News Largest Bitcoin Miners See $1 Billion Wiped From Value

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gg83

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Hey, thanks for the numbers and prospective! If they lost $1 billion, how much did they make overall? " Mining profitability, measured in dollars per terahash per second, peaked in 2017 at $3.39/TH/s. Today it sits at around ten cents/TH/s, having been at 41 cents in 2021. " this is a really interesting metric
 

edzieba

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Slowly going the way of over-leveraged banks as more people feel like crypto may end with a bank run type scenario.
A bank run is made possible because the majority of banks are fractional-reserve: they do not actually hold 100% of the funds you have 'stored' by them (e.g. if they have 1000 customers with accounts of $1000 each, the bank does not have $1,000,000 on hand, but has maybe $100,000 available and $900,000 invested elsewhere). This works right up until all customers want to withdraw all their cash, which is uncommon enough for fractional reserve banking to be the norm. If you think "that's just a Ponzi scheme!", well, welcome to modern banking, I guess. It works if you don't look too closely and nobody topples the scheme with any subprime lending crises or the like.
Cryptocurrency does not have this fractional reserve nature inherently, but individual companies that have taken cryptocurrency and then uses it elsewhere to make money. Hyperinflation is also not a possibility, as the vast majority of coins (including all the valuable ones) are either deflationary or have strong inflation controls as part of the protocol.
They are still vulnerable to regular old nobody-wants-to-buy-your-currency collapse , but that's an entirely different mechanism than a run on a bank. Bitcoin specifically is not vulnerable to the same manner of currency crises that have affected national currencies, but that does not mean it is vulnerable to entirely new and interesting (in the Confucian sense) ones.
It's status as a value intermediary rather than a value store - people think about "what USD is x BTC worth?" when transacting it, rather than "what is what I'm buying worth in BTC?" - further complicates things. If transaction transiency is short enough and valuation flux slow enough, the BTC network can function just as well at "1 BTC is worth 1 cent" and "1 BTC is worth $1 million". That's no consolation to those who try and use it as a value store, though.
Analogies with previous currency crises are not necessarily applicable, so pretty much the most accurate prediction that can be made is "it'll go up and down in value some more, just as it has for the last decade".
 
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A bank run is made possible because the majority of banks are fractional-reserve: they do not actually hold 100% of the funds you have 'stored' by them (e.g. if they have 1000 customers with accounts of $1000 each, the bank does not have $1,000,000 on hand, but has maybe $100,000 available and $900,000 invested elsewhere). This works right up until all customers want to withdraw all their cash, which is uncommon enough for fractional reserve banking to be the norm. If you think "that's just a Ponzi scheme!", well, welcome to modern banking, I guess. It works if you don't look too closely and nobody topples the scheme with any subprime lending crises or the like.
Cryptocurrency does not have this fractional reserve nature inherently, but individual companies that have taken cryptocurrency and then uses it elsewhere to make money. Hyperinflation is also not a possibility, as the vast majority of coins (including all the valuable ones) are either deflationary or have strong inflation controls as part of the protocol.
They are still vulnerable to regular old nobody-wants-to-buy-your-currency collapse , but that's an entirely different mechanism than a run on a bank. Bitcoin specifically is not vulnerable to the same manner of currency crises that have affected national currencies, but that does not mean it is vulnerable to entirely new and interesting (in the Confucian sense) ones.
It's status as a value intermediary rather than a value store - people think about "what USD is x BTC worth?" when transacting it, rather than "what is what I'm buying worth in BTC?" - further complicates things. If transaction transiency is short enough and valuation flux slow enough, the BTC network can function just as well at "1 BTC is worth 1 cent" and "1 BTC is worth $1 million". That's no consolation to those who try and use it as a value store, though.
Analogies with previous currency crises are not necessarily applicable, so pretty much the most accurate prediction that can be made is "it'll go up and down in value some more, just as it has for the last decade".
Your takes on how Banks operate is just not correct and it varies from Country to Country, which is what crytpo stuff doesn't have: legislation and consumer protection.

