[Discussion] Cryptocurrency

Cryptocurrency! Either it's going to disrupt everything and usher in a new era of artistic and consumer freedom, or it'll hasten the climate apocalypse while largely benefitting a tiny number of investors. Let's yell about it!

Mixolyde wrote:

Wouldn't the transaction fees and times prevent Russia from really using crypto?

They prevent anyone from really using crypto.

Unless the people they need to pay for things are accepting crypto (e.g. foreign banks), then it doesn't get them out of their bind.

Bitcoin is up 15% today with large trading volumes in both Russia and Ukraine. Probably more people looking to protect their wealth from the crashing ruble than to evade sanctions

jontra wrote:

Bitcoin is up 15% today with large trading volumes in both Russia and Ukraine. Probably more people looking to protect their wealth from the crashing ruble than to evade sanctions

Yup. Worthless paper chasing worthless bits.

If you can find someone dumb enough to offer your a dollar contract for your crypto, now would be a perfect time to dump your position.

A lot of stories around this week about Russia looking to cash out $billions of their crypto holdings.

They can't do it, because there isn't enough real money in the system to support that.

That no one wants to exchange BTC etc. for actual products shows where Big Money (tm) has their head.

It's still not going anywhere, but 2022 hasn't been a great year for Crypto so far. But why?

Here's some guesses:

Total crypto market capitalization has fallen to its lowest level in ten months. A further $130 billion has left the space over the weekend resulting in a market cap slump to $1.62 trillion. It has not been this low since early August, according to CoinGecko.

Bitcoin (BTC) and Ethereum (ETH) lead losses again during the Monday morning Asian trading session. Bitcoin has shed a further 3.1% to $33,486 at the time of writing, and Ethereum is down 4.2% to $2,443, its lowest price since January.

Crypto markets are cyclical, but there are a couple of other factors driving the selloff at the moment.

Meanwhile, the geat Crypto experiment in El Salvador hasn't gone great, apparently:

Most Salvadorans have already ditched their national bitcoin wallets

The launch of El Salvador’s national Bitcoin wallet, referred to as Chivo, has been a flop, with the majority of users having ditched it already, according to a paper published last month by economists at the National Bureau of Economic Research. The study is among the first in-depth nongovernmental efforts to quantify the success of the country’s national cryptocurrency push.

The study by the nonprofit, based in Cambridge, Massachusetts, surveyed 1,800 households in cities and rural areas. Where Chivo may have had minor unexpected success is in banking the unbanked. Researchers say that those who continue using the Chivo Wallet are using it to hold and transfer dollars, El Salvador’s official currency, similar to how one uses any digital wallet or bank. Some respondents told the researchers that they use the app as a debit card for dollars, with 20% of Chivo users saying they now spend less cash.

“There is no experiment where a currency was introduced with such strong incentives and still failed,” Fernando Álvarez, an economist at the University of Chicago and one of the study’s authors, told Rest of World.

Chivo was rolled out in September 2021, when President Nayib Bukele made El Salvador the first country in the world to make Bitcoin legal tender. The app, which stores and exchanges Bitcoin, save Salvadorans fees on the $6 billion sent to the country from abroad each year and boost the economy, he said.

Things have not gone to plan, though. Chivo’s launch was plagued with functionality and security issues. Though around half of the Salvadorans surveyed have downloaded Chivo to date, with 40% of those downloads happening in September 2021, around 61% of those have abandoned it after withdrawing the $30 dollar sign-up incentive, the National Bureau of Economic Research found. Only 1.6% of all remittances were received in bitcoins via digital wallets in February 2022, according to El Salvador’s Central Bank.

Meanwhile, many living in tourist hot spots on the Pacific coast, where Bitcoin usage is highest, have transitioned to other crypto wallets, such as the privately developed Bitcoin Beach.

“Don’t even talk to me about Chivo,” said Carolina Reyes, who sells snacks to tourists in the surf village of El Palmarcito. “It’s not secure, so I’m not going near it.” She said that she is one of at least 1,000 people who logged into the app in September last year, only to find that their identity had been used to steal the $30 dollar sign-up bonus.

Wait, Bitcoin is a speculative investment? Who could have predicted that?

Robear wrote:

Wait, Bitcoin is a speculative investment? Who could have predicted that?

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Maybe I should log into my old Bitfloor account and see how my 100 BC are doing. Should be up a bit after all these years!

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Here's a thought I had:

There is a lot of currency that has been confiscated by various governments around the world as they catch up with dumb criminals. Billions worth.

