Ethereum crashed from $319 to 10c on GDAX after ‘multimillion dollar’ trade
cnbc.comIt takes two to tango.
A lot of people lost a lof money because they got margin called at ~$2 for a commodity that is worth ~$300.
https://twitter.com/elnygren/status/877660177406865408
On the other hand, a lot of people made a lot money since there are buy orders that wen through at less than 1% of the real price.
Wait, so basically I could create a buy order for $2, leave it sitting there, and wait until there is another crash [1]? If there is no crash, then nothing happens. For good measure, do it for every currency on the exchange.
Is there any risk or downside to this? Seems like buying a lottery ticket for free.
----
[1] ... or someboy fat-fingers an order - although I think in that case I think still the higher bidders would win, wouldn't they?
Is there any risk or downside to this?
A number of people with USD on deposit at Mt. Gox, who correctly understood Bitcoin's price to be unsustainably high and were waiting for the correction, are now 3+ years into waiting for a Japanese bankruptcy court to pay out their claims. They are, in the Bitcoin economy, the lucky ones -- the more common thing which happens when exchanges fail (which happens in 20%+ of exchange-years) is for all money (and things of more dubious value) to be lost.
This is different than in more traditional markets, where custody of assets is distinct from being an exchange (you don't wire money to the NYSE to trade there), custodians/brokers are regulated, individual accountholders are insured, and you generally don't have to have $2000 cash on deposit and locked up to keep an order for 1000 of Google at $2 on the books.
I feel like I have to say that professionals very much do have orders far outside the usual trading ranges for various things in the expectation that a fill against that order usually represents a quickly profitable mistake by a counterparty. A major portion of the reason that this is something professionals do and amateurs largely don't is because there do exist cases where orders get filled far away from the market and one's counterparty praises all the spirits of capitalism that someone else was being inattentive to the fundamentals at a time where being inattentive to the fundamentals is a poor decision.
They call this "catching a falling knife", or more charitably "buying the dip". The conventional wisdom was that you shouldn't do this, because if it crashes to below $2 that's more likely to be because it's worth $0 than because of a glitch, and you're more likely to lose your money. But it's absolutely something you can try, and I wish someone with serious backing would try - I suspect the conventional wisdom isn't true any more.
The conventional wisdom was for stocks, which are much higher volume, liquidity, etc, and aren't a newfangled math experiment.
I think with these coins it could be a decent bet that we'll see this happen again in the next year or two.
> The conventional wisdom was for stocks, which are much higher volume, liquidity, etc, and aren't a newfangled math experiment.
If anything that means the conventional wisdom should apply even more, no? It seems more likely that Ethereum would go all the way to zero than whichever company it was that traded at $.01 during the flash crash (Proctor & Gamble?)
The trades caused by the flashcrash of apple were halted and reversed.
A central institute isn't always bad
Whether reversing those trades was good is not at all clear-cut. Some argue it punished those who were willing to make markets during unstable conditions (because their profitable trades were cancelled and their loss-making hedges weren't), whereas such trading is something we ought to be encouraging.
Agreed. And these are speculative investments, not currencies.
The downside is that when you put in a limit buy the exchange puts your money into escrow until the order is cancelled or filled. Since a crash like that is unlikely to happen (first time on that exchange I believe) it just means you have money tied up when it could be put to better use
"unlikely"
Complexity fattens the tail. Ethereum must be one of the most complex things out there.
It's been live for 1 year on GDAX and then it went for a 3000x round trip. What does that tell you about odds?
It tells me that its a terrible investment decision and that I am better off at the blackjack table. At least casinos are regulated.
And they could reverse the trades and null them out on both sides. Just because the order gets filled doesn't means it'll complete. Until you get the asset, sell it, and get your cash out of there, you're still at risk.
Yes it's sometimes called a stink bid.
