What the hell is (a) bitcoin?

[BottenFieldofDreams]

PJ Vogt was one of the guys at Reply All. A great podcast. He lost his way and bought into some good for goose/gander stuff regarding unionizing at his network that was problematic for a few reasons and resigned.

Anyway he’s got a solo thing now called Cryptoland. It’s good. He’s great at what he does.

[G. Keenan]

Apparently there's something called Luna, that is/was the fourth most popular crytpo? Anyway, if you put $100 on it a month ago it's worth $0.01 today.

I just hope kryptopoulin is ok.

So I just got back from Paris where I was visiting my good buddy who has been managing a crypto options fund that was primarily underpinned by its holdings in UST, which was in turn pegged to LUNA. It went bust while I was there. Ouch. A LOT of money lost personally and for his investors. But these are investors who understand and have an appetite for risk, so they knew what they were getting into. They'll be ok.

No one knows yet exactly what happened. There is scuttlebutt that Citadel was behind the liquidity play that put LUNA into its death spiral. Apparently this Do Kwan guy who founded Terra has made a lot of enemies by ridiculing anyone who questioned its design and being in general a notorious sh*t-talker, so there are some well-capitalized antagonists out there who may have exploited algorithmic vulnerabilities. As institutional investors are moving into crypto I think we'll see some battles play out with other stable coins. In DeFi, stable coins are meant perform the function of a federal reserve, so there is hot competition over whose coin is going to attract capital flows.

Personally I've changed my thinking on crypto to an extent. I still think it's something nobody asked for that is not solving a problem. The question of "why?" still has no good answer to me, but I'm not sure anymore that it matters that crypto has no useful purpose beyond pure speculation. That is probably in of itself enough to keep it around as an increasingly common investment asset. There is enough money in it now and enough institutional money coming that crypto is (probably) not just going to go poof as a thing.

At the end of the day, all these coins' value is, just like USD pretty much an act of faith. Even boring old stocks and bonds are more or less like that in practice, at least for retail investors. In theory you own a piece of the company equivalent to your shares, but if say tomorrow Apple tanks and its shares fall to zero, do we all get to walk in there and take the furniture home? Maybe if you own enough of Apple to rise to the attention of the bankruptcy court, but for regular retirement savers you ain't gettin' jack.

[heyzeus]

Apparently there's something called Luna, that is/was the fourth most popular crytpo? Anyway, if you put $100 on it a month ago it's worth $0.01 today.

I just hope kryptopoulin is ok.

At the end of the day, all these coins' value is, just like USD pretty much an act of faith. Even boring old stocks and bonds are more or less like that in practice, at least for retail investors. In theory you own a piece of the company equivalent to your shares, but if say tomorrow Apple tanks and its shares fall to zero, do we all get to walk in there and take the furniture home? Maybe if you own enough of Apple to rise to the attention of the bankruptcy court, but for regular retirement savers you ain't gettin' jack.

The similar question for crypto v. stocks: what if Apple decides to issue a million more shares tomorrow, devaluing those that you own? What if a crypto coin either publicly issues a million more coins, or more likely quietly issues them without oversight/announcement, to some cronies?

In the stock case, it requires shareholder meetings and SEC filings. It's ostensibly transparent and publicly known information. In the crypto case...good luck. I think that's always going to be a sticking point until there is either regulation or some other mechanism for transparency.

[Michael]

Re: Luna

IMO all stable coins are scammy junk and Luna was always going on fail regardless what happened. Luna was the crypto coin used to back the "stable coin" UST. Users could xfer between the "stable" coin UST and Luna (variable). The "idea" was arbitrage between the two coins would keep the UST stable. What gave the Luna coin value? A completely unsustainable guaranteed 20% rate of return.

If anyone guarantees you a 20% yearly return on something it's super likely to be a scam. As the old saying goes, "if it sounds to good to be true it probably is."

As institutional investors are moving into crypto I think we'll see some battles play out with other stable coins.

