Crypto Carnage Continues As The Fed Warns Digital Currencies Could "Pose Serious Financial Stability Issues"

Tyler Durden's picture

Update: Bitcoin and Ethereum are holding at the lows of the day, but following ECB comments earlier (see below), The Fed's vice chariman of supervision, Randy Quarles, warns that digital currencies like bitcoin pose "serious financial stability issues" as they grow...

Today, the vast majority of our payments by volume and value are processed by regulated financial institutions. In the U.S. payment system, digital currencies are a niche product that sometimes garners large headlines.

 

While these digital currencies may not pose major concerns at their current levels of use, more serious financial stability issues may result if they achieve wide-scale usage.

Perhaps most ironic is Quarles' description of the 'drawbacks' of cryptocurrencies...

But from the standpoint of analysis, the "currency" or asset at the center of some of these systems is not backed by other secure assets, has no intrinsic value, is not the liability of a regulated banking institution, and in leading cases, is not the liability of any institution at all. Indeed, how to treat and define this new asset is complicated.

So because it's not backed by 'other secure assets' - analysing its value is complicated... like the dollar.

*  *  *

It's a bloodbath in cryptocurrency markets this morning...

 

Having bounced overnight to over $10,600, Bitcoin prices are tumbling once again as we approach the US equity market open...

 

Ethereum is down over 20%...

While there is no immediate catalyst, CoinDesk notes that ECB Vice President Vitor Constancio  - ever eager to talk citizens away from decentralized 'anything' - warned about the risks of investing in bitcoin at current valuations.

Speaking to CNBC, Vitor Constancio said developments in bitcoin's price make it "a speculative asset by definition," continuing: "Investors are taking that risk of buying at such high prices."

Even so, Constancio told CNBC that the ECB is not in a position to regulate the cryptocurrency, saying, "We don't have responsibility or even instruments that point to particular prices of particular assets, that is certainly not the role of central banks."

His comments echo those of ECB president Mario Draghi, who in September indicated that the central bank does not have the authority to regulate cryptocurrencies.

"It would actually not be in our powers to prohibit and regulate" bitcoin and other digital currencies, he said at the time.

However, on the more optimistic side, CoinTelegraph reports that Ronnie Moas has upped his End 2017 target for Bitcoin to $20,000.

Moas looks at Bitcoin as a whole, incorporating all the chain splits in his split-adjusted price is and considering the price of the forked Bitcoin chains alongside the original was $12,740 when Moas made his new prediction, $14,000 looked undervalued again.

$20,000 is a month away

Moas now puts the line in the sand at $20,000 for the split-adjusted price when the new year hits. Looking at how things have gone so far for Moas, a month is a long time, and perhaps $20,000 will be broken before that time.

Many pickers, investors and money movers have thrown their hats into the ring trying to hit the sweet spot of this volatile asset when it comes to prediction.

Tom Lee, rather conservatively, set a Bitcoin growth of 40 percent to happen by the middle of 2018. His prediction put him at $11,500. That prediction was made a week ago, and in that time Bitcoin topped at around $11,300.

Max Keiser has a much more bullish view, but over a longer time frame as the host of Russia Today’s Keiser Report believes that $100,000 Bitcoin is an eventuality.

Why split-adjusted?

Moas, as one of the most well-regarded stock pickers, is clearly in the Bitcoin game for its investment potential rather than the technology side which has seen different factions at war with each other. Some people are vehemently Bitcoin Cash supporters, and others true fans of the original chain.

Moas, however, with his investor’s hat on, sees that by buying Bitcoin he not only received free Bitcoin Cash, but also free Bitcoin Gold, and thus counts them together in his portfolio, urging others to d the same as a diversification strategy.

Bitcoin Diamond and the real gold

“I am raising my 2018 fork- and split-adjusted price target on Bitcoin from $14,000 to $20,000,” Moas explained. “The current price is $10,720 and the split-adjusted price is now $12,740 when factoring in Bitcoin Cash, Bitcoin Gold and Bitcoin Diamond.”

