Crypto crash?

[Urbandreamer]

The value of the legal currency of a country is determined by the present and perceived future worth of that country. This will be a combination of factors such as GDP and trade balance. Money printing does not increase the total value of a country, it simply reduces the value of each unit of currency.

BTC is not backed by anything other than peoples perception of what someone else might be prepared to pay in the future or vague notions about its role in some 'ideal currency' fantasy World.
BoE

Ignoring the phrasing I would agree with your BTC statement.

The other? Presumably that's why the currency of countries like the DMC, Bolivia and Venezuela are so strong. After all such countries have assets with large values.

Presumably the "resource curse" just exists in a fantasy world like other forms of magic.
https://en.wikipedia.org/wiki/Resource_curse

BTW, you did note that both your statements claim to rely upon perception didn't you? Possibly it's perception that explains the weakness of some state currencies.

To be fair I did ask about the £ and $, mostly to draw your attention to the fact that you missed the fact that they are not the same. However how are the $, £ and € perceived. What are we to think about the money printing? Is cash in the bank today worth what it was yesterday and if not why?

This thread is actually about the Crypto crash, rather than a given crypto currency, so we really should be asking those sort of questions about crypto. Strangely if we do, you find very similar answers. Fractional reserves and money printing in the crypto community. Something that isn't possible with self custody of BTC.

[Hornblower]

It may be a stupid question, but what's a £ worth?

While we are on the subject what's a $ worth?

Not a stupid question at all and it does indeed require a bit of thinking about.

The value of the legal currency of a country is determined by the present and perceived future worth of that country. This will be a combination of factors such as GDP and trade balance. Money printing does not increase the total value of a country, it simply reduces the value of each unit of currency.

BTC is not backed by anything other than peoples perception of what someone else might be prepared to pay in the future or vague notions about its role in some 'ideal currency' fantasy World.

You are right about it not being worth £21m, it's a bit less thanks to the £/$ exchange rate. My mistake.

BoE

I'd disagree. Of course ultimately all value is subjective, the relative values of fiat currencies changes over time as people reassess their relative strengths, however the mining process connects bitcoin to the real physical world. People need to expend energy to compete to mine bitcoin. This energy use has risen exponentially over time, along with the price. There's some who argue that the increase in mining 'hashing power' is what actually drives the price up over time. I don't think I agree with that, but there's a link between energy expended & the price.

Of course you could argue that the miners are simply speculating that the price will rise in the future because others will buy bitcoin, so it's worth the work involved....but at least there's a link with real world work. Unlike fiat where central bankers can create trillions at the stroke of a keyboard with no work whatsoever.

I'd say there's a direct link between gold price and the expense & difficulty mining it, as well as it's relative scarcity. Bitcoin attempts to replicate this through maths.

H

[Hornblower]

What happens when all the Bitcoin is mined and also what happens if someone (like a government) uses a quantum computer and mines all the remaining bitcoin in seconds?

Genuine questions. Maybe should be on DAK.

We still have over a 100 years before all bitcoin is mined. The miners also receive transaction fees for the block that they mine, so as the BTC mined get programmatically fewer over the years, income will be replaced by fees. Theoretically.

No-one knows what will happen of course.

The quantum computing threat is unknowable. However you can't mine faster than the system allows. There's a 'difficulty adjustment' to keep the network producing a new block around around 10 minutes. If you had massively more hashing power than everyone else (say through a quantum computer, then you'd be more likely to find the next block & receive that block reward. At that point the market participants would be aware that the network was under a 51% attack (where one miner controls more than half the hash rate) and would react accordingly. There might be a fork proposed that would change some parameters & render the quantum computing threat null. People with faaaar more technical knowledge than me have talked about these topics.

H

[bungeejumper]

All good questions. But I'm trying to get my head around the potential complications if bitcoin does keep on going down. At present, I think, the total market capitalisation of bitcoin is around $350 billion. Which sounds like a lot of money, but actually it's well under a quarter of one percent of the world's stock market capitalisation (which went through the $100 trillion mark about ten years ago, I think?)

So would a meltdown catastrophe be limited solely to the bros, or could it spread wider? I'm reading that a lot of the recent activity has been leveraged using perfectly ordinary fiat-denominated assets as margin/collateral. And that there's quite a lot of BTC shorting going on, which I presume would also amplify the impact of any movement (in any direction!)

