nrd525 Market Tracker

[exstasie]

Some nice correlation between the stock market (down approx 5.5%) and BTC (down 10%, and then up 3%) today. 

Very interesting indeed. I've been operating under the assumption that if/when the stock markets crash again that BTC will follow. The question is are we seeing the beginnings of that, or just short term chop?

I'm concerned what this VIX breakout means for stocks:



That last VIX rally in February-March was the big crash. Looks ominous to me.

[nrd525]

Can people in China have relatively easy access to convert their money (Yuan) into Tether?

Tether going from $4.6 billion market cap (March 29) to $9.2 billion (now) is a lot!

Any other idea who is using it?  There is probably growing lending with it, but not $4 billion worth.

[nrd525]

Sidenote: if anyone wants to put their statistics and/or strategic mind to work - I recommend AxisandAllies.org - and playing me (and others) in Axis and Allies Global 1940 Edition. You can play for free using free software (TripleA)!  The game is very challenging. Addmittedly there is a sharp learning curve, but it is a lot of fun (and our small community could use some more players).  It's like Chess with statistics (or 100x better than Risk).  I've been playing various editions of Axis and Allies for thirty years on and off. 

We have a small League that is pretty friendly!  So while I might be taking out your capital, I'll be nice about it =)

[exstasie]

Can people in China have relatively easy access to convert their money (Yuan) into Tether?

Tether going from $4.6 billion market cap (March 29) to $9.2 billion (now) is a lot!

Any other idea who is using it?  There is probably growing lending with it, but not $4 billion worth.

It's mainly China.

I found this informative: Chinese investors secretly buying Bitcoin helped fuel Tether’s $5 billion surge

The basic idea is, supposedly, Chinese speculators (including institutional investors) are increasingly entering the BTC market. Because of the ban on Bitcoin exchanges and the implicit ban on BTCCNY trading (it'll get your bank account closed), speculators buy USDT on the OTC market from brokers who source it from exchanges. Then they use it for trading. This is apparently why there is such deep liquidity on China-facing USDT exchanges like Binance and Huobi.

"Our key point is that 1) OTC is an enormous market in China—far bigger than people think, and that 2) USDT is the crux of that flow," said Matthew Graham, CEO of Beijing-based Sino Global Capital, which prepared the report for Decrypt this week.

Tether has added $5 billion worth of USDT into the cryptocurrency market since 2020, reaching a total market cap of $9 billion—10 times higher than any other stablecoin. The demand for much of that Tether is coming from—by some estimates—100,000 Chinese retail and institutional buyers who can’t access cryptocurrency market pairs otherwise.

“USDT is a very popular way for Chinese crypto investors to enter the market with most exchanges offering a range of OTC options,” the report noted.

Over the past year, the broker has seen a 300% surge in customer volume. This trend is, supposedly, typical at the half dozen major OTCs that serve China. And, according to Sino Captial’s report and Chainalysis data, this trend has only grown since trading bans have made Tether an indispensable cog in China’s Bitcoin trading machine.

Drawing on data from Morgan Stanley, Sino Capital asserts that, before the Chinese government started paying attention, CNY (and earlier, USD) was the preferred payment method in China for intrepid Bitcoiners. But as the government started clamping down, USDT quickly subsumed that volume.

Most of this trading is done via referrals and knowing-a-guy-who-knows-a-guy connections, according to the report.

I found this particularly interesting:

But if you think that the Tether-Bitcoin connection only drives up the price of BTC, that's not exactly true. While the USDT-BTC exchange does allow far more Chinese to buy and sell, “actually in our view USDT inflows are to some extent dampening bitcoin price appreciation,” Graham said. “For those whose primary purpose is to be ‘off the grid,’ it provides an alternate place to land and without the volatility. Previously the similarly motivated would have been more likely to buy bitcoin.”

[nrd525]

Is there a significant part of Chinese demand for Tether to avoid currency controls?

If not, maybe large corporations and rich people already have a good way of getting around them or maybe they aren't as serious as I thought they were.