Bitcoin Diamond is another fork of the Bitcoin chain that went largely unnoticed. Its aim is to switch from proof-of-work to proof-of-stake after mining is completed - after just 10,000 blocks.

“Bitcoin is now up split-adjusted by 394 percent since my July 3 recommendation,” Moas went on.

 

“There is no way to justify Gold $7 tln at 40X Bitcoin ($180 bln). An argument can be made that Bitcoin will be equal to Gold within 10-15 years. I do not know how much Gold there is in the ground … I do not know how much Bitcoin there is.”

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dasein211's picture

Correction- yes finally. Tulips? Fuck no.

YUNOSELL's picture

Cryptovolatility is real

shamus001's picture

...Wait till Dec 10th. Then the REAL BLOODBATH begins!

D.T.Barnum's picture

wife's time of the month?

IH8OBAMA's picture

Tiptoe in the Tulips......

Looks like just about every crypto is down this morning except one that I noticed.

Tether is up a penny at $1.01 LOL

 

tmosley, quit crying in your beer and get in here and cheer up your coiner bretheren.

marysimmons's picture

So let me see... over the last year BTC goes from $746 to $1,1433, then has a 15% correction, the 6th 15% correction in that same period of time, and the BTC sky is falling?  BTC at $50K minimum this time next year, IMO.

 

The professor says BTC is a bubble and should be outlawed... LMAO!

https://mobile.twitter.com/business/status/935842470092447744/video/1

svayambhu108's picture

It is good that you can still get out pretty fast, whait what...

Gap Admirer's picture

Now look, peoples...

The inherent value of the electronic 1s and 0s produced in Mom's basement by the rare, open-source, freely available, crypto algorithms makes it not possible for crypto to go down. The virtually infinite uses for electronic 1s and 0s will force the value to be held and/or go to the moon. It is the LAW of supply and demand - infinite uses for 1s and 0s, almost, but not infinite supply of 1s and 0s. If you don't believe this you are anti-technology, a flat earther, a peanutz, jealous, not an argument, and a loser.

shitshitshit's picture

Exchanges are overloaded... looks like people are getting goxed now.

So, as I said in a previous thread: if you were a whale and your target prices would be reached, what would you do? -Liquidate and crash, then come back later to buy back at pennies on the dollar.

What's happening now?

 

Unreliable Narrator's picture

Comey reopenes HRC investigation days before the vote.  Why?

DoJ goes on a sex predator tear starting in January.  Why?

DoJ goes on an anti-MS-13 tear starting in January.  Why?

Trump interviews Mueller for a job he cannot legally hold days before appointment as special counsel.  Why?

Comey brings up pressure by Lynch in open session.  Why?

ChiTimes suggests Mueller is draining the swamp.  Why?

Bigger and bigger heads start rolling for sex stuff, long since buried.  Why?

Coinbase subpoenad to release big traders / owners.  Why?

Big traders suddenly cash in their BTC.  Why?

Zero_Ledge's picture

As I said yesterday, maybe this is the catalyst (via Bloomberg):

U.S. Magistrate Judge Jacqueline Scott Corley in San Francisco ruled that the tax agency’s demand for information isn’t overly intrusive. The price of bitcoin has been soaring and crossed $10,000 Tuesday.

With just 800 to 900 taxpayers reporting bitcoin gains from 2013 through 2015 in a period when more than 14,000 Coinbase users have either bought, sold, sent or received at least $20,000 worth of bitcoin, “many Coinbase users may not be reporting their bitcoin gains,” she wrote. “The IRS has a legitimate interest in investigating these taxpayers.”

BEND OVER, BITCHEZZZ !!!!!!!  HAHAHAHA!

Zero_Ledge's picture

Whoooole lotta peeps 'been whistling past the graveyard....

