Tether, the next FTX? Will it bring down the crypto market?

[LIBrty4all 3,749]

Not sure what you mean by "wind up"?

 

Elon is letting a LOT of people go in an attempt to increase profitability.  There was a HUGE amount of money being wasted by the company, it seems.

[seekingthetruth 1,238]

Here is a good article that I learned from, despite the complexity.

https://finance.yahoo.com/news/crypto-goes-zero-213727225.html

How crypto goes to zero

Wed, November 23, 2022 at 1:37 PM

 

 

If everyone stopped using it. That, in five words, is how crypto would go to zero. Still, the journey is more interesting than the destination. The death of ftx, an exchange declared bankrupt on November 11th after a spectacular blow-up, will encourage some people to turn their attention elsewhere. What would have to happen for everyone to give up?

An answer requires a sense of how the industry works. At crypto’s base are blockchains, like Bitcoin and Ethereum, which record transactions verified by computers, a process incentivised by the issuance of new tokens. The Ethereum blockchain validates lines of code, which has made it possible for people to issue their own tokens or build applications. These include stablecoins, which are pegged to real-world currencies, and tokens like Uniswap, which manage decentralised-finance (DeFi) protocols. Major chains and a handful of Ethereum-based tokens, like stablecoins, account for 90% of cryptocurrency value. Big businesses have been built on top of this world, including exchanges, investment funds and lending platforms.

To take out crypto entirely would require killing the underlying blockchain layers. They could either give way first, kicking the stool out from underneath everything else. Or the industry could unravel from the top down, layer by layer like a knitted scarf.

Knocking the stool out is extraordinarily hard, and the current high value of bitcoin and ether makes it even harder. To attack a blockchain and shut it down requires gaining 51% control of the computational power or value of tokens staked to verify transactions. The more valuable the tokens, the more energy it takes to attack a proof-of-work chain, like Bitcoin, and the more money to attack a proof-of-stake chain, like Ethereum. The security of these chains—as measured by the amount someone would have to spend to attack them—is now in the region of $5bn to $10bn. It would require either a government or an extraordinarily rich individual to mount such an attack. And even if Elon Musk was so inclined, he seems a little busy at present.

 

Unravelling is therefore the more conceivable path. The events of this year have revealed just how prone to this sort of thing crypto is. The implosion that seems to have set the chaos in motion is that of Terra-Luna, a decentralised stablecoin system, worth around $40bn at its peak. It collapsed in May, wiping $200bn off the market capitalisation of crypto. That led a few weeks later to the bankruptcy of several lending platforms and a hedge fund, events which wiped another $200bn off the market cap. The margin calls these platforms faced seem to have imperilled Alameda, the trading firm owned by Sam Bankman-Fried, and led to the decision to use ftx customer funds to plug the gap. When ftx failed, it wiped another $200bn off crypto’s market cap. Now other exchanges and lending platforms looks to be in trouble.

Beady-eyed readers will note that most of this stuff, apart from Terra-Luna, is in the “on top of” category and not actually on-chain tech. DeFi exchanges and lending protocols have continued to whir even as the enterprises more akin to normal businesses have imploded one by one. But the collapse of these enterprises could imperil the underlying tech by taking out chunks of its value, making the chains more exposed to would-be attackers and pushing miners or stakers to switch off their machines. The value of on-chain activity and tokens is self-reinforcing. The more people that use DeFi, the more valuable Ethereum becomes. The higher the price of ether, the higher the hurdle to attack the blockchain and the more confidence people will have that blockchains will endure. This also works in reverse. The more people shy away from crypto out of fear, the less secure it becomes.