I think this is totally oversold by the crypto community to make their space appear more legitimate. They need that legitimacy because they desperately need more people on the buy side. The greater fool theory demands it. I suspect most institutional interest comes from the fact there's a ton of dumb money in the crypto space and the markets are easy to manipulate.

[G. Keenan]

Re: Luna

IMO all stable coins are scammy junk and Luna was always going on fail regardless what happened. Luna was the crypto coin used to back the "stable coin" UST. Users could xfer between the "stable" coin UST and Luna (variable). The "idea" was arbitrage between the two coins would keep the UST stable. What gave the Luna coin value? A completely unsustainable guaranteed 20% rate of return.

If anyone guarantees you a 20% yearly return on something it's super likely to be a scam. As the old saying goes, "if it sounds to good to be true it probably is."

As institutional investors are moving into crypto I think we'll see some battles play out with other stable coins.

I think this is totally oversold by the crypto community to make their space appear more legitimate. They need that legitimacy because they desperately need more people on the buy side. The greater fool theory demands it. I suspect most institutional interest comes from the fact there's a ton of dumb money in the crypto space and the markets are easy to manipulate.

Agreed on stable coins. You just have to take their word for it that they have the liquid assets to redeem them all if there's a bank run. Spoiler alert, they don't. The promised returns in the ballpark of 20% are obviously not sustainable, but understandable as a promo rate to attract capital until the ponzi becomes a self-sustaining ponzi. High risk investments have to promise high returns or nobody is going to risk it. I don't have the money let alone the psychology to take that level of risk, but others do.

Institutions are definitely going to get into crypto more and more though. They sat out for years watching insane returns go by. Goldman, BlackRock, Citadel, etc are all spinning up crypto divisions. Fidelity is going to let people allocate up to 20% of their 401k in crypto. It's making money out of thin air, how can they resist? Maybe demand will vanish and the whole market will collapse. Crypto is moving more in line with traditional equities than its believers promised it would so the selling point as an asset that isn't correlated with other market forces is not holding up. If it stays that way, and remains an unregulated wild west honor among thieves kind of space maybe it will peter out.

[Transmogrified Tiger]

While institutions may have spun up divisions to take advantage of crypto mechanisms, is there much sign of actual activity that's being driven? BTC trading volume is half of what it was a year ago, and the price is down to late 2020 levels. Meanwhile Luna/Terra was doing billions daily and went belly up, Tether does several times that much and hasn't regained its peg and is absolutely not solvent if there's a run. Plus NFT activity evaporated, and we're well into the national campaign that peaked with super bowl ads imploring people to get into crypto so if that was gonna work it should have shown up by now. It seems to me that crypto had a huge rise on the backs of institutional uncertainty(2020 election + 1/6, pandemic, Ukraine) plus the pandemic cutting off other spending opportunities, and now it's going to fall back if not further as the ponzi's that drive most of the activity run out of the new blood needed to keep the gears turning. The actual lack of decentralization/transparency in the market with the exchanges and governance of the tokens themselves is basically the only thing keeping the slow moving crash from becoming an avalanche. At least that's my pessimist's take.

[Joe Shlabotnik]

You are never going to get the current blockchain technology to the point where it can process every day transactions - 100's of millions of them every day and I'm probably low balling that. Can you imagine trying to get those into the blockchain using the current competition-based algorithms using ever growing numbers of copies of these ever growing number of transactions? The server bandwidth would be unsupportable. For you computer nerds, its gotta be pretty damn close to an O(N!) type of complexity - long term exponential growth in both storage and processing time. Just crazy.

"Sorry you can't buy that can of soda right now, please come back at 1 AM when there's more internet bandwidth or maybe next week when the Treasury has put those necessary 100 more server farms online."

And, just as big an issue, are we REALLY sure people want endless copies of all their financial transactions they've ever made online in perpetuity?