I don't suppose anybody really knows, because this is uncharted territory. But if it's true that it currently costs $35,000 to mine a bitcoin, then the logical thing for a miner to do at $18,000 is to stop mining, no? What happens after that?

BJ

[JohnB]

There are many different cryptocurrencies, each with their oft-touted advantages over fiat currencies. But if Bitcoin's USP is that it uses lots of electrical power, then it is doomed, because, in case you haven't noticed, there is a strong drive to reduce power consumption worldwide. (And arguing that using bitcoin mining to help with electrical grid balancing, when you could use the same CPU cycles to find a cure for cancer or render a film is ludicrous). Its only valuable due to its fame, and the constant promotion by people already in the ecosystem looking for greater fools to sell to. Once a reputable consortium of countries or financial institutions launches a rival, with a better way to control supply and pay transaction costs, and initial links to fiat currencies or actual commodities/assets to reduce value swings, the rest of the world will adopt that and bitcoin will be stranded or banned as being an environmental problem like HFCs.

How about this way to allocate a world currency. Create 6.5 billion credits and give one to every person alive. At every new birth give the child credits_in_circulation/world_population new credits. Money supply will rise slowly with population, everyone starts at a level playing field, and credits will start to accumulate in a few hands as they buy out others with other currencies.

[Lanark]

Its only valuable due to its fame, and the constant promotion by people already in the ecosystem looking for greater fools to sell to.

And not forgetting it's useful to criminals who want to shift 'value' across international borders without those pesky authorities sticking their noses in.

Yes and then spending it on an NFT allows criminals to withdraw the cash to a real bank account with a plausible disconnect from the dodgy source.

When governments figure out how much money laundering is going through cryptocurrencies, I think they will clamp down on it hard.

[Hornblower]

All good questions. But I'm trying to get my head around the potential complications if bitcoin does keep on going down. At present, I think, the total market capitalisation of bitcoin is around $350 billion. Which sounds like a lot of money, but actually it's well under a quarter of one percent of the world's stock market capitalisation (which went through the $100 trillion mark about ten years ago, I think?)

So would a meltdown catastrophe be limited solely to the bros, or could it spread wider? I'm reading that a lot of the recent activity has been leveraged using perfectly ordinary fiat-denominated assets as margin/collateral. And that there's quite a lot of BTC shorting going on, which I presume would also amplify the impact of any movement (in any direction!)

I don't suppose anybody really knows, because this is uncharted territory. But if it's true that it currently costs $35,000 to mine a bitcoin, then the logical thing for a miner to do at $18,000 is to stop mining, no? What happens after that?

BJ

That depends on the miners conviction about the future value of bitcoin. They may choose to continue mining even at a loss. We've also seen periods of less mining happening. When China banned bitcoin mining in 2021, the total hash rate dropped 60% as they had to shut down the miners in that country! This had zero affect on bitcoin, it still produced blocks every 10 minutes, just like before. A few months later, the miners had been relocated & the has rate went back up. It's dynamic, thanks to the difficulty adjustment.


H

[CliffEdge]

As far as I can see the true value of bitcoin is zero. I've always believed that in say 50 years' time bitcoin will not exist - at all, in any way, not in any shape or form, it will be non existent, unlamented, unremembered. I suspect it is some kind of plot to undermine the capitalist system by Russia, or maybe some destabilising alien plot - you'd have to ask Ody for more gen on that one.

In other words bitcoin is BAD. VERY BAD. USELESS. WORTHLESS.

Like many useless and worthless things they somehow manage to infiltrate and contaminate useful and valuable things. Which is my main worry. Contagion I think they call it.

[CliffEdge]

As for the value of the pound. That depends on the value of the UK which since brexit is declining to match the long term value of bitcoin ie zero.

Stay away from the riots if you can.

It won't take much more for aggrieved Brexiteers to boil over.

[Hornblower]

There are many different cryptocurrencies, each with their oft-touted advantages over fiat currencies. But if Bitcoin's USP is that it uses lots of electrical power, then it is doomed, because, in case you haven't noticed, there is a strong drive to reduce power consumption worldwide. (And arguing that using bitcoin mining to help with electrical grid balancing, when you could use the same CPU cycles to find a cure for cancer or render a film is ludicrous). Its only valuable due to its fame, and the constant promotion by people already in the ecosystem looking for greater fools to sell to. Once a reputable consortium of countries or financial institutions launches a rival, with a better way to control supply and pay transaction costs, and initial links to fiat currencies or actual commodities/assets to reduce value swings, the rest of the world will adopt that and bitcoin will be stranded or banned as being an environmental problem like HFCs.