The total market cap of cryptocurrencies is currently $820bn. That is 70% below the peak a year ago, but still high compared with most of crypto’s history. It is higher than at the start of last year, for instance, and any point before then, including the peak of the bull market in 2017. Many more layers—such as a major stablecoin, big businesses or perhaps other on-chain protocols—would have to unravel to take crypto’s value back to the levels at which it traded just three or four years ago. Crypto’s reputation has been undermined before. It has collapsed in value repeatedly throughout its lifetime. Although fewer people will use crypto as a result of the ftx collapse, it is very hard to imagine the number will be small enough to take its value to zero.

© 2022 The Economist Newspaper Limited. All rights reserved.

From The Economist, published under licence. The original content can be found on https://www.economist.com/finance-and-economics/2022/11/23/how-crypto-goes-to-zero

[Boiler 44,855]

There is no inherent value, based on 1 and 0, could as easily be tulip bulbs.

 

When it comes down to it perception is key.

[LIBrty4all 3,749]

1 hour ago, Boiler said:

There is no inherent value, based on 1 and 0, could as easily be tulip bulbs.

 

When it comes down to it perception is key.

But the USD is no different than crypto.  It's all based on a belief.

[TBoneTX 44,671]

17 hours ago, seekingthetruth said:

a good article

Indeed it is.

 

Here's a pleasant reminder to all about "fair use" (see both posts in the pinned thread in this forum):

https://www.visajourney.com/forums/topic/595604-posting-news-articles-and-tos-enforcement/

 

[Boiler 44,855]

9 hours ago, LIBrty4all said:

But the USD is no different than crypto.  It's all based on a belief.

USD is backed by a Government that has assets and most importantly the ability to raise funds through taxes etc.

 

And looking at the USD probably the strongest factor is that it is the best of a bad bunch and is seen by many others as a safe harbour. Or much safer anyway.

[seekingthetruth 1,238]

2 hours ago, TBoneTX said:

Indeed it is.

 

Here's a pleasant reminder to all about "fair use" (see both posts in the pinned thread in this forum):

https://www.visajourney.com/forums/topic/595604-posting-news-articles-and-tos-enforcement/

 

I get confused because another forum I am on insists you post the ENTIRE article and discourages including a link.  I suspect the moderator there had no idea about the legality of that.

[TBoneTX 44,671]

12 minutes ago, seekingthetruth said:

another forum I am on insists you post the ENTIRE article and discourages including a link

Better let them know!

[seekingthetruth 1,238]

6 minutes ago, TBoneTX said:

Better let them know!

Actually I have.  He ignores me. 

[LIBrty4all 3,749]

15 hours ago, seekingthetruth said:

I get confused because another forum I am on insists you post the ENTIRE article and discourages including a link.  I suspect the moderator there had no idea about the legality of that.

Honestly, I think "the legality" of that has diminished about 437.26% since the advent of the internet and social media.

[LIBrty4all 3,749]

16 hours ago, Boiler said:

USD is backed by a Government that has assets and most importantly the ability to raise funds through taxes etc.

 

And looking at the USD probably the strongest factor is that it is the best of a bad bunch and is seen by many others as a safe harbour. Or much safer anyway.

It's all backed by a "promise".  From people who prove constantly they are corrupt and are there mostly for themselves, not We The People.

And the more money that is printed (see: 1980-2020 but especially 2021 & 2022), the less value our $$ has.

[Ban Hammer 13,110]

editing to add the 2021 line:

2021

$14.0/

$2.8/

$17.1/

$23.2/

$237.9/

$122.9/

$1,769.3/

$0.3

/$2,187.5

Edited November 27, 2022 by Ban Hammer

[TBoneTX 44,671]

2 hours ago, LIBrty4all said:

the more money that is printed

Two years in, and I haven't seen one in-circulation currency note signed by Treas. Sec. Yellen.

She must've concentrated on the big bills only.

[LIBrty4all 3,749]

1 hour ago, TBoneTX said:

Two years in, and I haven't seen one in-circulation currency note signed by Treas. Sec. Yellen.

She must've concentrated on the big bills only.

I have seen quite a few LETS GO BRANDON bills though.