So maybe they could all submit sell orders for the whole lot at the same time and crash the entire market faster than the whales can reinflate it. Kill this f*cking thing once and for all.

I've been out of loop about this thing, is there one single reason crypto is crashing or is it just inevitability coming a knockin?

None of this stuff was ever stable to begin with but my understanding is that the Fed made an announcement on potential monetary policy changes at the beginning of the month that made the investors that squat on the top of the crypto pyramids panic, and it sort of snowballed from there.

Here's a good overview, Most.

Remember that if people anticipate needing more money to buy things (inflation), then they will need to withdraw it from somewhere. Those who held crypto as investments likely expected more sales of crypto into real currencies, which of course lowered the value of their crypto. They then sold to protect their money, dropping the prices to get out before the anticipated rush. This triggered other sales and the volume of sales shot up as prices kept notching down. Finally, some of the large investors probably dumped huge positions in an attempt to cut losses, which cratered not just dozens of regular coins but also the "stable coins" as their theoretical pegged minimums were overwhelmed by the volume of sales and plunged past the safety point.

And that's just one reason.

Thanks for the link, Robear.
I guess the inevitability came a knockin. Seems that most of the talk was always about it being a currency while all it ever was was a risky commodity asset at best.
NFT craze seemed like a taxi driver's tech stock advice right before dotcom crash.

The NFTs are more like a pump and dump of a shell stock. Something that should be criminal but is so outside the anticipation of the law that it is, somehow, legal.

Most wrote:

I've been out of loop about this thing, is there one single reason crypto is crashing or is it just inevitability coming a knockin?

Nowadays crypto markets basically track traditional markets, but with more exaggerated movements. Crypto is down for the same reasons as everything else is (basically inflation, interest rate raises), just with more drama.

I don't think that accounts for the stablecoin failure, jontra. There are structural weaknesses.

Put another way, one of the reasons that countries moved off of commodity based currencies is that it's much easier to control the swings of financial booms and busts when the currency is free-floating (or tied to another currency). That way they can damp down market enthusiasm or prop up weakness without arbitrarily messing around with the price of real things like gold (and, crucially, without running out of them). Cryptocoins have shown not to have any external restraints, and the failure of the stablecoin shows that you can't just assert a minimum value (whether algorithmically or through commodity price pegging) and have it ride out every crisis.

Currencies should not be speculative commodities.

Considering that a huge proportion of “whale” investors are Russian oligarchs who have lost access to legitimate banking, I wonder if a gopnik sell off might be a contributing factor

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OG_slinger wrote:

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Yes, because investing your money in a speculative asset is exactly the same as putting it in a bank. (/sarcasm) It's more like investing in the stock market, which is covered by the SIPC - which covers you if the firm you're using gets liquidated, not if you just made a bad investment.

He probably just wants a new "precedent" set so if Ether crashes he can get the government to bail out all the people who bought into his product while he walks away with whatever he's able to loot.

The stablecoin failure occurred because the price was already crashing, and it then exacerbated the crash.

I wouldn't call it a structural weakness in this case because Terra is not structurally related to any other coin - it's more just that the situation triggered a panic on the news that the Terra team was selling BTC in an attempt to try and save the peg. If usdt or usdc failed it would be another story of course because a large part of the Ethereum ecosystem depends on those coins.

It was definitely a structural thing- Terra was using it’s own derivative native coin, Luna, to maintain it’s pegged value so when prices starting dropping the stablecoin algorithms for Terra started trading Luna in attempt to maintain it’s value but that only caused the value of Luna to drop which further depressed Terra and the whole thing became a death spiral, and since so many other coins are dependent upon btc when they desperately started selling off that to prop up their dying coin it dropped btc’s value and caused the bottom to fall out across the whole network.

Latest episode of Scam Economy goes pretty in-depth on this. It’s like the Terra stablecoin was designed to fail this way, and it’s not the only crypto on the market set up like this.

Yes, Terra definitely had structural problems. It was well known that their mechanism was garbage and it's really sad that so many naive investors got fleeced by buying into it.

My point was that the crash was already well underway before UST depegged. The situation contributed to the panic but Terra's BTC reserve was only a couple of billion worth, barely 10% of Bitcoin daily trading volume on a quiet day. Not enough to move the market this much on it's own.

All stablecoins are a joke. They’re meant to paper over the instability of crypto but they’re all either dependent upon that instability like Terra or get caught blatantly scamming their valuation like Tether.