Banks in several places outside of the USA can't have a situation where they can't pay their clients if they all come to collect (it's called "provisioning"; edit: I got the term wrong as provisioning is for lending so they don't default, but same-ish principle) and they have different types of accounts as well which operate with different protection. That's not even taking into account insurance and other optional mechanisms you can opt-in into or are State backed. If the Banks in the USA work in such a way that clients can get screwed, that's a problem specific to the USA, sorry.

Regards.
 
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InvalidError

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They are still vulnerable to regular old nobody-wants-to-buy-your-currency collapse , but that's an entirely different mechanism than a run on a bank.
It looks fundamentally the same to me: if a large enough number of people attempt to cash out of crypto at the same time, the value crashes, prompts more people to cash out before it gets even worse and the whole thing effectively becomes insolvent: you have millions of coins likely acquired at a substantial personal cost still in people's hands but nobody left willing to buy them for any meaningful amount of money.

The responsibilities and liabilities may get shuffled around but the main consequence is still the same: can't get your money back.
 

TJ Hooker

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It looks fundamentally the same to me: if a large enough number of people attempt to cash out of crypto at the same time, the value crashes, prompts more people to cash out before it gets even worse and the whole thing effectively becomes insolvent: you have millions of coins likely acquired at a substantial personal cost still in people's hands but nobody left willing to buy them for any meaningful amount of money.

The responsibilities and liabilities may get shuffled around but the main consequence is still the same: can't get your money back.
I'm going to have to agree with edzieba, what you're describing is completely different than a bank run. The situation you're describing involves an asset's value dropping dramatically/going to zero (i.e. selloff or collapse). In the case of a bank run, the asset is cash, and bank runs do not collapse the value of cash. Quite the opposite, the value of cash would, if anything, increase in a bank run scenario. A bank run occurs when demand outstrips supply of the asset (i.e. cash), a selloff occurs when supply outstrips demand (or demand disappears entirely, resulting in a complete price collapse).
 

TJ Hooker

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Mining profitability, measured in dollars per terahash per second, peaked in 2017 at $3.39/TH/s. Today it sits at around ten cents/TH/s, having been at 41 cents in 2021. " this is a really interesting metric
Indeed, although it doesn't quite paint the complete picture, as you'd also have to look at how the price of a TH/s worth of mining capacity has varied over the years (both in terms of upfront costs, and operating expenses i.e. power consumption).
 
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Wimpers

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Your takes on how Banks operate is just not correct and it varies from Country to Country, which is what crytpo stuff doesn't have: legislation and consumer protection.

Banks in several places outside of the USA can't have a situation where they can't pay their clients if they all come to collect (it's called "provisioning"; edit: I got the term wrong as provisioning is for lending so they don't default, but same-ish principle) and they have different types of accounts as well which operate with different protection. That's not even taking into account insurance and other optional mechanisms you can opt-in into or are State backed. If the Banks in the USA work in such a way that clients can get screwed, that's a problem specific to the USA, sorry.

Regards.
Yours is not entirely correct either... Most banks worldwide work as the example given by @edzieba , they're only required by law to have 1% of the deposits in assets in the Euro-zone, in 2012 it still was still 2%. This policy is dictated to them by the European central bank, and in the beginning of 2016 it was good for € 113 billion, way too low in any way. Most of the banks also can put that money in real estate instead of keeping the money in an account so that most of the times this will result in very luxurious (thus expensive) banking HQ's and the likes but when there is a global crisis like in 2008 no-one will want to buy those so they're actually quite useless but another unfair advantage obtained by lobbying.
Belgian law stipulates that each consumer's (not each account) savings and the likes is guaranteed up to 100,000 euros per bank but a maximum compensation of EUR 20,000 applies to securities (such as shares and bonds), so once again the regular consumer gets shafted by the banks and governments. Banks are insured but sometimes the insurers also go bankrupt and then you get nothing. But most of the times central banks make money out of thin air by printing billions per month and loan those to the banks in trouble via the governments and their nation banks.

This is also an interesting thing that kinda made the stuff I explained above possible by deregulation and having consumer banks merge with their commercial counterpart in one entity: https://en.wikipedia.org/wiki/Glass–Steagall_legislation

Basically the same '1% cash reserve' law will be in place but commercial banks take a lot of risks with their investments and it's about a lot more money via fiscal magic and bookkeeping tricks borderlining illegality that sometimes just is an elaborate Ponzi scheme but so complicated at times even the regulators don't understand it but via lobbying the banks get it approved and legal and if the stock market crashes the commercial bank can default while taking all the normal consumers like you and me with them.