Lots of contexts where this kind of bidding is a good idea. E.g. after a really bad year you can expect big price swings around tax loss selling season (nov-dec), where people take out their frustration on their worst performers. Doesn't always work but if you've already identified a couple of trainwreck stocks that you think deserve a second chance, getting a stink bid filled for one or more of those stocks can make a very big difference later on.
Of course, the Ethereum flash crash is on a different level :-)
>>Timing the market
>Doesn't always work
Thats putting it lightly, you're describing some form of survivorship bias. If it were that reliable and simple the major active fund managers could score reliable index-beating returns just off of Nov-Dec.
As it turns out, rules like that don't work, which is why passive index funds inevitably win out over attempts to time the market.
"survivorship bias". Bullshit.
In the specific example I gave, I talked about putting in stink bids for burned down companies you already wanted anyway, during the 1 or 2 month window when its stock has a big chance of getting another kick in the teeth for simple fiscal reasons.
The cost for trying this is pretty much zero. The worst that can happen is that the price never hits the bid and then you have to be content with the regular price. If it does work, you may get an additional 30% or whatever discount on the company.
If the rest of the story doesn't work out, it won't be caused by the extra discount. So stink bids literally do help performance and active investors do put them in and a lot of them do suck for a lot of reasons and these tax loss selling waves do happen despite everyone knowing about it because they are caused by regulations.
"passive index funds inevitably win out over attempts to time the market" This is a totally different discussion, not about the chance and impact of getting a low bid filled, but about efficiency of markets and whether people who beat some chosen benchmark are lucky or skilled.
But maybe there is a relationship. Let me ask you this: do you think Wall Street has ever had a good idea (like ETFs) and didn't take it way too far? Like 3x inverse Venezuelan Beaver Cheese ETFs? If there is a demand for passive index funds, Wall Street will indulge. But to make a passive index fund you need an index. And so they have been puking up a whole circus of indexes. With some of these indexes, especially ones that involve small companies, I wonder what will happen during the next serious drawdown. And so we can get back to the subject of stink bids.
Of course. But there is tons of risk there. If you get hit on it's way to nothing you are out your $2 per coin.
Some exchanges do put price bands on some items. Also some exchanges have trading halts when certain price points get hit.
Not really, there are risks attached to it.
One of them already been pointed out - the counter-party risk. Not only can there be situation like Mt.GOX disappearing with people's money. The exchange can refuse to honor the order specially if they are the market makers.
Some brokers put a time limit on the trades. These are called Good till Cancelled (GTC) limit orders. Like Schwab has a 60 days limit for the GTC orders. I am not sure how the crypto currency exchanges work.
Yup. I did this once. I had $20 sitting on MtGox in a $1 buy order. Had a crash happened I would have picked up 20 bitcoins (which would now be worth around $50,000).
Instead MtGox disappeared, taking my money with them.
Over a long enough time period, the risk of any given crypto exchange being hacked approaches 1.
You risk your buy going through and the price never recovering to above $2.
If you bought 1000 ether at $2, you'd be out $2000. If it is a glitch and the price does recover, you've made about $340,000. (Sounds like a scenario out of a post from the sub-reddit /r/LateStageCapitalism, doesn't it!)
Of course if you do this on every exchange, you multiply your risk by the number of exchanges, and your reward probably only comes out of a single one of those exchanges, unless it is the real deal "flash-crash" coin-wide permanent glitch-out end-of-the-world everything's hosed and the price is never coming back, in which case you lost $2000·N which sounds a little worse.
The risk is if you buy and continues to fall to 0.02 cents and stays there.
"commodity" :)
exactly the same thing happened to me with Litecoin on GDAX.
They sold off my entire holdings for $0.01 - $0 after fees. At the time LTC was trading for something like $25/LTC.
It took about 3 weeks to get anything but an automated response from their support team.
This was the response:
"After further review, this sell was due to a margin call of your margin position on the LTC/BTC order book. A series of large sell orders were placed on the LTC/BTC order book on May 21, 2017 around 1am UTC causing a large price decline which triggered a margin call of your position when your maintenance margin ratio was exceeded.
