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From my perspective, watching the markets since 2013, the 2017 boom was caused by Ethereum. Before Bitcoin shot up, Ethereum had shot up from $8 in December 2016 to nearly $50 a couple months later.

Now, Ethereum is a novel innovation on blockchain tech. The smart contract hype was very real at the time. (For the record, I still think smart contracts have tremendous potential) ETH had navigated a fork, secured corporate alliances, setup several foundations to promote work and was starting to generate a lot excitement around projects like Augur, Ox, etc. Then on top of that, the ICO boom happened when several projects raised tens of millions of dollars. That caused a run on ETH.

ETH boomed and then BTC followed, at least for the 2017 boom. And then the speculators danced between altcoins, Tether, Bitcoin and ETH, trying to maximize their returns while paying little attention to fundamental adoption.

I think we've seen certain technologies take over markets very quickly in the past couple decades, like desktops and wifi and mobile and then smart phones and social media...that we've gotten used to rapid disruption in tech. However, with financial tech like blockchain and crypto, it necessitates slow adoption. Why is this? Because it's real money on the line. It's cool to move fast and break things when it's an app or a fitness tracker, but when it's significant amounts of money on the line, maturity, trust, and security are tantamount.

I still think blockchain will win in the long run against legacy tech. But it will be a slow disruption.

Bitcoin has smart contracts, and has for many years now. Ethereum's marketing for the phrase is kind of misleading.

Why the downvoting? Apparently a number of people haven't heard of Bitcoin Script, or are upset I pointed out this very factual item about Bitcoin? Seems somewhat odd.

Ethereum's smart contracts are obviously more developer friendly and easier to implement. Ethereum smart contracts are the go-to for dapps, despite having a significantly smaller userbase and market cap than bitcoin.

To say Bitcoin smart contracts are equal to Ethereum smart contracts would be akin to comparing Myspace to Facebook.

Bitcoin originated smart contracts, but they were severely limited due to a filter that was imposed. Arbitrary scrypt execution was seen as a security risk (despite not being Turing-complete), so a set of scrypt templates were whitelisted. I think all clients would accept blocks with any scrypt in them, but most pools would only accept transactions with the fixed templates.

Bitcoin does have enough flexibility to do trustless cross-chain trading though, so it's possible to do dapp logic in Eth and manipulate BTC funds indirectly. (IIRC)

And MySpace was better all around in objective terms, but facebook was dumbed down for mass appeal so it won out?
Discreet-log contracts are a miracle, but in the same way that a dancing bear is a miracle. There's no way they can compete with smart contracts on a platform designed with smart contracts in mind, at least on a technical level. (Maybe we'll all end up using discrete-log contracts and their descendants due to network effects, but I doubt it. Or maybe some richer zero-knowledge contract-enforcement scheme can be devised on bitcoin... Maybe.)
Ethereum as a platform has made many bad design decisions. It's not really suitable for a lot of things; including, well, things it was marketed for (unstoppable, uncensorable, scalable applications).
Bitcoin was literally designed with contracts (programs deciding transactions) in mind from its inception. Ethereum is just script kiddies piling JavaScript onto blockchain and calling it the greatest invention in human history.
Ethereum was responsible for the 2017 bubble, but not because it is useful or smart contracts are useful or blockchain is useful. It was ICOs/scams running on Ethereum. Everyone saw their friends getting rich from Bitcoin and wanted in on one of the supposedly Next Bitcoins.

Blockchain is just a database, a slow and expensive one at that. “Legacy” tech (like a RDBMS) is much more efficient, reliable, and cutting-edge than blockchain. The only benefit of a blockchain is censorship-resistance—not needing to rely on government or centralized third-parties because a swarm maintains consensus (the longest Merkle tree). Financial markets operate in broad daylight with real identities enforced by judges and men with guns. There is absolutely no use case for censorship-resistance in that space. It is a lose/lose. How is it even supposed to work? Bankers pay miners to secure a log of their transactions? Ok, say someone robs a bank. A banker calls in to report the loss; a block gets mined showing that money is lost. Why did you need a blockchain? Why not just trust the banker to update a RDBMS cluster since you're trusting the banker's word anyway? Blockchain only works for purely digital things...like Bitcoin.

