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patio11's profile
Patrick McKenzie
Patrick McKenzie
Patrick McKenzie
@patio11

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Patrick McKenzie

@patio11

I work for the Internet, at @stripe, mostly on accelerating startups. Opinions here are my own.

東京都 Tokyo
kalzumeus.com
Joined February 2009

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    Patrick McKenzie‏ @patio11 26 Nov 2017
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    Bitcoin as the world's biggest game of hot potato: https://prestonbyrne.com/2017/11/26/the-bear-case-for-crypto-part-ii-fractional-reserve-marmot/ … @prestonjbyrne Liquidity crunch catalyzed by any disruption in the price would cause a bank run.

    8:26 PM - 26 Nov 2017
    • 77 Retweets
    • 208 Likes
    • WebCorrectly Nathan LeClaire Ondřej Sojka Simon Fordham Baud'Dib Antonio Isaza mobile Florian Klampfer Csaba Joe Robison
    10 replies 77 retweets 208 likes
      1. New conversation
      2. Patrick McKenzie‏ @patio11 26 Nov 2017
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        Bitcoiners think that they're structurally immune to bank runs because they repeat "we are not fractional reserves" as an article of faith. That is almost certainly false. Most distressing bit in that article, which I cannot verify but which I do not find implausible:pic.twitter.com/qZf6EXflG5

        2 replies 11 retweets 30 likes
        Show this thread
      3. Patrick McKenzie‏ @patio11 26 Nov 2017
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        Why is that distressing? Because it suggests that, when the Bitcoin music stops, 1+ real financial institutions will take eight or nine figure credit losses.

        2 replies 5 retweets 19 likes
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      4. Patrick McKenzie‏ @patio11 26 Nov 2017
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        I'd like to underline the "When 1+ Bitcoin exchanges looks like it is going to go under, everyone is going to go for the exits in BTC." part of the doomsday scenario. In particular, what happens when any one Bitcoin exchange looks like it is likely to go under.

        1 reply 3 retweets 8 likes
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      5. Patrick McKenzie‏ @patio11 26 Nov 2017
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        What will happen is, to avoid their assets being tied up indefinitely (ala Gox), account holders will try to move their BTC off-exchange. The entire Bitcoin network, which is saturated, can only serve ~3 transactions per second worldwide.

        5 replies 5 retweets 14 likes
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      6. Patrick McKenzie‏ @patio11 26 Nov 2017
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        This means that an exodus from one exchange, in addition to spooking account holders at every other exchange, will make it pretty difficult to move BTC in or out of another exchange.

        1 reply 2 retweets 11 likes
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      7. Patrick McKenzie‏ @patio11 26 Nov 2017
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        Your rational action, as an account-holder of a non-imperiled exchange, is to a) immediately request a wire (yes, a wire) of your USD and b) bid as high as possible for a transaction to exfiltrate your BTC.

        4 replies 2 retweets 6 likes
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      8. Patrick McKenzie‏ @patio11 26 Nov 2017
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        This turns non-imperiled exchanges into imperiled exchanges, quickly. The technical term is "contagion" and the way to avoid it is *drumroll* "temporarily freeze withdraws."

        5 replies 2 retweets 11 likes
        Show this thread
      9. End of conversation
      1. New conversation
      2. Beͫvͣaͬnͨd‏ @zorinaq 26 Nov 2017
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        Replying to @patio11 @prestonjbyrne

        None of the risks @prestonjbyrne describes are unique to Bitcoin. Compare INTC ($200B market cap, ~$1B traded/day) with BTC ($160B mkt cap, ~$5B traded/day). A "bank run" on Intel shares would be more disastrous due to even thinner trading volume!

        2 replies 1 retweet 9 likes
      3. Beͫvͣaͬnͨd‏ @zorinaq 26 Nov 2017
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        Replying to @zorinaq @patio11 @prestonjbyrne

        And he doesn't seem to understand how Bitcoin exchanges operate. The severity of a bank run would NOT be determined by the amount of dollar liquidity banks can provide, but by the depth of exchanges' order books.

        1 reply 1 retweet 11 likes
      4. 10 more replies
      1. New conversation
      2. Aidan Wolf‏ @Aidan_Wolf 26 Nov 2017
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        Replying to @patio11 @prestonjbyrne

        "never put in money you can't afford to lose" this is a looooong game, "real financial institutions" know the risk better than anyone

        1 reply 1 retweet 0 likes
      3. Kamil Choudhury‏ @kchoudhu 26 Nov 2017
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        Replying to @Aidan_Wolf @patio11 @prestonjbyrne

        I worked at real financial institutions for my entire career. They don't know risk, they know how to take short term profits. There is a difference.

        0 replies 1 retweet 5 likes
      4. End of conversation

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