The trading engine and margin call functioned as designed. The large price decline was due to the relatively low liquidity on the order book at that time."
They eventually refunded the coins.... but a couple of days later removed half of the refund with no explanation. I'm out of pocket by about $1200. I'm still waiting for a response from them on that one.
I don't see a reason why you should be refunded anything. As I understand it, you were margin long and you got margin called after someone dumped into a relatively low-liquidity market.
Waiting for a response? You were margin called, why did they refund you anything at all? The margin call did exactly what it's supposed to: mitigate the broker's exposure to your downside risk as it increases beyond your account size.
> They sold off my entire holdings for $0.01 - $0 after fees.
Why did you have such an order? I can understand a stop loss order at some small percentage of the original purchase price, because you still get something, but one that says "if this currency suddenly becomes worthless, give it away for $0.01" doesn't make any sense.
Sounds like a stop order without the limit.
https://en.wikipedia.org/wiki/Order_(exchange)#Stop_order
>When the stop price is reached, a stop order becomes a market order.
Market value was extremely low due to low liquidity.
This is a risk with stop orders that many investors aren't familiar with.
Was LTC trading for $25 on that exchange, at that moment? If some big dump wiped out the available buyers and it became illiquid then that may have been all they could do to meet the margin: sell at huge discounts over a huge number of trades such that fees become significant.
AIUI, the way margin buying works is, the first, second, and third priorities are repaying the broker, and the moment your collateral looks like it might not be enough they will dump everything without caution to get the money back, which can result in making stupid (in hindsight) trades.
With that said, I do have a hard time believing there were no buyers at a price closer to $25, so that definitely seems shady. But margin buying is playing with fire and I'd say it could have been a lot worse ...
It sounds like you lost a bet.
But he was promised 10x returns! Look at this graph!
That's OK, people investing in crypto currencies will either not see or dismiss stories like this in their pursuit of wealth.
I wish they would all crash and stay crashed so GPU prices will come down again ;-)
Ethereum mining will no longer require intense GPU work once Proof of Stake goes live https://en.wikipedia.org/wiki/Proof-of-stake
Now most miners are using ASIC instead of GPU.
There are no ASICS for ethereum and probably you will not benefit from them a lot more than from GPU becasue they use scrypt with 2GB+ tables instead of sha256 (like in bitcoin).
Which ASICs are for Ethereum? A quick search says GPUs are still popular?
There are no ASICs for Ethereum. It's currently impossible to get latest gen GPUs from any retailer, or for anything close to retail price on eBay, because there's a mad rush to get into Ether mining.
That's incredible, I remember when it was impossible to get ASIC miners from ButterflyLabs and we were all up in arms because of their inappropriate behavior. That was a niche vendor producing items that had basically no other uses.
GPU makers didn't sign up to build machines that print money. But it turns out when you do make machines that can print money, people tend to buy them at a rate faster than you can make them! Right away, whether or not you did it on purpose.
(I did get my ASIC Jalapeño miners from BFL before they were busted up, I did order more when they came around and offered to let everyone order more, and I still did manage to earn a pittance over and above my initial investment on both batches, regardless of the absolutely ridiculous production and shipping delays.)
Hah, I remember the BFL fiasco. When my Jalapeno arrived five months after ordering, I looked at the hashrate, etc, and turned right around and sold it for twice what I'd paid.
That's about what I made mining with it overall before the limit approached zero. Maybe twice what I paid *if you count cash dollar values only (keeping the BTC I spent would have obviously been a much better deal, if I held them til today!)
This worked better than it would have otherwise, because my employer had electricity priced into the rent at a flat rate, and told me he wouldn't mind if I threw these things into the server room.
(I got two early batch and four 10GHash later on for a total of about 50GHash. I don't remember exactly how long, but I am sure I waited a lot longer than 5 months.)
