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Anyone who owns Bitcoin/cryptocurrency or is thinking about getting some, you need to be aware of this Login/Join 
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Picture of Dead_Eye
posted
All questions, information and concerns are welcome. Negative or assume/know it all replies are not constructive and it isn’t appropriate to post them here. It’s far too early to know one way or the other and the extent to how much this is going to impact the market. The only guarantee I offer is that no one knows what is going to result from this. With all the popularity and excitement Bitcoin/crypto generating right now, the purpose of this thread is to help and educate those who aren’t aware of a peril that lies ahead. I’m going to keep this short and simple.

I’ll begin by reiterating there is no way to calculate how much of an impact this is going to have. There’s a lot of variables and moving targets that are dependent on each variable. That said, I stand by my previous statement in another thread that Bitcoin and other tokens (more accurately, the blockchains they reside upon) are the future. However, there are going to be bumps in the road and this is potentially a big one. Large enough that I sold off everything and am sitting in USD before I wrote this.

In writing this I’m going to use “token” for Bitcoin and every alternative coin/token available for trade on an exchange. A heads up: I’m not going to explain everything down to the last detail. You get what you pay for and I’m only posting this here because I care about you guys. I’m serious and I mean it. There’s a couple dozen other venues I could post/repost this on and I’m not going to.

The Tether token (USDT) is facing some serious accountability questions about its reserves. For every token issued there’s supposed to be a USD equivalent to back it up. After everything I’ve researched, that is simply not the case. Examples off the top of my head:

1. Close to $31mil of USDT was hacked on 11/21. While official statements from Tether are saying all the right things, the limited information that’s available suggests quite the opposite. They’ve released $10-20mil of USDT and there’s no proof that $10-20mil of fiat has been deposited as backing. This happened before the latest surge over Bitcoin’s $11k. A quick sidenote: As I type this, if I had and dumped $20mil on every sell limit on GDAX, the price would be $11,597… an all time high. If I had $20mil and used fear of missing out to trap legitimate fiat purchasers I could easily stretch that to well over $12k.

2. Bitfinex is an Asian owned exchanged (also the largest) and there’s a lot of smoke (and where there’s smoke there’s fire) regarding their involvement with Tether. It is important to note that the token surges as of late have been driven by Asian markets. Moreover, the average American/Coinbase/GDAX user doesn’t venture into exchanges that use Tether. Therefore, a lot of Americans who have put up solid USD may be in for a rude awakening. (Edit: Anyone who put in fiat may be in for a rude awakening)

3. Market cap of Tether on 11/19 was $644.84mil. On 11/20 it was $674.22mil. 11/21 it was 677.72… after ~$31mil was stolen. Tether says it blacklisted those tokens and forwarded it to exchanges to have it banned from trade. There’s no confirmation that the stolen Tether was prevented from entering circulation.

4. As of 12/3 Tether’s market cap is $816.29mil… an increase of ~20.5% in under 2 weeks. Institutional money has not entered yet. Total crypto market cap is almost $334bil. Bitcoin’s market cap is roughly $187bil. On 11/20 total crypto market cap was $243bil, Bitcoin $106bil. Some simple math: Bitcoin increases by $79bil (76.4%), total crypto (minus Bitcoin) increases by $12bil (8.8%) and here we have Tether increasing by 20.5% despite having $31mil stolen and has not produced tangible proof that their tokens are backed dollar for dollar with fiat.

5. The latest Bitcoin surge to $11k was done with an overbought, exhausted bull market yet out of nowhere on a Saturday it breaks through all layers of resistance and reaches new highs. I completely call BULLSHIT on this.

Where am I going with this? I believe Tether and Bitfinex are about to kill the golden goose. They’ve essentially released USDT without any backing to pump up the price of tokens, dump it for real fiat that people have invested during the surge and all that’s left is disappearing into the night with fiat and the market is left with a bunch of overvalued tokens because they were bought with USDT that isn’t worth the 1s and 0s they’re created from. Until they’re audited by a reputable third party firm (unlikely because what crook would willingly let that happen) or confirmation that every single USDT has the proper fiat backing (equally unlikely as they would have gladly published this information immediately to reestablish confidence in their token), it’s only a matter of time before the truth comes out and the markets correct to reflect the true price based upon actual fiat deposited into the market. By this time it won’t matter because it’ll be known as a scam and crypto’s reputation will be forever tarnished.