Smart contracts also do not need censorship resistance. People get along fine with the current legal system at least for civil lawsuits.

You need a blockchain iff:

- The data you are representing are other data in the same tree, not entities outside the data structure (much less entities irl).

- You need censorship-resistance because you're Silk Road or Wikileaks or trying to overthrow your government.

- The data is publicly/www world accessible by parties who do not trust each other.

TL;DR A blockchain is a domain-specific data structure internal to the Bitcoin project circa 2009.

>Smart contracts also do not need censorship resistance. People get along fine with the current legal system at least for civil lawsuits.

Really? How can a financially censored person access financial services? If you aren't allowed a bank account then you are immediately cut off from services which smart contracts could substitute for.

A coinbase account can be closed but an exchange built out of smart contracts like UniSwap can't censor its users.

You may not be able to access credit without a bank but you can get a loan on a smart contract money market like compound. You can even use a smart contract to lend money to yourself (Maker).

You may not have a bank account but you can use a smart contract wallet to give yourself bank-like protections such as withdrawal limits.

And so on.

I created an account just to respond to you.

You're too focused on the trees, you can't see the forest.

https://thedefiant.substack.com/p/ether-is-the-best-model-fo...

Some great alternatives Tether and Bitfinex are MakerDAO and Uniswap. The first one offers a decentralised & transparent stable-coin called DAI. The second one is a decentralized exchange that is also 100% transparent.

These are transparent because they're running as programs on top of of a blockchain (Ethereum). Each and every state change is recorded and the systems can be audited in real-time.

The Maker DAI stablecoin currency is backed by collateral (Ether), and it's currently overcollateralized by about 350%. The system has been remarkably stable, even in the face of the bear market, which resulted on some crazy swings in the price of Ether.

DAI also has a few fiat on-ramps, including Coinbase and Kraken. You can also mint DAI yourself - there's a tutorial on Coinbase where they give you $20 DAI for free, https://www.coinbase.com/earn

What's more is that since these systems are essentially programs (they can be used and called by other programs as "library" ) which means that they can be used as lego bricks to build new things. Some examples are "Pool Together - https://www.pooltogether.us", which is a no-loss lottery system. It combines MakerDao's DAI coin and a decentralized lending system called "Compound".

Please be mindful that all the above projects are still considered experiments and cutting-edge stuff. It will probably still take a few years to mature - however, a lot of new opportunities seem to be opening up in this area.

Are you saying Tether isn't run on a blockchain? Because it most certainly is.

The SEC crypto tsar recently had quite negative comments about MakerDAO at SWSX, as in they may be in breach of securities law. Something to note.

The decentralized nature still makes it far less riskier to the end consumer.

Well the Tether transactions are run on a centralized blockchain, but the underlying value of Tether is based entirely on trust in Bitfinex backing it with actual dollars.

As for Maker, I really don't know how the SEC would begin to shut it down if it wanted to. It's entirely smart contract driven and it's live on the Ethereum blockchain, which is truly decentralized. Surely we need to update securities law for the 21st century as I'm not sure the Howey test had blockchain era in mind.

Which securities law?
On a ski trip I took in 2017, I was in line to buy a lift ticket one cold December morning. I remember overhearing the winter bros (the ones that usually talk about gnar and their steezy tricks) talking about installing Coinbase and buying Bitcoin.

I wouldn't underestimate the amount of retail investors that speculated on Bitcoin during that time. It was on major news networks in America, but also on national networks outside the U.S. My uncles and aunts were calling me asking how to buy Bitcoin outside the USA. The FOMO was real back then. Did Tether play a part in the grand pump? I'm sure it did, but I imagine it was more of a catalyst, and not the primary driver as the original study suggested.

The day after our company Christmas party in 2017 I had to take an uber the next morning to go pick up my car. I was anxious mess like I had been for the last 3 weeks riding the insane wave up on a mish mosh of alt coins. Phone clasped hard in my hand I couldn't go 5 minutes without checking the market.