My recollection of how Bitcoin turned out indicates that most of those people will not make money. That, in fact, the simple rules of how markets work mean that most cannot make money, on several counts:
* Those with resources will have an edge, and will buy an optimal number of GPUs to get return before the price is driven down
* Anyone without resources will not be able to mine quickly enough to get a return before the price is driven down
* If the market were still lucrative, the GPU makers would not be selling all of their stock, which means it is a near certainty that either the GPU makers or someone with connections has already snapped up a healthy share
* Worse, the more lucrative it is, the more quickly ASIC makers will release ASICs which make those GPU investments all but worthless for mining.
All of this means that anyone contemplating whether they should get into mining already has their answer: "no".
> All of this means that anyone contemplating whether they should get into mining already has their answer: "no".
That certainly seems to be the consensus on the mining forums I'm following. /r/EtherMining is now inundated with people who lack the very basic skills needed to assemble a computer and run mining software, but are attracted to the prospect of free money. Many of those people also lack the ability to do basic arithmetic and the sense to realize that the only way they will turn a profit is if the USD value of ETH rises sharply -- and that if that happens they'd be better off in any case just buying ETH now instead of blowing $2000 - 3000 on equipment.
Curious. Is it at the point where the money earned is less than the cost of electricity, like bitcoin approached?
I'm not sure AMD has a corporate policy that makes it easy for them to just stop sales and start mining.
Your other points are fair, but they take time to catch up. Depending on how much you're buying the GPU for and your electricity price, it may make sense still. Also, another coin may become popular.
That's not quite accurate. You can get Nvidia stuff, sometimes at MSRP, sometimes a little over. It's the AMD hardware that's impossible to find.
Well no, actually. Good Nvidia cards are also nearly extinct, because they are actually still profitable for Ethereum mining. So when people couldn't find AMD cards, they settled for bying Nvidia.
Unlike the situation with Bitcoin a few years ago, Nvidia cards are ok for mining Ethereum (something like 40-50% lower hash rate than AMD, but still very much profitable).
That's true. The hashrate/$ and hashrate/watt for the AMD cards is much more favorable for Ether mining.
Huh? I saw several 1080s and 1080 TIs in stock at a local Microcenter in New York just two days ago. Which GPUs are specifically used for mining?
AMD Radeons are far more efficient than NVidias for the X11 hashing algorithm that Ethereum uses.
RX 480 and 580 are really popular AFAIK. In fact they can go over MSRP on secondary market
580s (~$300 MSRP) are selling for well over $500 on eBay today.
Remember this incident the next time someone on HN kvetches about how much money HFTs make "just" for providing liquidity.
Margin trading is inherently risky and even more so in the cryptocurrency market.
Remember the whale that hunted shorts and longs hours before the ETF rejection? If you do margin trading, you will get rekt sooner or later in this space.
There's the interesting technical side to cryptocurrencies but most people underestimate the entertainment factor.
How to turn 2.0003 million dollars into 3:
1- Have 1 million dollars in ETH
2- Place a buy order at a very low price
3- Place a sell order for the 1 million dollars in ETH you own
4- Have a partner fill that sell order
5- Watch the price topple down and your order from 2 get filled
That's not how exchanges typically work you don't get to choose who fills your order the exchange does.
But you can manipulate the markets in a similar way without a collaborator. It's called running the stops and is an old technique.
>That's not how exchanges typically work
They do if you work inside one. Just saying that people have done way more for way less money.
You can accuse the exchange of corruption that's a well worn technique!
Or it could be that this is immergent behavior that exists in all modern exchanges and it hit a population that wasn't prepared for it because of lack of sophistication.
Or:
1- Someone bought ETH for a ridiculously cheap price during the presale and forgot all about it (https://etherscan.io/address/0x7d551397f79a2988b064afd0efebe...)
2- Realised two years later how much it's worth
3- Decided to cash out having no prior experience of how stock/ForEx/crypto exchanges work, i.e. they were ignorant of the consequences of dumping that much ETH on one exchange in one go
4- Which then triggered a cascade of stop losses and margin calls.