On the other hand, it’s possible that any Tether fraud is a mouse fart in the grand scheme of things, especially when billions of institutional money comes pouring in. Maybe some hedgefund comes along and forks Tether. By eating the Tether discrepancy and are able to prove that every token is backed by USD, Tether is phased out and Tether 2.0 is the trusted standard. By the way, Tether charges 0.1% to exchange fiat into Tether and vice versa. Most people aren’t buying Tether, making trades, converting back to Tether then putting it back into their bank account. I’d argue that most people buy Tether and trade it.

There’s much more that I don’t have the time or energy to publish but here’s the bottom line:

If Tether is exposed as a fraud, tokens will drop in value. My estimate would be at least 50%, perhaps as much as 80%. If Tether isn’t exposed or is somehow made solvent then carry on, business as usual and to the moon it goes (I can’t stand it when people say that). When the dust settles, each investor/trader is responsible for their own decisions. This is my opinion and like I said before you get what you pay for. What may or may not happen in the future is out of my control. I am posting this because it is something that every token investor should take into consideration with how they manage their investment moving forward. Best wishes to all.


__________________________________________________________________

Beware the man who has one gun because he probably knows how to use it.
 
Posts: 367 | Location: Somplace with cold drinks and warm women | Registered: May 04, 2016Reply With QuoteReport This Post
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Right after I posted this (Sunday morning at 2:08am) the $11k barrier has been breached again (only took 300 Bitcoins this time, a very small amount to break such a barrier). Another Saturday/Sunday surge, in the wee hours of the morning no less. Be very careful.


__________________________________________________________________

Beware the man who has one gun because he probably knows how to use it.
 
Posts: 367 | Location: Somplace with cold drinks and warm women | Registered: May 04, 2016Reply With QuoteReport This Post
His Royal Hiney
Picture of Rey HRH
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quote:
For every token issued there’s supposed to be a USD equivalent to back it up. After everything I’ve researched, that is simply not the case.


This was at the heart of the question I raised previously. How can there be accountability if there's no central bank?

The first bitcoins generated and used in a commercial transaction was used to buy a pizza. Let's say that transaction placed the value at $1 per bitcoin. Meanwhile, subsequent bitcoins mined ended up being valued at $11,000. Presumably, that first bitcoin is now worth the same as any other bitcoin at $11,000. There isn't any USD equivalent money of $10,999 to back that first bitcoin. What am I missing?

Isn't it the same as deciding to use pukka shells as currency as long as the shells are certified as having come from only a specific island?

I'm not being negative, I'm just trying to frame the equivalence to avoid what seems to be smoke and mirrors.



"It did not really matter what we expected from life, but rather what life expected from us. We needed to stop asking about the meaning of life, and instead to think of ourselves as those who were being questioned by life – daily and hourly. Our answer must consist not in talk and meditation, but in right action and in right conduct. Life ultimately means taking the responsibility to find the right answer to its problems and to fulfill the tasks which it constantly sets for each individual." Viktor Frankl, Man's Search for Meaning, 1946.
 
Posts: 13438 | Location: Bay Area, CA | Registered: March 24, 2011Reply With QuoteReport This Post
Don't Panic
Picture of joel9507
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If you can't explain it to your grandmother, don't buy it.

That's generic advice - whether it's bitcoin, credit default swaps, pork belly futures or reverse repos, if you don't know it backwards and forwards, invest/speculate elsewhere.
 
Posts: 11638 | Location: North Carolina | Registered: October 15, 2007Reply With QuoteReport This Post
Leave the gun.
Take the cannoli.
posted Hide Post
quote:
Originally posted by joel9507:
If you can't explain it to your grandmother, don't buy it.

That's generic advice - whether it's bitcoin, credit default swaps, pork belly futures or reverse repos, if you don't know it backwards and forwards, invest/speculate elsewhere.


Occasionally, I have lunch with a money man who manages close to a billion dollar portfolio. When I asked him about Bitcoin he said he doesn’t know anything about it and doesn’t care to know. Much like the grandma analogy. The only guys I know who are playing bitcoin are computer geeks.
 
Posts: 5363 | Location: New England | Registered: January 06, 2003Reply With QuoteReport This Post
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Picture of Dead_Eye
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Valid point Rey and I'd be happy to address it.

The value of a Bitcoin is primarily derived from its ability to store value as well as its ease of sending, receiving and accessing it. When people exchange fiat for Bitcoin, it rises in price as demand exceeds supply. With the introduction of exchanges, it's allowed demand to increase to levels that push the price of Bitcoin to $11,761 as of this post.

