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Author Topic: Bitcoin vulnerability  (Read 1210 times)
DAN444
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March 21, 2013, 03:13:17 AM
 #1

Hi
I m trying to figure out how safe bitcoin is as an investment.
I found out that there are approx 11 million bitcoins in circulation.
Couldnt a central bank just purchase most of them and simply destroy them?
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DAN444
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March 21, 2013, 03:16:06 AM
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That would be awesome.
Because yours would be worth more?
But wouldnt the liquidity suffer tremendously?
Gator-hex
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March 21, 2013, 03:21:21 AM
 #3

21,000,000 x 8 decimal places.  Roll Eyes

It's a deflationary fractional currency.

21,000,000.00000001 BTC

The best way to destroy them is to crush the exchange rate with the Exchange Stabilization Fund. Which I expect them to do as soon as Wall Street gets hooked into it and creates a short derivative.

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March 21, 2013, 03:24:36 AM
 #4


That would be awesome.

Yes, Ben Bernanke, be our guest.

"The powers of financial capitalism had another far-reaching aim, nothing less than to create a world system of financial control in private hands able to dominate the political system of each country and the economy of the world as a whole. This system was to be controlled in a feudalist fashion by the central banks of the world acting in concert, by secret agreements arrived at in frequent meetings and conferences. The apex of the systems was to be the Bank for International Settlements in Basel, Switzerland, a private bank owned and controlled by the world's central banks which were themselves private corporations. Each central bank...sought to dominate its government by its ability to control Treasury loans, to manipulate foreign exchanges, to influence the level of economic activity in the country, and to influence cooperative politicians by subsequent economic rewards in the business world."

- Carroll Quigley, CFR member, mentor to Bill Clinton, from 'Tragedy And Hope'
DAN444
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March 21, 2013, 03:27:05 AM
 #5

21,000,000 x 8 decimal places.  Roll Eyes

It's a deflationary fractional currency.

21,000,000.00000001 BTC

I see.
Could a large financial institution discourage owning BTC simply by making it insanely volatile?
(Purchasing huge amounts then dumping them all etc..)
MoonShadow
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March 21, 2013, 03:41:17 AM
 #6

21,000,000 x 8 decimal places.  Roll Eyes

It's a deflationary fractional currency.

21,000,000.00000001 BTC

I see.
Could a large financial institution discourage owning BTC simply by making it insanely volatile?
(Purchasing huge amounts then dumping them all etc..)

Depends upon how much money that they were willing to lose.

"The powers of financial capitalism had another far-reaching aim, nothing less than to create a world system of financial control in private hands able to dominate the political system of each country and the economy of the world as a whole. This system was to be controlled in a feudalist fashion by the central banks of the world acting in concert, by secret agreements arrived at in frequent meetings and conferences. The apex of the systems was to be the Bank for International Settlements in Basel, Switzerland, a private bank owned and controlled by the world's central banks which were themselves private corporations. Each central bank...sought to dominate its government by its ability to control Treasury loans, to manipulate foreign exchanges, to influence the level of economic activity in the country, and to influence cooperative politicians by subsequent economic rewards in the business world."

- Carroll Quigley, CFR member, mentor to Bill Clinton, from 'Tragedy And Hope'
DAN444
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March 21, 2013, 03:43:28 AM
 #7

21,000,000 x 8 decimal places.  Roll Eyes

It's a deflationary fractional currency.

21,000,000.00000001 BTC

I see.
Could a large financial institution discourage owning BTC simply by making it insanely volatile?
(Purchasing huge amounts then dumping them all etc..)

Depends upon how much money that they were willing to lose.
People would be buying the dips?
MrClub
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March 21, 2013, 03:59:41 AM
 #8

Hey, a central bank's not getting mine!
DAN444
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March 21, 2013, 04:04:56 AM
 #9

Hey, a central bank's not getting mine!
Right. Since BTC is deflationary fractional, reducing BTC in circulation is not really an issue.
And if volatility is intentionally increased, it could be exploited by buying the dips I suppose
mzz
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March 21, 2013, 04:16:32 AM
 #10

21,000,000 x 8 decimal places.  Roll Eyes

It's a deflationary fractional currency.