...

Covid19 - it's interesting how what matters the most is the number of Actual Cases, not the number of positive tests.  If the models that are estimating cases are good (and I have no reason to believe they are not), those are the numbers we should be using to make decisions and the media should be focussed on those.  For instance, NY state peaked at an estimated 100k/cases per day.

https://covid19.healthdata.org/united-states-of-america/new-york

However it is safe to say that data scientists won't win the argument on this one, and we may see greater panic in the financial markets as the daily positive tests hit records in the US (50k+).  As with enough testing, and inadequate distancing - we could easily hit 100k/day.  Though so far the stock market and bitcoin are both holding strong.  It will be interesting to see if they hold up in the next two months.

...

Bitcoin search trend is down with June at a "14".  Though it might be the lack of price action. In March we had the crash, and in May we recovered to the pre-crash level.
https://trends.google.com/trends/explore?date=all&q=bitcoin

[exstasie]

Is there a significant part of Chinese demand for Tether to avoid currency controls?

So I've read, but Tether is still just a drop in the bucket compared to the overall market for capital flight.

However it is safe to say that data scientists won't win the argument on this one, and we may see greater panic in the financial markets as the daily positive tests hit records in the US (50k+).  As with enough testing, and inadequate distancing - we could easily hit 100k/day.  Though so far the stock market and bitcoin are both holding strong.  It will be interesting to see if they hold up in the next two months.

Do you think governors will bring back full blown lockdowns? I assume that'll send the markets tumbling.

Bitcoin search trend is down with June at a "14".  Though it might be the lack of price action.

Probably. I'm not too worried about it. Price action is everything.

First, investors and traders accumulate, then price gets marked up, and then retail no-coiners will start chasing the price. That's when Google trends kicks in.

[nrd525]

I think people are reluctant to do more lockdowns, and really we just need everyone to start wearing masks and that'd be enough to keep things at a non-crazy level.  I really don't know why the government isn't mass manufacturing n95s or even n100s -- or at least something better than these masks that people are wearing that are only 70% or less effective.  If you get someone to wear one of those it makes up for a person who doesn't wear a mask (something like 30% of the people in Philadelphia, maybe more).

I just learned about polymarket, in beta, using USDC on Ethereum. They have some interesting covid19 markets.  Has anyone tried them?
https://www.poly.market/markets/coronavirus

I think it's pretty clear that we'll have more measured cases in the US in Q3 than in Q2.  Not so sure about actual cases though, and thus deaths also might be lower in Q3. The verdict is still out on how many cases we'll get a day. Will we hit a 7 day average of 100k in about 3-5 weeks?  The trend is up and we're definitely going to have days that hit 80k-100k new cases.  But Fridays tend to have far more cases than the weekly average, so it is better to take a 7 day (or 14 day) average.

[exstasie]

I think people are reluctant to do more lockdowns, and really we just need everyone to start wearing masks and that'd be enough to keep things at a non-crazy level.

That's true, and it's working for Europe.

In the US, there are two problems with this approach. For one thing, a huge portion of Americans opposes wearing masks (almost as much as they oppose the idea of a getting a corona virus vaccine). Secondly, everybody is obviously against more lockdowns, but everything keeps going up. Infections, hospital cases, deaths. If this keeps up, more lockdowns are pretty much guaranteed, and Trump has no power to stop that.

And if the US starts locking down again, there will be another global demand shock. When America sneezes the world catches a cold, and all that.

[nrd525]

YFI offers a 600% APR and doesn't have a major use case. Providing liquidity?  That's what people thought Bitcoin Savings and Trust was doing!  At best it'd be worth a 20% APR.

What is the scam?
(Based on very little research it sure looks like one).

Sidenote: there is a bias towards the pro-scam/pro-ponzi arguments/people. As they have a lot of money to gain if they can get suckers to "invest".  But on the other hand there are very few incentives to take the opposing side as it is difficult to impossible to short the scams or to find people to take escrowed bets.  If you challenge a project for being a scam, you will be attacked much harder than the likely scammers.

