (Nugget’s News) has been using his break from shilling crypto to kick the opiates. It was the drugs that caused him to fleece all his crypto fanbois but he’s totally legit now.🤣

https://www.afr.com/technology/crypto-influencer-blames-drugs-for-losing-millions-in-investor-money-20220422-p5afe6

Stewie

Another amusing example of “DeFi” as the ‘future of finance’ NOT following the Luna debacle.

A Crypto lending platform ‘BlizzFinance’ that operates on the Avalanche protocol has just been drained of all its funds following a bug within another Blockchain called ‘Chainlink’.

Chainlink is based on the Ether protocol, that acts as an ‘Oracle’ that is a ledger where the prices of other tokens found on the various other chains or networks, have their prices immutably recorded. Consequently many DeFi apps also point to Chainlink in order to get their prices and ensure there are no price breaks.

Unfortunately Chainlink had some strange requirement to enter in a maximum and a minimum price, where it will fail beyond this range. For Luna those two values were apparently $10,000 per coin and $0.1 per coin.

Even more unfortunately for BlizzFinance and those that invested with it, no one at Chainlink bothered to tell them about this, nor did their own apps take into account this as a possibility.

Consequently an attacker was able to buy millions of now worthless Luna for fractions of a cent, before posting them to ‘BlizzFinance’ where they were still worth apparently 10c each. Apparently the funds were drained in a matter of minutes before anyone even noticed.

I love these arbitrage stories in Finance and particularly in crypto.

Peachy

That is fucking awesome! Seems like the modern iteration of the Y2K bug.

except apparently Y2K was all smoke and no fire, where as this is fireworks!

Stewie

People are ingenious and these systems are far from fully tested.

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