The buy price did. Sell price stayed mostly unaffected.
Would that imply nothing was exchanged at 10 cents?
https://stocktwits.com/jdemasie/message/86641301
Edit: fuck that, check this out! 7200 ETH at 0.1 USD!! https://api.gdax.com/products/eth-usd/trades?after=6326580&l...
So the current "value" is around $300, but something fishy is going on, and the exchange is trading at $.10?
This does not build confidence.
Somebody placed a huge sell-order which crashed the price. This caused stop-loss and margin calls to be triggered, adding a huge amount of market order sells, which crashed the price to effectively zero (more sell orders than buy orders on the exchange).
Some lucky people (or the people who orchestrated the crash) snuck in some super low buy orders that got matched.
The price had recovered within a few minutes (once all the margin calls had executed). It just goes to show the risk of trading on margin
It seems likely that this was sharks taking advantage of some naive speculators. It wasn't even a lot of money for the finance world, and I bet they will made a tidy profit selling off all of that Ethereum they just bought.
One exchange had a big market sell order large enough to trigger enough margin calls and stop loss orders to create a cascade effect. It flashed to 10 cents for a few seconds. So the combination of volatility and careless traders created this situation as far as we know.
No. there was a market flood so the asking price went down to 10 cents for about 2 seconds.
That's not what the article says. It said that trades occurred at the crashed price (and that's the common definition of 'price' when covering trades)
He means the resting asks did not drop that low, only the resting bids.
The resting visible asks.
Clearly if the exchange matching engine was working properly there were asks that low (in the form of stops).
That's pretty typical in crashes.
Don't place market orders, you will get screwed sooner or later.
Even market orders on highly liquid, perfectly well-understood things like forex can bite you in the ass; see all the levered people who got wiped out when Switzerland dropped their peg to the Euro. Stop orders on cryptocurrency are just pure idiocy.
I'm not following why stop orders on Crypto are idiocy?
You'd want to buy low and sell high; stop orders will force you to sell low in case of a random large fluctuation; cryptocurrencies are much more prone to random large fluctuation than most other types of assets. Ergo, agreeing to stop orders on cryptocurrencies is more dangerous than for other assets and is likely to cause you to lose money.
GP probably means stop -> market orders. When the stop price is reached, the order converts to market.
Various brokers and exchanges offer more types of stop orders, such as stop -> limit, where you set a limit price, and your order becomes a limit order after the stop price is reached.
Of course crypto exchanges take forever to implement new order types, and I'm not sure any of them have stop -> limit.
Also, stop orders don't work in general in a slipping market because liquidity vanishes from the book.
Don't know about the other ones, but the biggest exchange for alts, poloniex, has stop-limit.
How is the Swiss franc gap up related to market orders?
It's not "related to", it's "illustrative of" the pitfalls of market orders. The point was that even in highly liquid markets (i.e. Swiss franc), you can have sudden gap moves and liquidity fluctuations and a market order will just match against whatever momentary, ridiculous price happens to be there.
I would note however that after the SNB event many exchanges and brokers busted the trades that were done at extremely off prices.
A post-gap market sell on a gap up can end up filling pre-gap buy orders. And pre-gap market buys can end up being filled by post-gap sells. So people end up selling for much less or buying for much more than expected.
I think you are agreeing with the parent?
Replying to someone doesn't necessarily mean disagreeing with them.
I disagree.
Meh. Flash crashes happen with big namebrand stocks too. The nice thing about flash crashes due to dumping is that they are self-punishing: whoever was dumb enough to dump that much ETH in a few seconds cost themselves a ton of money. A fool and his money are soon parted.
It was actually a cascade - the market sell brought it down to 224, but then there was a crush of margin calls and market stop loss orders, which triggered all the way down to 10 cents. Wish I was there to scoop some!
Yep, someone who bought ETH during the pre-sale cashed out (https://etherscan.io/address/0x7d551397f79a2988b064afd0efebe...) which then triggered the cascade.