[nrd525]

Looks like Covid19 cases (testing positive) in the US might have just peaked on Friday. Or it will peak this next week.

Estimated cases > tested positive. Nationally the real peak was in March/April due to the 100k/day cases in NY.  At least so far.

Not sure what Bitcoin is doing at 9700. I'm still bearish. It'll be interesting to see the US Q2 GDP number on Friday. Probably -25% (quarter on quarter, annualized), but could be as little as -15%.  I recently saw The Economist Intelligence Unit only predicting -8% - which is very weird (unless they aren't annualizing it, aka multiplying it by four, but their FAQ says they do annualize it).

If Trump sends troops into major US cities, he will spark a wave of unrest that might even dwarf the George Floyd uprisings (though probably not - it'd also be a lot more concentrated in major cities, whereas the George Floyd / BLM protests reached thousands of US communities, including some very small towns). It could also shake up the election either in his favor or Biden. Hard to say.   Nixon benefited in 1968 from riots, but now it is white people rioting.

[exstasie]

Looks like Covid19 cases (testing positive) in the US might have just peaked on Friday. Or it will peak this next week.

How do you figure that? California and Florida just surpassed New York in case totals. Between those two and Texas, Dr. Birx says we've got 3 New York style outbreaks on our hands now. Given the exponential nature of these things, I'd say it's impossible to predict a peak, especially at the national level.

Not sure what Bitcoin is doing at 9700. I'm still bearish.

Following the stock market up. What else? It's hard to fight the Fed.

It'll be interesting to see the US Q2 GDP number on Friday. Probably -25% (quarter on quarter, annualized), but could be as little as -15%.

I wouldn't be surprised if it hit the negative 30s either.

It's probably already priced in either way, just like the April jobs data was when everyone was predicting doomsday back then.

[nrd525]

Looks like the slope of total infected is getting less steep.  We hit 400k/day and are dropping.
https://covid19-projections.com/#current-us-projections

[nrd525]

It is crazy crypto pump time. BTC at 11.3k and rising.

[exstasie]

It is crazy crypto pump time. BTC at 11.3k and rising.

Have you finally given up your bearish bias then?

I was surprised you held onto it so long given your interest in DeFi. That market was awfully pumpy even before BTC broke out a couple days ago. In fact, I probably should have seen it as a sign of latent bullishness in the overall crypto market.

[nrd525]

What's the real use case for DEFI?  As a lender high rates are attractive, but I cannot understand why anyone would borrow at extremely high rates.  I don't know if this is just true for Celsius Network and Blockfi (more centralized finance than DEFI - I'm not using DEFI), but the borrowing rate only seems low if you exclude the cost of collateral. If you include the cost of collateral, your "1%" loan that has a 50% loan to value ratio is actually costing you 8.6% * 2 + 1% = 18.2%.  Not to mention the risk that you might lose all of your collateral!

This seems like it is a great idea for another bubble (lots of hype, anti-bank sentiment, etc). But will do almost nothing to help the unbanked. People are unbanked because they are poor.  Micro-loans work. Getting poor people to buy ETH doesn't work.

Cryptocurrency users tend to be rich, or at least upper-middle class. They can get loans for 2-4% APR with their house, or probably 5%-10% from a personal line of credit. If the users need money why would they want to deposit $200 of collateral to get $100 in loans?  They won't have the collateral to do this.

Previously, crypto was going to take on the multi-billion dollar remittances market where people often pay a 10% transaction fee to send money back home.  This didn't happen.

The major use case I can see is that 18.2% APR works when you are borrowing money to go long on a bubble.  Whether that bubble is Bitcoin or a DEFI token.  But when the bubble bursts...  A secondary use case is people who want to put all their money into crypto-currency, but don't want to sell to avoid capital gains taxes and need short-term money.  I think most of the people would be better off cutting their expenses (or reducing their crypto purchases) and maintaining a financial cushion in fiat, or using a credit line.

