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100 sats \ 1 reply \ @Bell_curve 17 Jun 2024
There are growing concerns that paper Bitcoin, or Bitcoin IOUs issued by exchanges and institutions without holding the actual BTC, may be suppressing Bitcoin's price[1]. A few key points:
- Exchanges can sell paper Bitcoin without anyone noticing, as Bitcoin's blockchain is auditable but each exchange has its own internal accounting system[1].
- The FTX collapse revealed massive Bitcoin rehypothecation, with FTX having 80K BTC on their books but zero actual BTC, essentially increasing Bitcoin's supply issuance by 25% in 2022[1].
- Bitcoin ETFs have been buying record amounts of BTC since launching in 2023, but the price has remained flat, raising suspicions of price suppression[1].
- Centralized exchanges have no obligation to prove they hold the BTC they claim, and could be creating paper Bitcoin at will[1].
- The solution is for more Bitcoin to be held in self-custody by individuals to reduce the risk of paper Bitcoin and potential bank runs on exchanges[1].
However, some argue the ETFs are not directly impacting price due to arbitrage opportunities, and that long-term holder selling and miner selling are more likely factors[1]. Ultimately, the extent to which paper Bitcoin is suppressing prices remains unclear, but the risks highlight the importance of self-custody.
Sources
[1] The Hidden Hand: Is Paper Bitcoin Suppressing BTC Prices? | HackerNoon https://hackernoon.com/the-hidden-hand-is-paper-bitcoin-suppressing-btc-prices
[2] 600 Stories To Learn About Crypto - HackerNoon https://hackernoon.com/600-stories-to-learn-about-crypto
[3] HackerNoon - read, write and learn about any technology https://hackernoon.com
[4] Bitcoin ($BTC) Price, Wiki, Data and Crypto News | HackerNoon https://hackernoon.com/coins/BTC
[5] Technology Search Results for paper-bitcoin - HackerNoon https://hackernoon.com/tagged/paper-bitcoin
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0 sats \ 0 replies \ @eduardopro OP 17 Jun 2024
Decent summary.
Read the whole thing, though.
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21 sats \ 1 reply \ @freetx 17 Jun 2024
Anything is possible. However I seriously doubt it.
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Price of ETF is set from physical exchanges.
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Given that, how would paper shorting exert downward physical pressure on price?
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0 sats \ 0 replies \ @eduardopro OP 17 Jun 2024
The article covers all of that and more.
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