Yes BTC did witness a significant drop but it recovered pretty soon. Reason being China had already declared a ban months ago which led to a massive market crash , although this time the dip was around 15-20 percent but the rebound recovered most of their money.
China Declares Cryptocurrency Transactions Illegal; Bitcoin Price Falls
- Thread starter kmiklas
- Start date
Perfect summary!!!
@NoahA
USDT flows into BTC isn't a one-way street. Anyone holding BTC can convert back into USD. So the current price of BTC in dollars is the market consensus of value. If BTC was clearly over-valued to a majority of market participants we would see continuous outflows bringing the price back down.
Your argument would make a lot more sense if there was no path to convert BTC back into real dollars. Or if this was some tiny, illiquid fringe market that could dislocate from fair value and it's not worth anyone's time to deploy arbitrage capital into. A ton of capital and infrastructure has been invested into this space, the mechanisms of the coins and fractional reserve of the tethers is known by the market; and the risks are priced into the market which is why stablecoins are yielding 8% when UST is paying 1%.
It's good that everyone can trade their opinion but sitting on the sidelines calling hundreds of billions of smart money completely wrong in their risk assessment is a classic retail fallacy. Markets get overheated and discount risks too aggressively in certain points of their cycles but thinking you are smarter than everyone else in an environment where capital flows continually out of the hands of the losers into the best traders and investors is a little naive.
There is really useful technology that is a natural extension of the growing globalization and interconnected-ness that we have been rapidly developing over the past few decades and that is the real underlying of cryptocurrency. BTC may end up as a digital commodity but there are a ton of use cases for ETH and other primary coins and that is being continually built on. You can make a personal assessment on what risks and allocation you are comfortable with and whether to spend time to actually learn what is going on here. But anyone coming in and saying 0% is the right answer and treating the space as if it has no value is making a poor assessment.
USDT flows into BTC isn't a one-way street. Anyone holding BTC can convert back into USD. So the current price of BTC in dollars is the market consensus of value. If BTC was clearly over-valued to a majority of market participants we would see continuous outflows bringing the price back down.
Your argument would make a lot more sense if there was no path to convert BTC back into real dollars. Or if this was some tiny, illiquid fringe market that could dislocate from fair value and it's not worth anyone's time to deploy arbitrage capital into. A ton of capital and infrastructure has been invested into this space, the mechanisms of the coins and fractional reserve of the tethers is known by the market; and the risks are priced into the market which is why stablecoins are yielding 8% when UST is paying 1%.
It's good that everyone can trade their opinion but sitting on the sidelines calling hundreds of billions of smart money completely wrong in their risk assessment is a classic retail fallacy. Markets get overheated and discount risks too aggressively in certain points of their cycles but thinking you are smarter than everyone else in an environment where capital flows continually out of the hands of the losers into the best traders and investors is a little naive.
There is really useful technology that is a natural extension of the growing globalization and interconnected-ness that we have been rapidly developing over the past few decades and that is the real underlying of cryptocurrency. BTC may end up as a digital commodity but there are a ton of use cases for ETH and other primary coins and that is being continually built on. You can make a personal assessment on what risks and allocation you are comfortable with and whether to spend time to actually learn what is going on here. But anyone coming in and saying 0% is the right answer and treating the space as if it has no value is making a poor assessment.
Tell it to all Madoff investors. People tend to ignore obvious while good times are rolling. Once again 70% of daily volume is fake USDT, and with zero regulation you do the math. Noah gave a great example with auction with posts ago.
I completely agree that at any moment in time, the value is whatever someone thinks it is. What makes this interesting is that there is so much BTC in cold storage, so that in some way helps given these guys are long term HODLers, but on the flip side, the fact that BTC can drop 10% or more in minutes is extremely worrisome. Honestly, its trading like a penny stock sometimes. Since the price can be so easily manipulated, we really have to hold off on calling this a long term store of value. But it is of course an excellent trading vehicle.