I can't speak for all exchanges but Coinbase and Gemini (the two largest US exchanges) accept USD and keep the trading USD and Bitcoins in storage. Their income comes from maker/taker fees and they're doing very, very well. I'm sure Bitfinex does something similar but I don't have any first hand experience because US citizens are prohibited from signing up on their exchange. I don't know what they hold for assets for the fiat and Bitcoins they have on their exchange. What I know for sure is that they've constantly manipulated the market (to be fair what market isn't manipulated) but this latest bit with Tether crosses the line because it's one thing to manipulate a market, it's another to outright defraud it and use a "trusted" token to pump and dump it time and time again.

Imagine if the Asians were able to counterfeit fiat and pump up the price of the stock market. Legitimate buyers see the movement and want in on the action so they put their money in and off the market goes. At some point the Asians dump the over inflated stocks, get fiat in return and the market plummets. But then the Asians come back with more counterfeit fiat to build the market back up again and again (to new highs no less) and more legitimate buyers are taken. At some point they'll be exposed but by that point how is any government/central bank going to calculate the damage done and compensate the damaged parties, especially when investors were cautioned about investing in the stock market and the risk that comes along with it.

Aside from Bitcoin there are ICOs that are doing really amazing things and bringing new ideas and services to the market. Read up on POWR, LSK, XRP, IOTA, etc. All those are going to be affected because Bitcoin is the main medium in which any other token can be traded. Those tokens aren't worth what they are because people are trying to store value in them. Their value is derived from the progress the company has made (IOTA signed contracts with Microsoft, Fujitsu, Bosch and another 20 companies). It'd be a real shame to see great ideas kept from the world because of this.


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Beware the man who has one gun because he probably knows how to use it.
 
Posts: 367 | Location: Somplace with cold drinks and warm women | Registered: May 04, 2016Reply With QuoteReport This Post
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Picture of Dead_Eye
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Beware the man who has one gun because he probably knows how to use it.
 
Posts: 367 | Location: Somplace with cold drinks and warm women | Registered: May 04, 2016Reply With QuoteReport This Post
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Picture of msfzoe
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If any Bitcoin buyers are interested, there is a bridge for sale in Brooklyn, NY.
 
Posts: 1717 | Location: newyorkistan | Registered: January 06, 2008Reply With QuoteReport This Post
Free radical
scavenger
Picture of rh
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Just a "heads up", there are already two other Bitcoin threads on SIGforum:

Bitcoin: The World’s Most Dramatic Bubble Ever?

Any BitCoin investors / owners here ???>>>>>>>

Dead_eye is providing interesting inside information, but it is traditional on this forum to use an existing thread. Those receiving notifications on the other two threads might miss this topic. (And thanks for that information.)
 
Posts: 851 | Location: TEXAS | Registered: April 02, 2007Reply With QuoteReport This Post
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quote:
The value of a Bitcoin is primarily derived from its ability to store value as well as its ease of sending, receiving and accessing it.


Pardon for confirming my seat on the economic short bus: I've read/tried to understand the entire couple threads, and fail to grasp whatever essential my granny would go "ah-HA!".

Thanks to OP for trying to clarify whatever Bitcoin is doing.


**************~~~~~~~~~~
“One of the sad signs of our times is that we have demonized those who produce, subsidized those who refuse to produce, and canonized those who complain.” Thomas Sowell


COTEP # 362
 
Posts: 7400 | Location: sunny Orygun | Registered: September 27, 2009Reply With QuoteReport This Post
Yew got a spider
on yo head
Picture of DoctorSolo
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You can mine it.

Much lower risk and the power consumption is not a huge deal unless you build a chinese farm.

I'm gonna let my shitty little rig chug away until I decide to make it into a racing simulator.

You do need to know what you are doing. I have a love/hate relationship with my rig.
 
Posts: 4130 | Location: Colorado Springs | Registered: April 12, 2006Reply With QuoteReport This Post
Free radical
scavenger
Picture of rh
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quote:
Originally posted by signewt:

Pardon for confirming my seat on the economic short bus: I've read/tried to understand the entire couple threads, and fail to grasp whatever essential my granny would go "ah-HA!".



If you can understand gold or other precious metals, then you can understand Bitcoin (and vice versa). There are a finite number of Bitcoins which, as intended, are becoming increasing more expensive and harder to find. As I tried to explain to JALLEN HERE, a Bitcoin is proof of resources being expended by computers (electricity and hardware) that solved a cryptographic problem. Gold is proof of mining resources being expended to find an increasing rare metal.