I'm betting the very rude awakening happens this year with so many more bitcoin "investors"

opport.knocks's picture

What is there to refute?

Has anyone ever bought a cup of coffee with Bitcoin other to just prove it can be done? It would be the slowest most expensive transaction on earth.

This a better, more useful video: https://youtu.be/nguMVr9YNuU

Crypto-payments with a value under $600 will not be required to be reported to the IRS for gains purposes.

Meat Hammer's picture

Taxation is theft.

-Captain Obvious

JimmyJones's picture

Its only a gain or a loss if you cash it in and transfer to you bank account.  Till then its not.  Till the Transfer back to your bank you don't poses it ( you really don' t poses it then either but that is another debate).

Giant Meteor's picture

Yes, yes, it is a bit amusing, Speaking as someone that doesn't know fuck all about "digital coin" and furthermore, could give even less than two shits one way or other, frankly, however, I am starting to really appreciate, and applaud all these digal coin cowboys, dip buyers, and bright siders. I say so with all the sincerity and regard, in much the same manner as voting for (Mr. it's all a humongous bubble folks, it's ALL a scam!) DJ TRUMP. In short, LET ALL DOUBT BE REMOVED, who run Bartertown. 

I'm surprised the ruling class, the money for nuttin crew has allowed these shenanagins to go on so long in the first place ! (yes that last bit was sarcasm for those wondering.) Anything, oh pray, anything, to divert, distract, obfuscate, but mostly to anesthetize like a black widow, right before dinner. War on this, war on that .. War on every fooking thing. Nothing by accident, nothing escapes notice. It's like one big junior high school science experiment, in a lifesize petrie dish. 

Come on in the waters fine !

The traps are set, ready to be sprung and anything that denies the greatest hopes, dreams and aspirations of tentacled moneychangers, the three- headed Hydras etc. demanding their cut, their vig money, will not, cannot be tolerated. Why if all this nonsense were to keep up folks might get the funny idea that they can just open up a lemonade stand any ole time they please, and without the proper license! 

Well certainly, we didn't arrive here by bus, nor from Kansas, yesterday. So I say,  Let all weak and strong hands be revealed, for better or for worse, so that maybe (and this may be the longest long shot) there may be something useful left in which to rebuild  .. Then again, maybe I'm just an ornery brokedown old bastard,  pissing on the nice parade as it passes on by .. ..

Either way ..

Demon Slayer's picture

With just 800 to 900 taxpayers reporting bitcoin gains from 2013 through 2015 in a period when more than 14,000 Coinbase users have either bought, sold, sent or received at least $20,000 worth of bitcoin.

They didn't gain anything...if you bought ten bitcoins 7 years ago and you have ten bitcoins now, you have gained nothing. You still have ten bitcoins. Some might say they gained buying power in US Dollars. No, the US Dollar lost value. Also, even if someone bought bitcoins 5 years ago, any bitcoin balance they have now, in the corrupt US Dollar, or secret fiat monetary system, would be considered an unrealized gain. If you bought Apple stock at $11.00, even if the price in $300 plus now, you owe no taxes on unrealized gains.
 
One more way to look at it, is that every transaction is a no profit transaction. If I trade you $5,000 for your car, or $25 for a haircut, there is no profit for anyone. The transactions are neutral. If I trade you 3 cans of soup for cutting my lawn..zero profit, zero gains.

What someone will give you for a bitcoin is what they believe is of equal value to it.
Period. No profit.

QueeroHedge's picture

Crypto carnage used to mean I lost 80% overnight, now I wake up to crypto carnage headlines yet prices are same as when I went to bed.

Buckaroo Banzai's picture

"Exchanges are overloaded... looks like people are getting goxed now."

Uh, no, only ONE exchange is overloaded-- Coinbase/GDX

Unlike 2014, when there was only one major crypto exchange (Mt. Gox), today there are literally dozens of major crypto exchanges worldwide, and hundreds of smaller ones.