How about this way to allocate a world currency. Create 6.5 billion credits and give one to every person alive. At every new birth give the child credits_in_circulation/world_population new credits. Money supply will rise slowly with population, everyone starts at a level playing field, and credits will start to accumulate in a few hands as they buy out others with other currencies.

"I'm new to Bitcoin & I'm here to fix it" (it's a meme used when people that don't understand bitcoin come along with improvement suggestions)

The bitcoiner response to 'it uses too much power', or 'it's boiling the oceans', is just to say 'cry harder'.
According to the game-theory, there's nothing anyone or any government can do to stop the mining. Bitcoin energy usage will likely keep increasing for decades to come. Different areas or governments will try to control it or ban it, and the network will adapt in response. It's anti-fragile, it grows stronger the more that it is attacked.

If you think Bitcoin's USP is simply that it uses lots of power, you don't understand it yet. It's PART of what makes bitcoin, bitcoin. Proof-of-work as a concept isn't unique to bitcoin, it started with 'hash cash' as a way to limit email spam & DOS attacks.

"It's only valuable due to its fame", again this just speaks of your ignorance around bitcoin. There are of course many speculators that trade bitcoin trying to make a quick buck. There are others who recognise the value in a digital sound money that's provably scarce, and that can't be confiscated or censored. They buy bitcoin with the conviction that it's going to become more valuable over time as the rest of the world catches up. These people choose to own it in much the same way that people choose to own equity over the long term to share in the success of a company.

This may be a technology that remakes the world, in the same way as the printing press did. The separation of money & state could fundamentally shift the balance of power between individuals & the state. Dismissing it as 'digital Bennie Babies' is very short-sighted imo.

H

[Hornblower]

Its only valuable due to its fame, and the constant promotion by people already in the ecosystem looking for greater fools to sell to.

And not forgetting it's useful to criminals who want to shift 'value' across international borders without those pesky authorities sticking their noses in.

Like people in Argentina, Venezuela, Lebanon, Nigeria, Turkey, or the six African nations suffering under the Central African Franc? THOSE criminals you mean? Those criminals where their government tries very hard to stop them moving their assets overseas, or of moving out of their collapsing currencies?

Yes, bitcoin is explicitly for that. Individuals can exchange value with each other anywhere in the world, irrespective of borders, laws, banking regulations, currency controls, sanctions.

I see this as progress for humanity.

H

[CliffEdge]

The evil that is Bitcoin kind of sneaked in under the radar and is still tolerated and permitted.

It's a bit like if I decided to produce goldplated "wonder sticks" made out of dog poo. I persuade people to buy them because they are beautiful elegant, much more manageable than gold bars and will go up in value so don't miss out. Over time millions of these stinkers enter into the system and nobody stops it.

Until one day... "OMG these wonder sticks are basically s**t!"

[JohnB]

The bitcoiner response to 'it uses too much power', or 'it's boiling the oceans', is just to say 'cry harder'.
According to the game-theory, there's nothing anyone or any government can do to stop the mining. Bitcoin energy usage will likely keep increasing for decades to come. Different areas or governments will try to control it or ban it, and the network will adapt in response. It's anti-fragile, it grows stronger the more that it is attacked.

So like the Mafia or drug trafficking then! Banning gold mines because of their environmental damage is pretty straightforward. The social ills of hard drug lead to bans which are really hard to enforce, and escalate into other social ills, but still we try.

But with financial instruments, we can attempt to disconnect harmful ones from the main financial system. Driving them underground may make them tools of the DarkWeb, but at least people are aware that using them has moral implications.

I bang on about the environmental damage of bitcoin, not to persuade the snake oil salesmen to abandon their barrels of snake oil, but to warn people new to the subject that not only will snake oil do you no good, it will cause you harm.

Framing bitcoin in evangelical terms doesn't really advance its cause.

[Itsallaguess]

The bitcoiner response to 'it uses too much power', or 'it's boiling the oceans', is just to say 'cry harder'.

According to the game-theory, there's nothing anyone or any government can do to stop the mining. Bitcoin energy usage will likely keep increasing for decades to come. Different areas or governments will try to control it or ban it, and the network will adapt in response.

