Bitcoin Bubble


#2409

Don’t worry about the cocky ones. They need to learn some lessons.


#2410

Here’s some background that I learnt about during the past 2 weeks.

While at US-based exchanges (CoinBase, Kraken - both are in San Francisco) people send in US$ and then buy Bitcoin (BTC) for US$, the largest (by volume) exchange, Bitfinex (supposedly in Hongkong) uses an intermediary currency called “Tether” (USDT). It is supposedly to have parity with the US$.
Somewhere you can see the current value of a “tether” and it fluctuates between $0.99 and $1.01
Users of Bitfinex deposit US$, and convert it to USDT (1:1), then buy BTC with USDT. BTC will then be sold for USDT.

Bitfinex is supposed to have full backing in US$ for all Tethers that were given out.

You probably know now what comes. Bitfinex introduced some sort of fractional reserve system. Which in itself, in the right limits, is possibly acceptable. Traditional banks use that principle - banks are not prepared for a “bank run” (all customers withdraw their funds at the same time). Even real estate values rely on that concept. If all owners in Cupertino were to sell in one day, there would probably not enough buyers. But only ~3% decide to sell in a given year, so the values stay up.

In the case of Bitfinex, they kept issuing 100s of millions of tethers, some possibly to themselves. Without backing of US$ deposits. The operators of this exchange then used those fake tethers to buy lots of BTC, which drove up the price.

I read about an analysis that estimated that up to 80% of the peak price volume may have been caused by the operators of Bitfinex.

I think another possibility for fraud would be that they took a good chunk of their clients’ US$ deposits directly and bought BTC with it on USbased exchanges.

An investigation was started, I think in December.
Bitfinex stopped cooperating with the auditors in January.

I read that the operators of Bitfinex have a history of financial fraud. Sorry, no link right now.

The theory is that right now, Bitfinex is under pressure to build up their $ reserves, because further investigatiors are knocking on the door. I think the US-Fed is not too happy either about a “currency” that claims to be 1:1 to the US$ … with all what they have done.
So the crooks issue more tether and use it to buy BTC on their own exchange. This causes the price to go up a bit.
Then they transfer those BTC to a US-based exchange and sell them for US$. This causes the dip.
Then they funnel those US$ back to build up their reserves.

Parallel, they obviously sell the BTC that they amassed before 12/2017, also for US$.

What does that 80% number mean? If the price went from $1000 to $20,000… remove 80% of that increase… you’re somewhere at … 1k + 0.2 * 19k = $4800.

Some panic has set in, and the price could fall further. @wuqijun predicted $5000. It may well happen by Wednesday. (One week after his prediction.) Right now it’s testing the $6000 limit.

All that said, I will continue to buy. I’m now waiting for $5500. I put an order at that price, and it may be filled by the time I wake up tomorrow morning.


#2411

Don’t need no respect from you… :rofl:


#2412

Looks like you like playing with rattlesnakes. Where’s the upside?


#2413

you’re still doing that bet? The way it has moved in the last 2 days, it would be $5500 on Feb 06 and $5000 Feb 07.


#2414

Don’t buy at $5500!!! Fall not over!!! :scream:


#2415

Below 6000.
No floor


#2416

Many bloggers make predictions and sprouts all kinds of BS, but dare not bet a cup of starbucks coffee, sure win right, why not bet? I’m giving free coffee.


#2417

Bitcoin crash happened before stock crash. Is this just a coincidence? Is there fundamental connection?


#2418

More likely they are like tomato (no offense, just illustrating), trade both bitcoin and stocks. If they need to top up margin for bitcoin, have to sell stocks. There are no causal relationship between bitcoin and stocks.


#2419

since you talked me out of Dollar-Cost-Averaging (every day $500, until $100k are gone), I’m now looking at a modified system.

Something like
invest $1000 at a price of $9k
$2000 at $8k
$3000 at $7k
$4000 at $6k

$9000 at $1k
$10,000 at $100.

How do you like this strategy?

@elt1: I’m just having fun. I’m not checking the price every 10 minutes. Setting my orders and then back to life.


#2420

Invest all $100k at below $500.


#2421

Just having fun too
This definitely reminds me of 1987
So hopefully it won’t be painful like 2008/9


#2422

it will fall below 2K


#2423

Have you sold your altcoins?


#2424

it’s too much risk :wink: There’s no guarantee that the price will reach so low.
Or the exchanges’ servers may be overloaded and I’m unable to place an order.


#2425

You said the exchange servers were going to overload at even $8000. But it’s $6500 now. Has the exchanges’ servers crashed yet???


#2426

When?


#2427

You two should bet.


#2428

Just place a limit order at 1999 and forget about it for 10 years, ok?