My uber driver, a middle aged black women cheering about her Christmas plans and whole family coming to visit, suddenly breaks off track and excitedly brings up bitcoin. Her and her husband got their account set up and were putting "all their money" into it. "I don't even know what the hell it is but people are making money left and right!" I told her that it was probably a terrible idea.

The next day I liquidated all my holdings.

I did miss the final run up, but I came out a lot better than most.

Years ago I took a random day off.

I remembered after breakfast I had some old stock options that were never worth much and some stock I had been buying via an employee stock plan.

I knew the company stock was doing well so I log in and find that day the stock had jumped a fair amount.

It occurred to me that "I'm never going to see a return like this any other time and I almost forgot this was even here"... so I sold it all.

The stock sold at a penny or two less than the all-time high that it would ever reach.

That was a few months before everything hit the fan with the mortgage crisis.

I like to tell that story about how calling a high or bottom in the market is pretty hard and the only time I ever did it it was because I took the day off on the right day.

Similarly, in June 2018, I was chatting with my Uber driver and I told them I was interning as a software engineer and the driver started asking me about the AI/ML usage at my company (without me starting that discussion). Even before then, I thought AI/ML was overhyped. That interaction just confirmed it for me.
Late 2017 was nuts. I recall my brother texting me “Hey should I buy XRP?” out of the blue.

Wish I had had the presence of mind to realize it was time to get out.

I can remember Bitcoin going to $200 thinking it was nuts.

I can also remember it going to $700 thinkin it was nuts.

Now it's over $9000.

So when was there really a reason to get out?

Bitcoin has a usecase that makes sense, rare, government free money.

Xrp, centralized money. Just as unreliable as government money.

To this day, alt coins seem utterly useless. (Save privacy coins)

Having been through that bubble, I'm fairly confident FOMO had a huge effect. Every single person I know was asking how to buy some. You can even see it on Google Trends[1].

It's possible that the very first initial bump was manipulated (and crypto is definitely manipulated each and every day...), but the crazy increase afterwards probably wasn't due to a single entity.

1: https://trends.google.com/trends/explore?date=today%205-y&q=...

Next FOMO bubble is going to be exciting: it's getting much easier to acquire Bitcoin, so the conditions seem ripe for the next bubble to be even wilder. Keep an eye out for next spring, when Bitcoin block reward halves again.

(don't invest more than you're willing to lose entirely it's very risky, but having skin in the game during a bubble is very fun in my experience and will quickly educate you in the emotionality of trading. Dollar cost averaging weekly seems like the best strategy: easy to feel dread at best entry points and greed at best sell points.)

The way I look at it, Bitcoin is a historical experiment happening during our lifetimes and mid-May (the time of halving) will be a very interesting milestone in that experiment.

It could go up or down, but either way, it will be interesting to watch.

Do you see what you've become? You're excited about people FOMO'ing into a risky investment (that you happen to hold). You have become the bad actor in this scenario, waiting for new people to hand over their money.
How do you DCA?
When/if the price goes over 20k again, that's when animal-mode FOMO adrenaline will re-emerge. Even Nouriel Roubini will be buying. At some point, people will genuinely fear they are missing out on the next world currency, even the skeptics. That will either be the best time in the world to sell or the best time to buy, who knows.
Yes, some of it was organic, but towards the end of the bubble, folks were looking at tether printing and using that as a signal to buy / sell. People even during the bull run called out tether for being the biggest risk to crypto markets and understood that without this well-timed injection of cash into the crypto markets, the price would fall flat.

Given Crypto markets' propensity to scam, I'd be shocked if finex & co didn't engage in manipulation. Maybe not to the extent that the paper's authors claim - China, S. Korea, India all banned / tried to ban crypto and I think Chinese volume drying up was a major cause for the bubble popping.

Agreed. During the 2017 run up, I had tons of non-technical folks asking me to buy Bitcoin for them. A doctor from Europe was ready to spend $100k, which is what he's making per year. A healthcare specialist from New York, with an annual salary about $40k, was ready to spend $10k. An athlete from Brazil was begging to spend his $300k on altcoins. Many people do not realize how strong FOMO can be.
Pretty much this. How could one whale pump so much money into the market?