So basically consumers are always screwed, even whole countries can almost go bankrupt by investing in such too good to be true scenario's like Greece did.
Too big to fail is a bitch, the banks and pokering investors know they'll always get saved because (most) governments will not let 95% population lose all they have because of this.

I worked in IT for the biggest bank in Belgium, I started literally at the beginning of the financial crisis. A lot of commercial anti-fraud and money laundering IT projects were put on hold perpetually or just cancelled yet top bankers still got their bonuses from ECB bail out money. I quit a few years later and since then I'm pretty disgusted by what banks and the likes can get away with, they're a bunch of greedy bastards.

EDIT: My words are not cold and out minister of finance has asked banks here to put 1,4 billion extra in the cash reserve and already banks are bitching about it like that it could weaken the economy. Apparently we have 334,7 billion euros in deposits covered, 1.8% of that is about 6 billion. So the banks would have to chip 1,4 billion extra to get to that amount yet already claim it's not fair. Yuck... Happy translating: https://www.tijd.be/ondernemen/banken/van-peteghem-wil-1-4-miljard-euro-extra-van-banken/10407948
 
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willgart

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they LOST ????
no, they earning dropped.
they did not lost.
or they invest in GPUs etc... + electricity for more than 1 billions $ in 1 quarter...

also if they were able to sold 14 600 BTC... this means they have a lot of BTC in reserve.
so no I do not see any lost for them.
just less revenues than expected.
 
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Yours is not entirely correct either... Most banks worldwide work as the example given by @edzieba , they're only required by law to have 1% of the deposits in assets in the Euro-zone, in 2012 it still was still 2%. This policy is dictated to them by the European central bank, and in the beginning of 2016 it was good for € 113 billion, way too low in any way. Most of the banks also can put that money in real estate instead of keeping the money in an account so that most of the times this will result in very luxurious (thus expensive) banking HQ's and the likes but when there is a global crisis like in 2008 no-one will want to buy those so they're actually quite useless but another unfair advantage obtained by lobbying.
Belgian law stipulates that each consumer's (not each account) savings and the likes is guaranteed up to 100,000 euros per bank but a maximum compensation of EUR 20,000 applies to securities (such as shares and bonds), so once again the regular consumer gets shafted by the banks and governments. Banks are insured but sometimes the insurers also go bankrupt and then you get nothing. But most of the times central banks make money out of thin air by printing billions per month and loan those to the banks in trouble via the governments and their nation banks.

This is also an interesting thing that kinda made the stuff I explained above possible by deregulation and having consumer banks merge with their commercial counterpart in one entity: https://en.wikipedia.org/wiki/Glass–Steagall_legislation

Basically the same '1% cash reserve' law will be in place but commercial banks take a lot of risks with their investments and it's about a lot more money via fiscal magic and bookkeeping tricks borderlining illegality that sometimes just is an elaborate Ponzi scheme but so complicated at times even the regulators don't understand it but via lobbying the banks get it approved and legal and if the stock market crashes the commercial bank can default while taking all the normal consumers like you and me with them.

So basically consumers are always screwed, even whole countries can almost go bankrupt by investing in such too good to be true scenario's like Greece did.
Too big to fail is a bitch, the banks and pokering investors know they'll always get saved because (most) governments will not let 95% population lose all they have because of this.

I worked in IT for the biggest bank in Belgium, I started literally at the beginning of the financial crisis. A lot of commercial anti-fraud and money laundering IT projects were put on hold perpetually or just cancelled yet top bankers still got their bonuses from ECB bail out money. I quit a few years later and since then I'm pretty disgusted by what banks and the likes can get away with, they're a bunch of greedy bastards.
I worked for Santander and now I work for an even bigger conglomerate that deals with financial data, so I also remember all the innards around the globe for it, that's why I'm not putting all legislation under the same umbrella. Different world regions have different legislation for Banks. Some are better than others, sure, but the point is they do offer minimal protection to consumers whereas no crypto-lender/wallet has any equivalent or better offerings and are not regulated on their trade either.

