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The Crypto Crash

Toro

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The biggest bubble ever. Well, the biggest bubble of the past decade.

We need a collapse, and genuine panic and fear, which I believe is coming.

It’s perhaps easy to see why the end of easy money might spell disaster for those invested in a highly leveraged crypto bubble, but it’s less obvious why it is causing bitcoin to sell off. You’d think it would encourage people to pile into deflationary cryptocurrencies like bitcoin. After all, bitcoin was originally intended to replace the dollar, and some people still think it eventually will. What better time to buy and HODL the world’s future currency than the start of the inflationary Armageddon that will bring about the demise of the dollar as the world’s principal reserve currency?​
But most of those invested in cryptocurrency now don’t want to replace the dollar. Indeed, they fear its replacement. What they want is to get rich in dollar terms. So cryptocurrency prices are typically quoted in dollars, most crypto transactions involve stablecoins pegged to dollars, and dollar-pegged stablecoins are widely used as safe collateral for crypto lending.​

The crypto ecosystem has tethered itself firmly to the traditional financial system, and the dollar dominates crypto markets just as it does traditional financial markets. And as crypto markets have grown, so has the dollar value of the cryptocurrency industry.​

But these dollars aren’t real. They exist only in the virtual space. They are not, and never were, guaranteed by the only institution in the world that can create real dollars, namely the Fed. The Fed has no obligation whatsoever to ensure that those who have made life-changing amounts of these “virtual dollars” can actually exchange them for real dollars. So when the crypto bubble bursts, the “virtual dollars” simply disappear. If you can’t exchange your virtual dollars for real dollars, your wealth is an illusion.​

The only real dollars in the cryptocurrency industry are those paid by new entrants when they make their first cryptocurrency purchases. The rest of the dollar liquidity on crypto markets is provided by dollar-pegged stablecoins. These fall into two groups: those that have actual dollars and/or dollar-denominated safe liquid assets backing them, and those that don’t. There aren’t enough of the former to enable everyone to cash out into real dollars, and there’s no guarantee that the latter can be cashed out into real dollars at all. So, in effect, the entire crypto industry is fractionally reserved.​

There’s now a race on to exchange cryptocurrencies for the few real dollars still available. As is always the case in unregulated markets, the law of the jungle applies. Those with the biggest teeth get the dollars. Perhaps “whales” is the wrong name for them. Crocodiles might be more like it.​

When everyone is trying to cash out cryptocurrencies into increasingly scarce dollars, cryptocurrency prices rapidly fall to the level at which there are sufficient dollars in the system for everyone to be able to cash out. For derivatives and synthetics, that probably means zero. After all, if the underlying assets are falling rapidly in price, who is going to want the derivatives? And synthetics are, as their name suggests, not real. When there’s a flight to reality, unreal things are worthless.​


 

johngaltshrugged

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So you didn't see the coming demise of private digital fiat currency that doesn't even have the backing of the power & economy of a sovereign nation?
These cryptos were a mirage from the beginning, just a huge Ponzi scheme that would've made Bernie Madoff jealous
 

MarathonMike

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It's too bad there is so much focus of bitcoin and not block chain, the technology upon which bitcoin relies. Block chain has many powerful applications, hopefully when the bitcoin bubble pops block chain won't go down with it.

 
OP
Toro

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It's too bad there is so much focus of bitcoin and not block chain, the technology upon which bitcoin relies. Block chain has many powerful applications, hopefully when the bitcoin bubble pops block chain won't go down with it.


The technology is incredibly awesome. It’s potentially highly disruptive to so many industries.

But super-cool new technology often spawns bubbles and collapses, from the railroads of the 1800s to the Internet of 2000.

I’m waiting for Ether to break $100.
 

Polishprince

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The collapse of bitcoin might be a good thing for the economy, at least as far as inflation is concerned

Of course, it is bad for those invested in it.

But it definitely means less buying power for those folks, and less money chasing goods and services- so it could help cool down inflation.
 

EvMetro

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It's too bad there is so much focus of bitcoin and not block chain, the technology upon which bitcoin relies. Block chain has many powerful applications, hopefully when the bitcoin bubble pops block chain won't go down with it.

Blockchain is the future of finance and technology, there is no stopping it. I'm anxiously waiting for the bottom of the crash, since blockchain is inevitable.
 

EvMetro

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The collapse of bitcoin might be a good thing for the economy, at least as far as inflation is concerned

Of course, it is bad for those invested in it.

But it definitely means less buying power for those folks, and less money chasing goods and services- so it could help cool down inflation.
Bitcoin is the answer to jekyll island.
 

rightwinger

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I feel so sorry for them
 

ThunderKiss1965

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The biggest bubble ever. Well, the biggest bubble of the past decade.

We need a collapse, and genuine panic and fear, which I believe is coming.

It’s perhaps easy to see why the end of easy money might spell disaster for those invested in a highly leveraged crypto bubble, but it’s less obvious why it is causing bitcoin to sell off. You’d think it would encourage people to pile into deflationary cryptocurrencies like bitcoin. After all, bitcoin was originally intended to replace the dollar, and some people still think it eventually will. What better time to buy and HODL the world’s future currency than the start of the inflationary Armageddon that will bring about the demise of the dollar as the world’s principal reserve currency?​
But most of those invested in cryptocurrency now don’t want to replace the dollar. Indeed, they fear its replacement. What they want is to get rich in dollar terms. So cryptocurrency prices are typically quoted in dollars, most crypto transactions involve stablecoins pegged to dollars, and dollar-pegged stablecoins are widely used as safe collateral for crypto lending.​

The crypto ecosystem has tethered itself firmly to the traditional financial system, and the dollar dominates crypto markets just as it does traditional financial markets. And as crypto markets have grown, so has the dollar value of the cryptocurrency industry.​

But these dollars aren’t real. They exist only in the virtual space. They are not, and never were, guaranteed by the only institution in the world that can create real dollars, namely the Fed. The Fed has no obligation whatsoever to ensure that those who have made life-changing amounts of these “virtual dollars” can actually exchange them for real dollars. So when the crypto bubble bursts, the “virtual dollars” simply disappear. If you can’t exchange your virtual dollars for real dollars, your wealth is an illusion.​

The only real dollars in the cryptocurrency industry are those paid by new entrants when they make their first cryptocurrency purchases. The rest of the dollar liquidity on crypto markets is provided by dollar-pegged stablecoins. These fall into two groups: those that have actual dollars and/or dollar-denominated safe liquid assets backing them, and those that don’t. There aren’t enough of the former to enable everyone to cash out into real dollars, and there’s no guarantee that the latter can be cashed out into real dollars at all. So, in effect, the entire crypto industry is fractionally reserved.​

There’s now a race on to exchange cryptocurrencies for the few real dollars still available. As is always the case in unregulated markets, the law of the jungle applies. Those with the biggest teeth get the dollars. Perhaps “whales” is the wrong name for them. Crocodiles might be more like it.​

When everyone is trying to cash out cryptocurrencies into increasingly scarce dollars, cryptocurrency prices rapidly fall to the level at which there are sufficient dollars in the system for everyone to be able to cash out. For derivatives and synthetics, that probably means zero. After all, if the underlying assets are falling rapidly in price, who is going to want the derivatives? And synthetics are, as their name suggests, not real. When there’s a flight to reality, unreal things are worthless.​


I hope so GPU's are expensive as shit because of crypto mining.
 

Votto

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I feel so sorry for them
1657033285796.png


Not everyone is sad about the economic misery we all face

After all, Big Oil and Putin are to blame

Besides, January 6th and Roe vs Wade
 

rightwinger

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Votto

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