Crypto is a STUPID idea which I can't believe has lasted as long as it has. The fact that it is being pushed so hard should provide a clue as to who the winners would be. It's a very small club and you ain't in it.

[G. Keenan]

While institutions may have spun up divisions to take advantage of crypto mechanisms, is there much sign of actual activity that's being driven? BTC trading volume is half of what it was a year ago, and the price is down to late 2020 levels. Meanwhile Luna/Terra was doing billions daily and went belly up, Tether does several times that much and hasn't regained its peg and is absolutely not solvent if there's a run. Plus NFT activity evaporated, and we're well into the national campaign that peaked with super bowl ads imploring people to get into crypto so if that was gonna work it should have shown up by now. It seems to me that crypto had a huge rise on the backs of institutional uncertainty(2020 election + 1/6, pandemic, Ukraine) plus the pandemic cutting off other spending opportunities, and now it's going to fall back if not further as the ponzi's that drive most of the activity run out of the new blood needed to keep the gears turning. The actual lack of decentralization/transparency in the market with the exchanges and governance of the tokens themselves is basically the only thing keeping the slow moving crash from becoming an avalanche. At least that's my pessimist's take.

So you're telling me the Lyft driver who told me a year ago that "fiat currency is dead" was wrong?

[Transmogrified Tiger]

While institutions may have spun up divisions to take advantage of crypto mechanisms, is there much sign of actual activity that's being driven? BTC trading volume is half of what it was a year ago, and the price is down to late 2020 levels. Meanwhile Luna/Terra was doing billions daily and went belly up, Tether does several times that much and hasn't regained its peg and is absolutely not solvent if there's a run. Plus NFT activity evaporated, and we're well into the national campaign that peaked with super bowl ads imploring people to get into crypto so if that was gonna work it should have shown up by now. It seems to me that crypto had a huge rise on the backs of institutional uncertainty(2020 election + 1/6, pandemic, Ukraine) plus the pandemic cutting off other spending opportunities, and now it's going to fall back if not further as the ponzi's that drive most of the activity run out of the new blood needed to keep the gears turning. The actual lack of decentralization/transparency in the market with the exchanges and governance of the tokens themselves is basically the only thing keeping the slow moving crash from becoming an avalanche. At least that's my pessimist's take.

So you're telling me the Lyft driver who told me a year ago that "fiat currency is dead" was wrong?

No he was right, it's just that the future isn't crypto, it's bartering with sunscreen so we don't have to become subterranean as a species

[G. Keenan]

While institutions may have spun up divisions to take advantage of crypto mechanisms, is there much sign of actual activity that's being driven? BTC trading volume is half of what it was a year ago, and the price is down to late 2020 levels. Meanwhile Luna/Terra was doing billions daily and went belly up, Tether does several times that much and hasn't regained its peg and is absolutely not solvent if there's a run. Plus NFT activity evaporated, and we're well into the national campaign that peaked with super bowl ads imploring people to get into crypto so if that was gonna work it should have shown up by now. It seems to me that crypto had a huge rise on the backs of institutional uncertainty(2020 election + 1/6, pandemic, Ukraine) plus the pandemic cutting off other spending opportunities, and now it's going to fall back if not further as the ponzi's that drive most of the activity run out of the new blood needed to keep the gears turning. The actual lack of decentralization/transparency in the market with the exchanges and governance of the tokens themselves is basically the only thing keeping the slow moving crash from becoming an avalanche. At least that's my pessimist's take.

So you're telling me the Lyft driver who told me a year ago that "fiat currency is dead" was wrong?

No he was right, it's just that the future isn't crypto, it's bartering with sunscreen so we don't have to become subterranean as a species

MLB.tv is always showing me an ad from Uniqlo for UV blocking clothing. It has a bunch of people cowering in the shade of a building afraid to step out into the sun while a family in Uniqlo prances around confidently in the sun's rays with their special Uniqlo SPF clothing or whatever.

So you might be onto something here . . .