It was a societal thing more so than an individual person. People were speculating like crazy to the point where you had grandmas giving investment advice on this new thing called 'bitcoin' for their grandkids to get rich from.

Tether's in the spotlight right now and journos will have a nice round of clickbait articles to keep the interest going. Reason will prevail!

> How could one whale pump so much money into the market?

Well, the allegation is, because they were printing it.

It's the same as attributing the Sterling crash in '92 just to Soros. He had a large position and enough to move the market but he wasn't the only player, and probably small in comparison to all the retail investors who would have lost out late in the sell off panic.
Thank you for bringing some basic logic back to the table.

People love to imagine that odd phenomenon have simple solutions. This whole "tether was the sole cause of the bitcoin bubble" theory is completely ridiculous.

Go into a random bar in December of 2017 and you would hear people talking about btc and altcoins...

I was tired of hearing this crap!

This is when everyone finally heard about Bitcoin after the runup. And continued it until the overexuberance ran out of steam. Not like it’s the first time that happened.

> Perhaps the takeaway is that when banks refuse to do business with crypto traders, or when a government bans trading altogether, it doesn’t stop traders from trading. It just forces them to find creative solutions. If it were easy for crypto exchanges to use the traditional banking system, there would be no need for Tether at all.

This is a point not many seem to understand.

The reason it's not easy is because of anti-money laundering/know your customer legislation - which directly contradicts the few currency uses Bitcoin has at this point.
http://archive.is/dhAsU
I find it difficult to defend Tether. I leave the investigation to regulators. But assume Tether team has good intention and try to do the right thing, it is easy to make mistake. Tether software may have had a bug that inflates Tether coin over reserve. This is a problem with permissioned money system. It is difficult to audit and verify transactions.

I think Libra is an improvement. They use open source software. But it is still a permissioned money system. There's room for error. Who would be responsible for the damage? I think every participants need to share the responsibility. I've advocated for a new category: decentralized and digital native crypto with constant inflation. Permissionless is a key feature. It provides many advantages over permissioned.

https://bitflate.org/post/2019/11/05/tether-problem-highligh...

Tether sounds like the Federal Reserve's interface to Bitcoin.
article titles are topic suggestions to espouse pre-existing beliefs, exhibit a

yesterday had people saying “Aha! I knew it” alongside anecdotes that completely neglected the role of a crowd and media to support their fictional higher standard for a bitcoin pump over how literally any rally works

today has different people saying “yeah this makes way more sense” because of the role of actual distinct buyers. this article is just using its platform to surface that explanation higher

The bitcoin "bubble" was caused by an invention in the ecosystem. Bitcoin was "stuck" for a long time around $300, because it is not much good @ 10 mins tx time. Then a solution was published, the lightning network whitepaper. A mere 5 days later volume exploded and a period of 6 months of accumulation occurred where price was contained by large bid / ask walls. Volume dropped off after this point and the price rocketed up. The ultimate destination was the joint mcap of visa and mastercard, which it would in theory now be able to compete with at some point, which worked out at 18k per coin at the time. The collapse afterward is due to the fact that it must be used in this way and at that tx magnitude to justify that valuation. Your basic buy the rumour sell the news variation. It might thus range around 10k for a long time. Whether those who accumulated used bots or tethers or both to drive the price up rather than it being organic price action is debatable, and it seems difficult to prove. What is interesting to me is how fast money went to work on this after the technical hurdle was overcome.
There was no bitcoin bubble. Bitcoin is currently 50% down from the high mark. That is not a bubble. After actual bubbles, the low mark is may be 90% or more below peak.
Is the definition of a "bubble" invalidated if the stock goes back up some time after the crash? It did drop initially from $20K to a low of $3,200, which is 84%.
Yes it is. If you had invested in the stock market at the height of the “””bubble””” in 2000 you would be off well now. In hindsight it was not a bubble. You may disagree but sadly you probably didn’t have that perspective at the time.