If you are borrowing USD (ex. to go long BTC) on Blockfi, and using BTC as collateral - you are losing 6.4% (from not lending out your BTC - assuming you are over the 5 BTC threshold, otherwise this is 12%!) and paying an interest rate of 9.75% + 2% origination fee.  So if you borrow for one year this is a rate of 18.15%.

[exstasie]

What's the real use case for DEFI?  As a lender high rates are attractive, but I cannot understand why anyone would borrow at extremely high rates.  I don't know if this is just true for Celsius Network and Blockfi (more centralized finance than DEFI - I'm not using DEFI), but the borrowing rate only seems low if you exclude the cost of collateral. If you include the cost of collateral, your "1%" loan that has a 50% loan to value ratio is actually costing you 8.6% * 2 + 1% = 18.2%.  Not to mention the risk that you might lose all of your collateral!

I can think of one reason: margin trading. You can use borrowed collateral on platforms like dYdX and get up to 5x leverage trading pairs like ETHDAI and ETHUSDC.

When sentiment gets really bullish on Bitmex, bulls pay insane interest rates on perpetual swaps. They were paying almost 0.08% every 8 hours on longs last week.

Anyway, that's just the lending aspect of DeFi, right? Isn't there other stuff being built, like prediction markets, synthetic assets, DEXs that are actually decentralized, and so on?

[nrd525]

I think articles like this just scream "SCAM".  While confusing me.
https://www.coindesk.com/defi-degens-gaming-ethereum-money-legos

Where is the money coming from for the yield farming? Is it mostly pump and dump extracting money from the losing bag holders?

The guy who runs the Box Mining youtube channel (more credible than most, but seems to lack cautionary judgement) is into this.

This fool thinks that you can lend out at 100% without it being 1000 times riskier than a bank (I'd estimate it is 10k times more risky, at least in the US).  But otherwise the article is half-decent.
https://www.forbes.com/sites/leeorshimron/2020/06/22/defi-yield-farmers-and-crypto-investors-are-raking-in-100-annualized-yields/#599276d35eb5

It seems like people are just discovering a new version of what has been around since 2012 when Bitcoinica let you lend funds.  Decentralized finance might be appealing to new people because 1) the centralized rates for ETH (and BTC) were historically very low - often < 1% APR on Bitfinex (though more recently they've been pretty good), 2) some of these opportunities were unavailable to US residents when Bitfinex stopped supporting US customers, 3) the hoopla around smart contracts and remaking the financial system attracts the dumb money.

[exstasie]

I think articles like this just scream "SCAM".  While confusing me.
https://www.coindesk.com/defi-degens-gaming-ethereum-money-legos

"Minimally viable monetary experiments." I like that.

“The longer it takes you to do due diligence in this cycle, the lower your alpha,” McKie told CoinDesk in a phone interview. “If you are clued in to play the game, play it. If not, sit out to the next one.”

That's how the altcoin game is played. It's 99.9% hype. Ride the wave and get out, or don't ride at all.

Where is the money coming from for the yield farming? Is it mostly pump and dump extracting money from the losing bag holders?

It's just a game of greater fools. Or hot potato, if you prefer. The money is coming from altcoin whales pumping + dumping, and get-rich-quick pump chasers, not sustainable long term investment.

[nrd525]

A good discussion on use cases for defi. In some countries (not the US) there are some tax advantages.
https://www.reddit.com/r/ethereum/comments/ce9qc0/is_defi_based_on_a_false_premise/

[exstasie]

A good discussion on use cases for defi. In some countries (not the US) there are some tax advantages.
https://www.reddit.com/r/ethereum/comments/ce9qc0/is_defi_based_on_a_false_premise/

Why not the US? The same use case (using loan over-collateralization as a way to avoid selling an asset) applies there too, doesn't it?

Coinbase is trying to capitalize on the DeFi craze too. You can lock up your BTC as collateral and borrow up to $20K against it now. https://www.coinbase.com/borrow