I know we're having a premium stacking opportunity right now with prices falling by more than 50% from the all-time high, sort of a mild retracement compared to previous years percentage-wise, but still enough to freak out normies and first cyclers. But I've been watching the amount of bitcoin leaving exchanges and it seems like this cycle, we're seeing people get to the level of self custody faster than in previous cycles and exchange balances are dropping.

Exchanges needing supply

Exchanges obviously can't offer that much interest on bitcoin to get people to turn tale and leave it on exchanges, especially with all the shitcoin market-making they have to do creating BTC pairs with shitcoins. So I am wondering how bad bitcoin rehypothecation on these exchanges are, these smaller markets may only have 1 or 2 BTC backing their entire order book, and people who trade shitcoins don't really take custody, they looking to trade back out probably for a stablecoin, so an exchange could in theory use 1 or 2 BTC and back multiple markets knowing they can cover redemption risk watching the flows.
What I wonder is how much paper bitcoin is running the current float and suppressing the real price? Not that I mind getting cheaper bitcoin, I'm just thinking for every person getting this subsidised bitcoin there's going to be someone who might not get their redemptions filled in the future.
I think people need to consider the increased custody risk
Rehyp leads to bank runs which leads to central banking which leads to
reply
That's why we need to keep encouraging users to take self custody, the only way to avoid centralised capture is to teach people so they don't sit with paper claims on exchanges or ETFs
reply
I'm not sure what your conclusion is. You think this activity leads to btc overvaluation? For what it's worth Bitcoin dominance index has risen sharply the last few weeks
reply
More your previous point, that normies may think they have claims to bitcoin and if there are bank runs, exchanges will leave you holding the bag and while you thought you avoided shitcoins and stuck to bitcoin, you're actually not better off, I think we've yet to see a real blow up of an exchange but feels like the conditions for one is coming.
I've tried to warn my social circle who don't self custody to do so, but very few listen
reply
I think we'll never know
Might need a totalitarian 6102 world law to shake it all up & see how much these exchanges have.
Hope not.
But anyway, I know what I got & will watch from a place of comfort
reply
Indeed, I would just like to know some kind of estimate to how much we overleveraged, gold they say is about 293 paper ounces for every physical ounce, so imagine that blow out should physical redemptions be a thing that couldn't be stopped.
I too watch with my goodies safely custodied, but I'd like to be able to help as many as I can get to this point of safety, as much as I like seeing shitcoiners getting rekt, i don't want the normie who got half way in and got their bitcoin, but didn't take the next step lose their shirt
reply
I think, we shouldn't care about this at all.
reply
Why not? I think people should know they're holding unbacked bitcoin claims, how is that not important?
reply
I mean, people should withdraw their Bitcoin to their own wallets.
But everybody who already has (like most Bitcoiners I imagine) - it just really doesn't matter at all. Let exchanges fail, let normies loose their real money, who cares? The Bitcoin network certainly does not.
reply
Yeah I get that, I just think this is a stronger narrative to add with not your keys not your coins. Sure normies are only there to get rekt, that's the game, but doesn't mean we shouldn't expose whats going on
reply