Please stop spreading this misinformation. If you look at the transaction, the only thing that happened was using the safe split contract which essentially gives the owner equivalent ETC.
I don't think it was confirmed this was the person, or was it?
On reddit someone commented that this whale must have know what he was doing... So, in theory could dumping large amount of ETH could affect pricing of even larger amount enabling the whale to profit from this procedure?
it's called stop-loss hunting; this just happened on a grand scale.
Theoretically because literally everyone doing it got liquidated it probably won't happen again - people wont set up stop losses and gdax will probably introduce a circuit breaker.
The margin calls are what pissed everyone off, and exacerbated the crash.
It's even possible that the multi-million dollar trade wasn't an accident, and they put a bunch of buy orders in to hunt the margin traders.
Someone needs to teach them the concept of accumulation & distribution phases of trading!
So is there something like a limit order on ethereum? I'd like to place a $1 limit order & see if I catch anything.
Sure, most experienced people use limit orders. However, an event like this will likely not happen again for a few years, since people are adjusting their behavior now.
How can someone adjust to such behavior, apart of stopping to trade it.
The people who make stupid orders now have no money, whereas the people who don't kept their. Thus the market changes behaviour.
by lots of people hoping to replicate this and putting in lots of low bids that would cushion the next fall? :-)
Oh, wait, Ethereum is not a reliable financial resource? Now that's a surprise.
In the normal stock market, this is an action called Taking out the Stops. Market makers can know where stops are placed so they may sell some to get it to hit those prices and have stops automatically trigger
I want nothing more than for Ethereum market to crash and then the people who bought 10+ cards have to sell them and lose money. Then people will be able to get the card for a reasonable price.
"CNBC has been unable to verify the screenshot posted by DeMasie."
It just shows CNBC is not ready for the crypto world. The whole point is the trade info public and distributed.
There was a trade for 3809 as the screenshot shows but also other larger trades. At $.10, there was $2,592.33 in trades now worth ~$7.8M.
Here are the trades in question:
{"time":"2017-06-21T19:30:18.05Z","trade_id":6326580,"price":"0.10000000","size":"134.00000000","side":"buy"} > {"time":"2017-06-21T19:30:18.05Z","trade_id":6326579,"price":"0.10000000","size":"7203.30515953","side":"buy"} > {"time":"2017-06-21T19:30:18.05Z","trade_id":6326578,"price":"0.10000000","size":"801.00000000","side":"buy"} > {"time":"2017-06-21T19:30:18.05Z","trade_id":6326577,"price":"0.10000000","size":"5060.32727547","side":"buy"} > {"time":"2017-06-21T19:30:18.05Z","trade_id":6326576,"price":"0.10000000","size":"2.87731448","side":"buy"} > {"time":"2017-06-21T19:30:18.05Z","trade_id":6326575,"price":"0.10000000","size":"3809.73327491","side":"buy"} > {"time":"2017-06-21T19:30:18.05Z","trade_id":6326574,"price":"0.10000000","size":"2534.39163532","side":"buy"} > {"time":"2017-06-21T19:30:18.05Z","trade_id":6326573,"price":"0.10000000","size":"50.00000000","side":"buy"} > {"time":"2017-06-21T19:30:18.05Z","trade_id":6326572,"price":"0.10000000","size":"74.77560000","side":"buy"} > {"time":"2017-06-21T19:30:18.05Z","trade_id":6326571,"price":"0.10000000","size":"50.00000000","side":"buy"} > {"time":"2017-06-21T19:30:18.05Z","trade_id":6326570,"price":"0.12000000","size":"220.00047159","side":"buy"} > {"time":"2017-06-21T19:30:18.05Z","trade_id":6326569,"price":"0.12000000","size":"779.99952841","side":"buy"} > {"time":"2017-06-21T19:30:18.05Z","trade_id":6326568,"price":"0.12000000","size":"50.00000000","side":"buy"} > {"time":"2017-06-21T19:30:18.05Z","trade_id":6326567,"price":"0.15000000","size":"295.00000000","side":"buy"} > {"time":"2017-06-21T19:30:18.05Z","trade_id":6326566,"price":"0.15000000","size":"790.93796645","side":"buy"} > {"time":"2017-06-21T19:30:18.05Z","trade_id":6326565,"price":"0.15000000","size":"1728.30611742","side":"buy"} > {"time":"2017-06-21T19:30:18.05Z","trade_id":6326564,"price":"0.15000000","size":"480.75591613","side":"buy"} > {"time":"2017-06-21T19:30:18.05Z","trade_id":6326563,"price":"0.20000000","size":"0.20000000","side":"buy"}
The trades happen inside GDAX's own market (instead of Ethereum network transactions,) so they don't necessarily need to be public.