21,000,000.00000001 BTC

I see.
Could a large financial institution discourage owning BTC simply by making it insanely volatile?
(Purchasing huge amounts then dumping them all etc..)

Depends upon how much money that they were willing to lose.

Your awesome quote just introduced me to a book I had never read. Thanks!
MoonShadow
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March 21, 2013, 04:37:06 AM
 #11

21,000,000 x 8 decimal places.  Roll Eyes

It's a deflationary fractional currency.

21,000,000.00000001 BTC

I see.
Could a large financial institution discourage owning BTC simply by making it insanely volatile?
(Purchasing huge amounts then dumping them all etc..)

Depends upon how much money that they were willing to lose.

Your awesome quote just introduced me to a book I had never read. Thanks!
Care to share? Cuz I wasn't quoting anyone on purpose.

"The powers of financial capitalism had another far-reaching aim, nothing less than to create a world system of financial control in private hands able to dominate the political system of each country and the economy of the world as a whole. This system was to be controlled in a feudalist fashion by the central banks of the world acting in concert, by secret agreements arrived at in frequent meetings and conferences. The apex of the systems was to be the Bank for International Settlements in Basel, Switzerland, a private bank owned and controlled by the world's central banks which were themselves private corporations. Each central bank...sought to dominate its government by its ability to control Treasury loans, to manipulate foreign exchanges, to influence the level of economic activity in the country, and to influence cooperative politicians by subsequent economic rewards in the business world."

- Carroll Quigley, CFR member, mentor to Bill Clinton, from 'Tragedy And Hope'
TradeFortress
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March 21, 2013, 04:48:03 AM
 #12

21,000,000 x 8 decimal places.  Roll Eyes

It's a deflationary fractional currency.

21,000,000.00000001 BTC

I see.
Could a large financial institution discourage owning BTC simply by making it insanely volatile?
(Purchasing huge amounts then dumping them all etc..)
Sure, but they'd have to purchase the huge amounts  first unless they start naked short selling on gox (in which case we stop using mtgox).
TradeFortress
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March 21, 2013, 04:48:33 AM
 #13

21,000,000 x 8 decimal places.  Roll Eyes

It's a deflationary fractional currency.

21,000,000.00000001 BTC

I see.
Could a large financial institution discourage owning BTC simply by making it insanely volatile?
(Purchasing huge amounts then dumping them all etc..)

Depends upon how much money that they were willing to lose.

Your awesome quote just introduced me to a book I had never read. Thanks!
Care to share? Cuz I wasn't quoting anyone on purpose.
Probably about your sig?
MoonShadow
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March 21, 2013, 04:50:19 AM
 #14

21,000,000 x 8 decimal places.  Roll Eyes

It's a deflationary fractional currency.

21,000,000.00000001 BTC

I see.
Could a large financial institution discourage owning BTC simply by making it insanely volatile?
(Purchasing huge amounts then dumping them all etc..)

Depends upon how much money that they were willing to lose.

Your awesome quote just introduced me to a book I had never read. Thanks!
Care to share? Cuz I wasn't quoting anyone on purpose.
Probably about your sig?

Oh, that one. Sure.

Want to see something disturbing?

enter "Depends upon how much money that they were willing to lose" into the google search box.

"The powers of financial capitalism had another far-reaching aim, nothing less than to create a world system of financial control in private hands able to dominate the political system of each country and the economy of the world as a whole. This system was to be controlled in a feudalist fashion by the central banks of the world acting in concert, by secret agreements arrived at in frequent meetings and conferences. The apex of the systems was to be the Bank for International Settlements in Basel, Switzerland, a private bank owned and controlled by the world's central banks which were themselves private corporations. Each central bank...sought to dominate its government by its ability to control Treasury loans, to manipulate foreign exchanges, to influence the level of economic activity in the country, and to influence cooperative politicians by subsequent economic rewards in the business world."

- Carroll Quigley, CFR member, mentor to Bill Clinton, from 'Tragedy And Hope'
MoonShadow
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March 21, 2013, 04:52:23 AM
 #15

21,000,000 x 8 decimal places.  Roll Eyes

It's a deflationary fractional currency.

21,000,000.00000001 BTC

I see.
Could a large financial institution discourage owning BTC simply by making it insanely volatile?
(Purchasing huge amounts then dumping them all etc..)
Sure, but they'd have to purchase the huge amounts  first unless they start naked short selling on gox (in which case we stop using mtgox).