 

tmosley's picture

The problem is that most of them trade in tethers, which, given their fraudulent nature, makes it de facto the same thing. Almost all of the exchanges will be effected by this. Those that survive will have a good reputation going forward.

silverserfer's picture

they will be "affected" by this moron. Oh sage one.

Buckaroo Banzai's picture

Tether trading volume represents a rounding error of all cryptocoin trading volume. Besides, anybody trades something of value for a tether gets what they deserve. It's an "asset" that can never be worth more than a dollar, but can definitely be worth a lot less.

Tethers are a clusterfuck, but you are making them into a much bigger problem than they actually are IMO.

ronin12's picture

What if they are creating tethers, buying crypto with them, selling crypto for real USD to then back the "tether"? 

If that is happening, is that not a problem?

 

 

Buckaroo Banzai's picture

Tether is just another kind of cryptocurrency. By your logic, anybody who creates a cryptocurrency, and uses it to buy other crypto, and then sell that crypto for dollars, is a problem.

I'm not a fan of Tethers, and the people who created them are clearly incompetent, but making them out to be behind some kind of huge BitCoin pump-and-dump scheme is pretty absurd. Remember that the tether/dollar pair trades openly on exchanges, so you can at least see what a tether is worth at any given time.

 

tmosley's picture

You really, REALLY need to read the Bitfinexed Twitter feed.

It is NOT a pump and dump scheme. They are printing tethers claiming they are backed by one dollar for each tether, while their user agreement clearly states that they are absolutely not redeemable. There is ZERO proof they have the dollars they claim to. It would be pallates of cash (they have no banking access, the entire reason for their adoption of tether).

Buckaroo Banzai's picture

Tethers aren't redeemable, the same way the ledger dollars in your checking account aren't redeemable. They are simply a liability that can be defaulted on.

11b40's picture

And Coinbase does not trade in tethers.  I has been running slow, but I managed to execute trades this mid-morning through that exchange.

Spaced Out's picture

"effected”

Fucking imbecile!

tmosley's picture

Wow, TWO trolls who have no better argument than a misspelling felt the need to comment about that.

God damn, I just don't know what I'm going to do with all this free headspace. Guess I need to start subletting.

lickspitler's picture

Go Mose .  Just wrong always wrong . Got the first move in BTC then got all clever clever.

Now you look like a total fucktard trying to hold up the big losing switch to Bcash with

all your desperate dribble.  You are wrong and left out... not an argument.

tmosley's picture

Funny you should point that out, because your post is not an argument.

shitshitshit's picture

wex was also down earlier on, and I haven't checked the rest

ThirteenthFloor's picture

When I was younger we called that dump and pump. That game’s obsolete - since banksters have a super wallet, filled with a no cost credit card (0 %), fifty get of jail cards, and a too big to fail membership card, who needs to dump and pump, it’s a no risk game - equities only go one way up.

As a bonus the Fed is a direct into the veins injection of the drug of choice (fiat).

MisterMousePotato's picture

Oh. So, in other words, some select few had advance knowledge (magic? telepathy?) on what position us.gov was going to take concerning cyptos?

Gorgeous's picture

Yes, you are.  Because "financial stability issues", aka "dollar price issues", is the new White.

TruthHunter's picture

Gee wiz wow! It really is different this time!

OTH, you could use your fingers to count the peeps in the Fed that understand it. Same in the government. This genie ain't going back in the bottle.

There is a perception of great opportunity among the thieving classes, though. Crypto is like a medieval castle with no army.

SILVERGEDDON's picture

That is called the " MOM ! WHERE'S MY MEAT LOAF !!! " effect. 

cowdiddly's picture

"All Fiat currencies eventually return to their intrinsic value which is ZERO."  Voltaire

and this be yet another one. nuff said

IH8OBAMA's picture

The quote of the Day!

 

11b40's picture

Eventually, we are all dead.