As posted, the trade data was available, I got it yesterday after this occurred.
I know, but they don't necessarily need to be public.
this is only "possible" because etherium has even less real value than btc.
btc still have intrinsic value as it is traded for chinese expating money, scared Venezuelans, American weekend drug users, etc.
etherium exists for the sole purpose of playing investing with btc. everyone I know who owns etherium bought after they decided to buy btc and got a price hike on their investment so they flip btc and etherium instead of btc and usd. because they see it as two things that ever goes up. ha.
this is the most perfect scenario for a pump and dump. intentional or not.
Today, yes, more people accept BTC for real-world goods than ETH. I, and most ETH holders, are betting that tomorrow that may not be the case. The strength of a cryptocurrency is the strength of it's platform, and Ethereum is basically Google to Bitcoins Yahoo, or Facebook to Myspace, take your pick.
The reason? It's an applications platform, not just a currency. It brings fundamental innovations in decentralized computing that means it can reach places Bitcoin never could. And when that happens, the utility (and price :) of ETH will match.
Events like this happen on currency exchanges as well.
So unless you are suggesting the Swiss national currency is also not as valuable as bitcoin your hypothesis doesn't hold up.
ethereum has 70% of the market cap of bitcoin.
it's worth more than bitcoin was worth ~3 months ago
market cap is worthless when we talk about fiat currency.
but ethereum/bitcoin aren't fiat currencies?
market cap is useful in that it shows the total value of the coin. Comparing the price of 1BTC to 1ETH doesn't make sense, but comparing their market cap does
> ethereum/bitcoin aren't fiat currencies
The alternatives to fiat money are commodity money, e.g. gold, or representative money, e.g. pieces of paper exchangeable for gold at a fixed rate. Cryptocurrencies are more similar to fiat money in terms of their value being a function of social agreement versus utility.
gcb0 isn't proposing that value should be measured in ETH per BTC. Sounds like they think the value of currency is in people using it for a medium of exchange--e.g., Oversatock.com accepting bitcoin makes bitcoin valuable.
"Useful" might be a better term, but it makes some sense to equate those two.
>but ethereum/bitcoin aren't fiat currencies?
Fiat currencies are created by fiat (legal declaration). No government created either, so no, they are not fiat currencies.
you can assume that the bitcoin/ethereum code-base are the modern/digital version of a legal declaration.
But I meant in the sense that they don't have intrinsic value like gold.
Well you cannot eat, drink or breath gold either... Gold is impossible to fake, but ETFs based on double-counted collateral and various other fixing fixes have made it a fool's errand to preserve capital with gold.
Well they have no intrinsic value like gold. And the code could be considered a legal framework that acts as a contract for how BTC/ETC are valued.
Well gold also has little intrinsic value. Of course, it has uses like in the manufacture of technology, but most gold is used for making useless shit into shiny useless shit. Crypto has uses, too though. Such as facilitating payments, DLT, etc.
All value is assigned. So, what then, besides traditional consensus, makes gold 'intrinsically valuable' without also making cryptocurrencies intrinsically valuable?
Bitcoins have intrinsic value until the hash is broken and gold has intrinsic value until we can make it from neutrons, protons and electrons