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Bitcoin is emerging systemic risk: more and more people enter the market, the bubble may be getting bigger and bigger

Recent news reports make it clear that people who just invested in bitcoin do not know what bitcoin is.

Bitcoin is a big tool for trading.

Cryptophiles who love it do not care about money, they choose to hold bitcoin for a long time, so they are not afraid of bitcoin price fluctuations.

And these new people are different. The only reason they invest bitcoin is to make money. They are very afraid of price fluctuations.

When we think that every month, new and innocent lay people come into this industry at the rate of one million people, we should also understand that these lay people are better off than their perseverance, vulgarity, socialism, Ancestors of war are more susceptible to animal spirits.

They tend to sell.

For example, the impact on the system: Just as the trade in enforcement actions that are necessary and late may lead to a loss of confidence in the entire cryptocurrency ecosystem, which has not yet occurred on bitcoin Too

A recent article that I wrote on my blog points out that bitcoin, as a distributed bank, has also created an unreasonable expectation for new "depositors" who will forever be able to base their $ 200 billion market capitalization and new Investors' funds to cash in some of their assets can create huge mismatches - apparently a terrible figure.

Such expectations are dangerous, which means that in times of liquidity tightening, people do not behave as they did when stocks fell sharply, and more often held bitcoin long when the solvency of banks was questioned . Do you remember bank runs during the financial crisis?

Bitcoin Distributed Banks are running a part of the long-standing lack of dollars in the United States, so the impact is not only likely to lower the price of bitcoin, but may also lead to significant liquidity crunch and extreme panic.

Credit goes to cryptocurrency market

I wrote in the article:

"In the current environment, there are many things that can happen, and first of all, I'm very doubtful whether brokers and traders are capable of quickly adding dollars to catch the money that depositors and counterparties make from bitcoin. It is also possible that in a corrective event or law enforcement action, a bank that is risk averse will withdraw credit or banking services to key service providers and will not allow service providers to convert bitcoin to U.S. dollars, refrain from providing margin loans or even No legal deposit. "
I have a hunch that people will loan into this business. I just do not know how active the loan is.

Fortunately, I am reading CoinDesk and the report "Consensus: Investment Conference" this afternoon:

Dan Matuszewski, head of transaction at Circle Internet Financial, responded to these speakers during the morning panel discussion that there was "a really strong need for credit" on the market.He said credit is not only conducive to shorting, but also for the trading platform to provide working capital to open up the market.
At the same time Boonen B2C2 endorse Bitcoin is born for the irony of the 2008 subprime mortgage crisis
He said Bitcoin lovers really do not like credit, he added. But credit is still an important part of the normal functioning and flow of financial markets, both good and bad. '
Even before the agency invested, he noticed that the major exchanges had provided leverage to early retail investors. "

Therefore, some people directly enter the market for loans. We just do not know who will ultimately come from these credit lines and how much they do not know the liquidity of these credits.

There are other ways to sneak into the ecosystem: for example, Coinbase accepts credit cards, which are basic margin deals for aunt - no collateral at an annual interest rate of 20%.

There is no doubt that there is a systemic risk because there are quite a few people who seem interested in buying bitcoins in this way, and the platform is adding hundreds of thousands of users every week.

Then Bitfinex and Tether, I do not intend to discuss them, just to share the New York Times paragraph:

"One commentator, named after Bitfinex, wrote a few very detailed papers on Medium that Bitfinex seemed to create Tether out of thin air and use it to buy bitcoin and push prices up."
To put it simply, these emerging industry leaders are too young (or busy like California developers) to feel unaware of the financial crisis and hard to spot, successfully (a) allowing buyers to leverage Buying a coin - in some cases that will do the trick, or (b) persuading the agency to ease such one-way, unilateral, up to $ 300bn crazy deals and trying to convince more people to do so.

This can get serious

People have two kinds of reactions that may not necessarily be mutually exclusive to the huge bubble of 2017: one is looking for gloom and the other is extreme fear.

So far, the response from the mainstream financial community has been the former, and the Wall Street Journal has treated it more or less as a long-term joke.

However, while retirees attempt to show how stylish they are by being "close to the young" and "big coins," they are in fact exposed to many serious bubble risks (and the attendant social negative externalities) Worth further attention. At present, the nominal value of the cryptocurrency sector is about one-third the value of the long-term capital management company in the United States.

Admittedly, cryptocurrencies are much smaller than the subprime bubble that emerged ten years ago, two orders of magnitude larger than today's Bitcoin. However, Bitcoin has repeatedly, in less than 12 months, consistently increased orders of magnitude to refute the slanderers like myself. If you continue this way, it will be three times longer than the US long-term capital management company. The United States Long-Term Capital Management Company destroyed the world almost in 1998.

If we were not careful, this was a market where financial institutions could get into a very tight grip very quickly (imagine the risks of trading bitcoin contracts like Nick Leeson or Kweku Adoboli - and the upcoming CME and rumored Starkey).

Checks opened in the cryptocurrency market can not be cashed; most of these systems can not serve as the backbone of global finance. Investors on the streets were disillusioned and turned into a grumpy blockchain software entrepreneur like myself. This is just a matter of time. Only a newcomer knows what they are doing, and most of the older people who knew it were shut down for their own benefit.

In other words, a disaster is waiting to happen. Fortunately for us, 2008 is not an ancient history, bitcoin is a classic fanatic bubble, the fact has been so obvious, there are certainly people who have other solutions. There is no reason not to ignore the last society and taxpayers to bail out the financial services sector.

Refuse it

So, I beg you, banks, shadow banks and any other institution of systemic importance: For the benefit of everyone, I mean, for the good of all, to expel you of this trash and of any related things from you The balance sheet.

Just once, please understand, do not accumulate bubble financial assets in the bubble. What you have done so far has predictable laws, just as the European Central Bank can simulate it and write a 52-page document that is very interesting to read.

As a result, when regulators eventually bring the party to the bottom line of suffering, the rest of the ship will not sink with it.