I wasn't trying to take a side in my post. I was simply presenting how USDT can easily inflate the price of BTC to the point where had USDT not existed, maybe the price of BTC would be only 10k, or who really knows. I'm not sure of when USDT hit the scenes, but it would be interesting to plot it on the chart.
I never made the claim there is no value. The benefits of crypto are clearly huge, and many have already accomplished their goals so whatever happens going forward doesn't matter.
But I think its a fair point to make that if you can buy BTC with something that may end up being a fraud, we have to question how this has affected the price. Listen, didn't the Romans start to dilute the silver coins which led to the collapse of the currency? If you buy a gold bar today, don't you want to make sure its 100% gold all the way through? Therefore, it just makes sense that 1 USDT should be backed up by 1 USD. If its not, there will be a problem. Its a bit strange they won't show their books and only time will reveal how this all ends. Granted, this by itself doesn't mean crypto will suffer, but as I illustrated, we really don't know how BTC would have traded without the ability to use USDT as a buying vehicle.
At this stage, I'm not too concerned about USDT trading volume. People go in and out constantly, so it doesn't so much matter.
What I wonder about is how much new USDT is minted. I might sell 1 BTC and get 43k USDT just as some guy used his USDT holdings to buy BTC. This shows up in the volume, but it doesn't do anything to the circulating supply. So what you'd really want to see is if the company that issues USDT has consistent USD flowing to their bank accounts and if you can match up the inflows of USD with the same amount of tethers they release.
I don't care enough about this to do any research, but this is where I think is a good place to start.
IMO Madoff conducting internal fraud is a little different than crypto where they are competitively traded in a free market by a lot of different firms and entities. Blockchain is public. You know what you are getting when you convert your USD into crypto. The information about USDT is known at this point and priced accordingly.
Fair enough that maybe you guys perceive more risk in USDT than the market does, and it's also true that risk is discounted more later in cycles. Still, value is produced in spite of the risks and being too cautious usually makes for poorer outcomes in the long-haul. It sounds like we're on the same page about that.
Also there is no blockade between crypto and USD so if someone doesn't like USDT you can avoid it. And at this point if the stability of USDT starts to come under question, I think we will see flows go into other stablecoins like USDC or custodians will come along who will do it even better and more transparently to satisfy market appetite.
For sure the state of USDT has a lot of market impact on crypto. Markets can run further if they have more liquidity, and strangely is seems like markets will soak up a lot more liquidity than you'd expect before drastically changing their risk assessment. Like the USD printing and US indicies recently. Agree that it is interesting to see something get so big yet still remain extremely volatile. Almost wonder if part of it is in the crypto culture, or if it just takes years even in present times to slowly saturate and stabilize a new space.
Trying to value the convexity creates bubbles and instability so I think that is another factor. I think a lot of smart money in 2000 knew they were throwing allocations at junk, but if you hit 1 Amazon out of 100 crazy buys you are still going to be ahead. Same thing some PE groups do. If you have a feeling the world might look a lot different on the other side that is going to encourage some overextension.
At the end of the day you do kind of have to use some intuition in less charted territory like this. I think we're still early in crypto compared to all the things that can be developed here. And I think we see things like easier access to crypto via traditional finance such as more ETFs and such, and/or a blow-off top before the market gets gun-shy about risks. At least that's how I'm positioned.
Fair enough that maybe you guys perceive more risk in USDT than the market does, and it's also true that risk is discounted more later in cycles. Still, value is produced in spite of the risks and being too cautious usually makes for poorer outcomes in the long-haul. It sounds like we're on the same page about that.
Also there is no blockade between crypto and USD so if someone doesn't like USDT you can avoid it. And at this point if the stability of USDT starts to come under question, I think we will see flows go into other stablecoins like USDC or custodians will come along who will do it even better and more transparently to satisfy market appetite.