It's anti-fragile, it grows stronger the more that it is attacked.

Framing bitcoin in evangelical terms doesn't really advance its cause.

It's one hell of an insight into the minds of these types of crypto-enthusiasts though, wouldn't you agree?

Cheers,

Itsallaguess

[JohnB]

El Salvador politicians react. https://cointelegraph.com/news/el-salva ... oin-hopium

With their finance minister Alejandro Zelaya saying

I have said it repeatedly: A supposed loss of 40 million dollars has not occurred because we have not sold the coins.

Well, its not even a paper loss I suppose....

Not sounding good in New Scientist either

https://www.newscientist.com/article/23 ... -salvador/

“They are never going to accept that they have failed on this,” says Mario Gomez, a developer who was detained by police for criticising the bitcoin law.

[Hornblower]

The bitcoiner response to 'it uses too much power', or 'it's boiling the oceans', is just to say 'cry harder'.
According to the game-theory, there's nothing anyone or any government can do to stop the mining. Bitcoin energy usage will likely keep increasing for decades to come. Different areas or governments will try to control it or ban it, and the network will adapt in response. It's anti-fragile, it grows stronger the more that it is attacked.

So like the Mafia or drug trafficking then! Banning gold mines because of their environmental damage is pretty straightforward. The social ills of hard drug lead to bans which are really hard to enforce, and escalate into other social ills, but still we try.

But with financial instruments, we can attempt to disconnect harmful ones from the main financial system. Driving them underground may make them tools of the DarkWeb, but at least people are aware that using them has moral implications.

I bang on about the environmental damage of bitcoin, not to persuade the snake oil salesmen to abandon their barrels of snake oil, but to warn people new to the subject that not only will snake oil do you no good, it will cause you harm.

Framing bitcoin in evangelical terms doesn't really advance its cause.

You're framing anti-bitcoin rhetoric in moralistic terms which I find ironic. The roughly 50 year project to make a viable digital currency has been an attempt to free humanity from the many ills of state-ism & centralised control. You can see the aims of the project in such things as A Cypherpunk Manifesto written by Eric Hughes back in 1993. The first line explains it well, 'Privacy is necessary for an open society in the electronic age'. Bitcoin aims at financial privacy.

Bitcoin is really really hard to ban, deliberately so. The current FUD around the amount of power it consumes is another attack vector that critics are trying, part of the ESG narrative. It's been thoroughly debunked by better minds than mine. However if you can be persuaded, as I suspect you have, that bitcoin has no justifiable use case whatsoever, then it using ANY power at all is an evil and selfish act.

Bitcoin will continue doing it's thing whatever amount of moral outrage each new narrative against it will muster. Your opinion of it doesn't matter, it'll continue producing blocks every 10 minutes...even if 99% of the mining infrastructure was forcibly closed, the network would continue working, completely unaffected. The meme to express all this is simply: "cry harder".

I'm trying to explain the thinking behind bitcoin (as best I can considering that I'm not a developer) to anyone on these boards who may be interested. I suppose my cause would be to try & explain bitcoin to independent-minded UK-based investors. People consuming the woeful output of the UK financial press over the past decade would have a very skewed view of bitcoin. In contrast large US outfits like Bloomberg and CNBC have had a much more thorough and balanced output.


H

[Itsallaguess]

I suppose my cause would be to try & explain bitcoin to independent-minded UK-based investors.

Because 'greater-fool' pyramid schemes don't build themselves, of course...

The meme to express all this is simply: "cry harder"

I've heard it said that if the crash in the bitcoin price continues much longer, there's no real concern about any harm coming from a 'Black Friday' event, because people don't tend to hurt themselves jumping out of basement windows...

:O)

Itsallaguess

[Adamski]

When bitcoin doubled (roughly June to Nov 2021) the story was it was the ultimate hedge against inflation.

Now we have real inflation it's crashed c 60%. Be amazed if makes a come back. I'd prefer real gold, or a gold etf than investing in this.

[Bubblesofearth]

This may be a technology that remakes the world, in the same way as the printing press did. The separation of money & state could fundamentally shift the balance of power between individuals & the state.

H

So do you advocate anarchy?

BoE

[Hornblower]

This may be a technology that remakes the world, in the same way as the printing press did. The separation of money & state could fundamentally shift the balance of power between individuals & the state.

H

So do you advocate anarchy?

BoE

Is that the only binary options that you can conceive?