Monitoring the Crypto Bubble

Where do you think we are in the crypto bubble?

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That article isn't much but it does make some decent points. It sounds like there's more than a few reasons to be concerned about tether and the potential tether has to impact the broader market.

* Tether doesn’t claim that its tokens are backed by fiat currency. It simply says its tokens “are 100% backed by Tether’s reserves,” which are defined so broadly that any asset could qualify.

*Coindesk recently described Tether as “a key piece of plumbing for the roughly $2 trillion global crypto market” because traders “use it to quickly transfer dollar value between exchanges to capture arbitrage opportunities.

*Approximately 65% of Tether tokens are held through the Chinese exchange Huobi, according to the crypto analysis firm Long Hash.

*Although there are almost 3.5 million addresses that hold Tether tokens, the top 10 addresses hold 24% and the top 100 hold 41% of all tokens. That could increase the risk of a run.
 
^ hard to defend those accusations, except that the crypto market is high risk, that's why its potential for reward is also so high.
 
tdtwedt said:
Anyone want to discuss the recent article in Bloomberg about Tether.

Says could wreck havoc on the crypto market.

I think it could...
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I've given this issue some more thought.

Could it wreak havoc? Possibly.

Is it likely? No.

The author Timothy Massad is really just suggesting a good old fashioned bank run. Investors holding USDT for whatever reason are spooked and dump all their Tether in exchange for USD. So it's a liquidity issue - and while it doesn't provide a sound argument in favour of that situation not occurring, the same problem faces currencies fully backed by commodities and our current fiat system. That is, a gold backed currency for example would have even greater liquidity concerns in the event holders dumped their gold backed and redeemed them for physical precious metals. That would take time, and in the unlikely event of it happening, desperate sellers would likely accept exchange values below whatever the official rate was, thereby essentially breaking the peg or the "back" of the value of the gold backed $.

Massad said:
Tether recently disclosed that as of March 31, only 8% of its assets were in cash, Treasury bills and “reverse repo notes.” Almost 50% was in commercial paper, but no detail was provided about its quality. “Fiduciary deposits” represented 18%. Even more troubling: 10% of total assets were in “corporate bonds, funds & precious metals,”
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https://www.bloomberg.com/opinion/a...s-like-tether-should-face-regulators-scrutiny

Central Banks recognise this and so they assume the role of "lender of last resort", fully backing our commercial banks and deposit taking institutions.

Why is it not likely? Simply because users have faith in the system, which is not really a cypherpunk trait. It's more a legacy mentality, an attribute of market players willing to take on some risk in exchange for reward. As George Calomiris, former (I think) chief economist of the Office of the Comptroller of Currency argued, faith is enough to give stability to the market and users of currencies. This is the line he takes when he goes on to argue in favour of algorithmic fractional reserve stablecoins as alternatives to government issued fiat.

Is there faith in the market? Yes. For two reasons. 1. As evidenced by the history, it's nearly 10 years old and despite a chequered past market participants still use it and 2. as argued by some the huge amount of volume sitting as "dry powder" in the form of stablecoins awaiting to be spent on cryptos, rather than being cashed out for USD.

Screen Shot 2021-06-02 at 7.17.31 am.png

Edited: for more current stablecoin data, the lower the ratio, the higher the aggregate supply of stablecoins
 
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Donald Trump has said bitcoin is a “scam against the dollar”
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Wow. I wonder if that had anything to do with the El Salvador declaration. Timing fits perfectly.

Sounds like someone is a bit insecure.... and considering how weak the USD is in comparison to BTC, it's not surprising.

He's right about one thing though... BTC is going after the USD.
 
if it drops another $7k to $12k and stablises around $20k to $25k I am buying couple bitcoins again and wait few months or few years for the next upwards cycle.

BTC is becoming more predictable. But if I miss this cycle there will be next one.

Speculate with cool heads.
 
The FUD cycle might be over with El Salvador hitting headlines this week. This weekend is going to be interesting. I'd be surprised if we don't test the $30-$40K range over the weekend.

Beware of false breakouts ;)
 
I guess it was inevitable.

Effectively a Credit Default Swap in the Crypto world? The decentralization of our financial instruments continues....
 
If you print stablecoins out of thin air and then buy Bitcoin aren't you creating fake demand?
 
tdtwedt said:
If you print stablecoins out of thin air and then buy Bitcoin aren't you creating fake demand?
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We've discussed this before.

When stablecoins are issued they are not new money that enters the system as they are backed by assets that are already in existence. Further, there is no correlation between the amount of stablecoins issued and the price of BTC. Sometimes the price of BTC goes up as more stablecoins are issued, sometimes the price of BTC falls as more stablecoins are issued. The number of stablecoins being issued is likely a result of demand for cryptocurrencies as they provide an on/offramp for many buyers, though purchasers of stablecoins may hold them rather than trade them in anticipation of the market moving higher - as is thought to be the case currently.

The various legislative bodies around the globe are involved in investigating how risk holding stablecoins and other crypto assets can be mitigated. Crypto assets are viewed as a similar asset to more traditional assets that banks and other institutions may hold, but as the market is is still in its infancy and constantly evolving, legislators and the BIS are investigating how best to design a prudential regulatory framework for the treatment of those crypto assets.
 
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