For sure the state of USDT has a lot of market impact on crypto. Markets can run further if they have more liquidity, and strangely is seems like markets will soak up a lot more liquidity than you'd expect before drastically changing their risk assessment. Like the USD printing and US indicies recently. Agree that it is interesting to see something get so big yet still remain extremely volatile. Almost wonder if part of it is in the crypto culture, or if it just takes years even in present times to slowly saturate and stabilize a new space.
Trying to value the convexity creates bubbles and instability so I think that is another factor. I think a lot of smart money in 2000 knew they were throwing allocations at junk, but if you hit 1 Amazon out of 100 crazy buys you are still going to be ahead. Same thing some PE groups do. If you have a feeling the world might look a lot different on the other side that is going to encourage some overextension.
At the end of the day you do kind of have to use some intuition in less charted territory like this. I think we're still early in crypto compared to all the things that can be developed here. And I think we see things like easier access to crypto via traditional finance such as more ETFs and such, and/or a blow-off top before the market gets gun-shy about risks. At least that's how I'm positioned.
Tethers were released in 2014 and led to 2017 peak, I believe they printed about 4 billions back then, then took a pause for few years, and then printed over 60 billions pushing BTC to over 60K.
here a bit of public info:
Tether Limited as of 2017 stated that owners of tethers have no contractual right, other legal claims, or guarantee that tethers will or can be redeemed or exchanged for dollars.On 30 April 2019 Tether Limited's lawyer claimed that each tether was backed by $0.74 in cash and cash equivalents. In May 2021, Tether published a report showing that only 2.9% of Tether was backed by cash, with over 65% backed by commercial paper.
Think about it, they openly say, they give no guarantee to honour the crap they printed. All their history shows that they constantly lie, and this is the coin controls crypto prices.
Wish I did not know any of the above, and just bought coins, just as many here did. Sometime too much knowledge and thinking is not good
oh well. And congrats to all who bought years back!!!!!
here a bit of public info:
Tether Limited as of 2017 stated that owners of tethers have no contractual right, other legal claims, or guarantee that tethers will or can be redeemed or exchanged for dollars.On 30 April 2019 Tether Limited's lawyer claimed that each tether was backed by $0.74 in cash and cash equivalents. In May 2021, Tether published a report showing that only 2.9% of Tether was backed by cash, with over 65% backed by commercial paper.
Think about it, they openly say, they give no guarantee to honour the crap they printed. All their history shows that they constantly lie, and this is the coin controls crypto prices.
Wish I did not know any of the above, and just bought coins, just as many here did. Sometime too much knowledge and thinking is not good
oh well. And congrats to all who bought years back!!!!!
First of all I want to thank you for that idiot proof explanation, and you do bring up some valid points, but what you're failing to realize is that Tether makes up 20% of the stable coins already out there. But let's say you are right and Tether was 100% of any stable coin, you still have to pay 1 dollar of real U.S Fiat to get 1 Tether, which most investors don't even bother buying Tether first because that would be extra commissions being paid. So then where is the fake money? Now I could see the producer of Teether possibly engaging in market manipulation, but that would show up on the Blockchain and be exposed to everyone wouldn't it? Why hasn't anyone heard about that yet? And Tether is also a centralized stable coin, so I'm sure they are already being watched.
Let's say the market comes tumbling down and Tether becomes obsolete, well then there are 5 other stable coins to go to including real USD on most major exchanges.
So I see your point, I just think most are making this a mountain out of an ant hill by believing everything they read on the internet. When someone thinks "oh Bitcoin has been inflated with all this fake money and blah blah blah!" Then that gets others to panic because most don't know about what they are invested in so they start telling the same rumor, "oh Bitcoin is going to zero when Tether gets busted! Blah blah blah!"
Do you see where I'm getting at?
Because it is in the open for a long while, no one pays any attention. Where did you get info that Tether represent just 20% of stable coin? Tether stands at whopping 70 billions, that means other stable coins are at 280 billion, which is not the case of course.
Just put side by side 2 charts. BTC and Tethers. They are identical. Confirmation bias are hard to overcome.