It's more complicated than that since Bitcoins, like gold, are divisible into smaller quantities, but I hope that I did a good job of explaining the basic concept of Bitcoin.

And in another Bitcoin topic, I am about to explain why Bitcoin will never be a long term store of value. Some other cryptocurrency might work, but not Bitcoin.
 
Posts: 851 | Location: TEXAS | Registered: April 02, 2007Reply With QuoteReport This Post
safe & sound
Picture of a1abdj
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quote:
If you can understand gold or other precious metals, then you can understand Bitcoin (and vice versa).



I guess this is the part that throws me, and why I can't understand. I can hold gold in my hand. I can make industrial items out of it. I can make jewelry out of it. If the electricity goes out, my gold is still there. I don't need a computer to buy or sell gold.

Things like Bitcoins are nothing. You can't see them. You can't touch them. You can't make anything out of them. Even tulip bulbs were something you could possess.


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Posts: 12327 | Location: St. Charles, MO, USA | Registered: September 22, 2003Reply With QuoteReport This Post
Tinker Sailor Soldier Pie
Picture of Balzé Halzé
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quote:
Originally posted by DoctorSolo:
You can mine it.



What exactly does this mean? How does one mine a bitcoin?


~Alan

Acta Non Verba
NRA Life Member (Endowment)
Family, Guns, Country

"My guns are always loaded."
~R.G. Justified

What whiskey will not cure, there is no cure.
 
Posts: 18360 | Location: Out of Jersey, Into Utah | Registered: October 29, 2012Reply With QuoteReport This Post
Free radical
scavenger
Picture of rh
posted Hide Post
quote:
Originally posted by a1abdj:
quote:
If you can understand gold or other precious metals, then you can understand Bitcoin (and vice versa).


I guess this is the part that throws me, and why I can't understand. I can hold gold in my hand. I can make industrial items out of it. I can make jewelry out of it. If the electricity goes out, my gold is still there. I don't need a computer to buy or sell gold.


But you can't easily smuggle significant amounts of gold around the world, with India and China coming to mind.
 
Posts: 851 | Location: TEXAS | Registered: April 02, 2007Reply With QuoteReport This Post
goodheart
Picture of sjtill
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So if all these new Bitcoins are being “mined”, why isn’t the price falling? Perhaps because there’s a sucker born every minute?


_________________________
"the difficulty of making new laws isn't some bug ... it's the point of the design, the better to preserve liberty"--Justice Neil Gorsuch, in his first "dissent"
 
Posts: 13059 | Location: One hop from Paradise | Registered: July 27, 2004Reply With QuoteReport This Post
Yew got a spider
on yo head
Picture of DoctorSolo
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there are asics optimized for mining bitcoin but you can mine ethereum or a few other flavors with good gpus. thats why gpus have gotten expensive.

Mining is like turning energy into money, slowly.
 
Posts: 4130 | Location: Colorado Springs | Registered: April 12, 2006Reply With QuoteReport This Post
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Picture of sourdough44
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Haven't we been here before? Bitcoin?

I'm sure it was a great ride for many, it's also of no interest to me. One doesn't want to be without a chair when the music stops.
 
Posts: 3110 | Location: WI | Registered: February 29, 2012Reply With QuoteReport This Post
Leave the gun.
Take the cannoli.
posted Hide Post
quote:
Originally posted by rh:
quote:
Originally posted by signewt:

Pardon for confirming my seat on the economic short bus: I've read/tried to understand the entire couple threads, and fail to grasp whatever essential my granny would go "ah-HA!".



If you can understand gold or other precious metals, then you can understand Bitcoin (and vice versa).


I’m sure my grandmothers could understand how to purchase gold or silver whether it was in the form of coins, bars, or jewelry. Explaining how to purchase cyber currency is a whole ‘nother thing. So is cashing out quickly - at least as quickly as bonds, stocks, etc.
 
Posts: 5363 | Location: New England | Registered: January 06, 2003Reply With QuoteReport This Post
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Same people chasing this dream are the ones who brought us the Dot.com bubble, the mortgage bubble......


____________________________________________________

The butcher with the sharpest knife has the warmest heart.
 
Posts: 10494 | Location: Bottom of Lake Washington | Registered: March 06, 2007Reply With QuoteReport This Post
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