Crypto is a dry reminder of "just treat it like gambling" in the commodity trade. Anyone going into it has zero security or legislation protecting them from anything. You are literally handing whatever value your crypto has to these online wallets with zero backing from the law. This is the equivalent of giving a stranger your money and hoping they don't steal it. Banks have several years of legislation built on top to not make them a gamble when you give them your money. Sure, it's not super perfect and there's a little bit of risk, but come on. They're not even on the same page in terms of risk and volatility.

Also, here in the UK we have an £85K cap on automatically insured money backed by law. Anything above that you can insure privately.

Regards.
 
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This creates a very interesting tax problem. When calculating gain/loss on an asset like crypto, how do you honestly determine that value for taxes IF YOU MINED IT and created it from nothing?

So lets say you created a new coin entirely from mining. And on that day the coin was worth $25K. Is that $25K in capital gains? You can deduct electrical and infrastructure cost. But it creates quite a problem.

I don't think legally you can count it as a "loss". If you hold an asset and you paid $1000 for it, but it's only worth $100 now, that's an unrealized loss of $900. But you can't claim it on taxes as a loss because you haven't sold it. Now if you sell it after you bought it for $1000, and you sold it for $100, then that is a valid realized loss, for which you can take a write off. But since it's mined, and you created it from nothing, how do you claim it's a loss unless you know the amount of $ you put into mining it? If I put $200 in electricity + hardware into it, and it's worth $100 then that's a realized loss of $100. However if that coin is worth $500 and you only put $200 into that coin, that means you still have $300 in capital gains.

That's a VERY tricky math and likely to get you scrutinized by 85,000 new IRS agents whose soul purpose is to look for tax cheaters.
 
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This creates a very interesting tax problem. When calculating gain/loss on an asset like crypto, how do you honestly determine that value for taxes IF YOU MINED IT and created it from nothing?

So lets say you created a new coin entirely from mining. And on that day the coin was worth $25K. Is that $25K in capital gains? You can deduct electrical and infrastructure cost. But it creates quite a problem.

I don't think legally you can count it as a "loss". If you hold an asset and you paid $1000 for it, but it's only worth $100 now, that's an unrealized loss of $900. But you can't claim it on taxes as a loss because you haven't sold it. Now if you sell it after you bought it for $1000, and you sold it for $100, then that is a valid realized loss, for which you can take a write off. But since it's mined, and you created it from nothing, how do you claim it's a loss unless you know the amount of $ you put into mining it? If I put $200 in electricity + hardware into it, and it's worth $100 then that's a realized loss of $100. However if that coin is worth $500 and you only put $200 into that coin, that means you still have $300 in capital gains.

That's a VERY tricky math and likely to get you scrutinized by 85,000 new IRS agents whose soul purpose is to look for tax cheaters.
As you mention, taxes only apply when money moves (or "changes hands"), so it's not a hard thing to tax. Problem is, much like with all intangibles assets, you can only tax when you turn them to something that is taxable. Whenever you move in crypto, you're "tax free", much like if you were trading in postcards, until you want to convert them into regular currency that is taxed.

So, for accounting (GAAP) you have to turn everything into regular currency and then you see what you have to pay in taxes. Also, as I remember, for intangibles, the converted value is at the moment and you put everything else into depreciation. My accounting is a bit rusty, but I'm sure it's not off the mark.

Regards.
 
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As you mention, taxes only apply when money moves (or "changes hands"), so it's not a hard thing to tax. Problem is, much like with all intangibles assets, you can only tax when you turn them to something that is taxable. Whenever you move in crypto, you're "tax free", much like if you were trading in postcards, until you want to convert them into regular currency that is taxed.

So, for accounting (GAAP) you have to turn everything into regular currency and then you see what you have to pay in taxes. Also, as I remember, for intangibles, the converted value is at the moment and you put everything else into depreciation. My accounting is a bit rusty, but I'm sure it's not off the mark.

Regards.
Thanks Fran
 
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Sleepy_Hollowed

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This is nothing but great news.

Reading around, there's an entire segment of "techies" and "finance bros" that are addicted to losing money and burning the planet and making video cards unavailable in the process.
 
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