MtGox will never permit naked shorts, as that puts them as the naked long.  That's a real quick way to go bankrupt in this market.

"The powers of financial capitalism had another far-reaching aim, nothing less than to create a world system of financial control in private hands able to dominate the political system of each country and the economy of the world as a whole. This system was to be controlled in a feudalist fashion by the central banks of the world acting in concert, by secret agreements arrived at in frequent meetings and conferences. The apex of the systems was to be the Bank for International Settlements in Basel, Switzerland, a private bank owned and controlled by the world's central banks which were themselves private corporations. Each central bank...sought to dominate its government by its ability to control Treasury loans, to manipulate foreign exchanges, to influence the level of economic activity in the country, and to influence cooperative politicians by subsequent economic rewards in the business world."

- Carroll Quigley, CFR member, mentor to Bill Clinton, from 'Tragedy And Hope'
bubblesort
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March 21, 2013, 06:20:25 AM
 #16

If you have bitcoin loans then you de facto have bitcoin short positions.  Investment sites that allow you to short by checking the box for 'short sell' rather than 'buy' is just a convenience.

The mechanism for short selling is to get a loan for say, 10 BTC, then use that to buy cash (say, $650 USD today), then when it's time to pay back the loan you buy 10 BTC at current market rates to pay back the loan.  If you pay the loan back a month from now and the price has dropped by $10 per BTC, then it would cost $550 to buy 10 BTC to pay back the loan, earning you $100 USD.

Of course, you have an interest rate on a loan, so if your interest rate on the 10 BTC is, say, 1% then you have to pay back 10.01 BTC, which would eat into your profits from a short position.  You want to take this into account when timing your purchase of BTC to cover your short position.  If a lot of people start to think that BTC is going to go down in value then demand for short positions will increase, which will increase the demand for BTC loans, which will increase the short term loan interest rate.

How many services are there for BTC loans?  In aggregate, how much BTC credit is really out there?  If there isn't much BTC credit out there and short selling picks up then it would be very profitable to be a seller of BTC credit, because as demand increases so do interest rates.

Dreadful
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March 21, 2013, 06:39:06 AM
 #17

Wouldn't that be a major waste of money? I mean buying something to destroy it when it will never be on their level.. seems counterproductive to me.  Huh
odolvlobo
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March 21, 2013, 07:13:12 AM
 #18

Wouldn't that be a major waste of money? I mean buying something to destroy it when it will never be on their level.. seems counterproductive to me.  Huh

We are talking about the U.S. Government. "Counterproductive" and "waste of money" are its primary characteristics.

Seriously, destroying BTC only makes it more valuable because it is more scarce. If you want to kill bitcoin, just constantly create bubbles and pop them. Nobody will trust it to retain any value.

Buy bitcoins with cash from somebody near you: LocalBitcoins
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bubblesort
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March 21, 2013, 08:14:35 AM
 #19

This has nothing to do with the US Government and nothing is destroyed.  If anything, it makes bitcoins circulate more, which is a good thing.

This also allows people to make money off of market movements whether the market goes up or down.  The lending institution makes money in the form of interest, the short seller makes money if the BTC value decreases.  If it doesn't then the short seller looses money, but the lender still gets their original investment plus interest.  On top of that, you can use the interest charged on short contracts as an indicator of optimism about BTC, which is pretty useful.

I don't see a downside to this at all.

Do you really think there are any investors out there who can build up the value of BTC, then short the market, then crash it and then cover their shorts when the market tanks?  If people like this do exist then bitcoins are insecure and should not be used.



Edit:  Oh, you were responding to the OP, not to me.  Sorry about that.  Some people have accused short sellers of 'destroying value' before, so I misread the two posts above this one, LOL.

GambitBTC
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March 21, 2013, 12:18:50 PM
 #20

Hi
I m trying to figure out how safe bitcoin is as an investment.
I found out that there are approx 11 million bitcoins in circulation.
Couldnt a central bank just purchase most of them and simply destroy them?

I wont sell mine.

As i am sure others wouldn't sell theirs, monopoly will NOT happen in the Bitcoin economy.

If BTC were to ever become centralized im buying pieces of sting and using them as currency instead.
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