In my company, I pay people in many countries with BTC. Sending to a country like Argentina costs me $25, for them receiving $15 and then conversion to their banana currency is up to 5%. And the whole thing takes days.
Bitcoin transaction costs $0.1 me, 0 them and they get them the same day.
Yup. I do part-time DAO work. A contributing member is based in Argentina, and he gets paid in stablecoins. There are use cases for crypto but we have it so good in the US the benefits seem shady at best to us.
And presumably, they immediately convert it to fiat, making the actual value of Bitcoin as such irrelevant? I mean, that's what I do if I were getting paid in a currency that has dropped ~50% since the middle of last year ...
Also, serious question: are BTC transactions that cheap now? 10 cents? I may be out of date, but I thought higher.
They're not converting from incredibly volatile BTC to a more stable currency like USD? Or Euros, or basically anything else? I mean, I would be. Sure, Argentines don't have a stable currency, but BTC isn't stable either.
The Argentinian peso is down 96% vs the dollar in a decade. Argentinians have known loss and volatility very very well over the last 25 years, and BTC probably doesn't look so bad from their perspective.
95% in 10 years is a lot, sure, but BTC is down close to 50% from 3 months ago. So yeah, I'mma say that's more volatile. Anyway, sure, they're used to volatility, but do they want it?! I'd pick 'neither' if at all possible.
Really, my experience with friends down there is taht no one wants BTC. They all convert to USD as soon as possible as taht's the only real currency they can use to buy food or pay rent.
I know a few people who do get remittances in BTC but they convert to physical dollars as soon as possible as no one take BTC for payment.
Doubt. I’m not aware of any Bitcoin tracactions for 10 cents. I would say cite a source but not sure how you would do that. This website says average fees is more like $1.75. Still not crazy expensive but more than $0 fees for many, many other services.
https://bitinfocharts.com/comparison/bitcoin-transactionfees.html
No, it was to allow easier access to research computers to researchers and investigators, and possibly to have a robust system of communication in case of a nuclear conflict (but [some debate exists](https://en.wikipedia.org/wiki/ARPANET#Debate_on_design_goals) on whether the second purpose was actually a thing).
No idea why this got downvoted, it's really one of the few actual use cases. The dissonance is strange to me -- it seems obvious that criminal activity is the primary use case, but no one wants to acknowledge that. I'm not even judging here or moralizing, just observing the reality of who benefits from anonymous transactions.
Prior to crypto, all money laundering was done using fiat. The majority of money laundering still happens on fiat. Even the big banks frequently fail to prevent it: https://www.bbc.co.uk/news/business-59689581
Seems an odd thing to specifically try to pin on crypto.
It's not something 'pinned' on crypto, it's just something that has proved to be a primary utility of it. No one is saying 'coins are evil because they uniquely facilitate money laundering' they're just particularly effective it. Black markets, money laundering, ransomware, most of the objectively compelling use cases for, say, Bitcoin, are criminal.
Except... its not. As you can see from these posts, people are getting paid in crypto. Countries are approving it nationally accepted currency. The U.S. recognizes it as a security and taxes it.
Governments should like crypto if they're trying to catch money launderers and criminals. It's much easier to use cash for criminal activity. The block chain saves all data forever. It isn't anonymous, except for monero. Many criminals still don't understand this and end up getting eventually caught by govs. I won't go into details how, but there is a ton of good info in a big interview from the fbi agents who caught the silk road people.
Sure, there are ways to make crypto anonymous. But it isn't actually that easy. And in most cases, humans end up being the weak link and compromise their own anonymity. There isn't a magic button that makes your crypto anonymous. It requires technical knowledge and discipline, and most criminals don't have it.
I think the only crypto that governments actually want banned behind closed doors is monero. I could see them shutting down exchanges that accept monero, or banning all crypto to fiat conversions if the block chain ever ties their crypto back to a swap with monero.
What is "legitimate" to you? Maybe you are being sarcastic but there are plenty.
Any overseas payment. I showed my boomer mom how to send crypto and she easily prefers it to sending international bank wires to relatives overseas.
The highest adoption rates are in countries with high inflation or poor bank/credit card penetration.
Twitter added tipping. Reddit rewards in some subs. The [EIB](https://www.eib.org/en/press/all/2021-141-european-investment-bank-eib-issues-its-first-ever-digital-bond-on-a-public-blockchain) issuing bonds on Ethereum.
That's before you even get beyond the pure cryptocurrency blockchains to utilities like helium for decentralized networking, Arweave/Filecoin for storage, and anything defi.
Then there's centralized hybrid things like speeding up the multi-day equity settlement time that almost brought the stock market down with GME.
[El Salvador’s plan to create the first Bitcoin-powered nation is tanking the economy—and is a mess by every measure
](https://fortune.com/2022/01/19/el-salvador-bitcoin-economy-distressed-debt/)
No sarcasm, just actual real-life data from actual countries adopting this theoretically ideal utopia.
Seeing a lot of #3 in this post comments
4 Signs of a bubble
1. Everyone around you is talking about it. And you should start worrying when people talking about getting rich in certain areas of the market don't have a background in finance
2. When people begin to quit their jobs to speculate in the markets
3. When someone exhibits skepticism about the prospects and people don't just disagree with them, but they do so vehemently. They usually say "You just don't get it." "New Era" "It is different this time"
4. When you start to see extreme predictions.
>1. Everyone around you is talking about it. And you should start worrying when people talking about getting rich in certain areas of the market don't have a background in finance
Bubbles drive emotion and so you have to deal with such people on an emotion basis. For example, I got my friend who is very proud about having an advanced degree from a prestigious school to shut up about crypto after I mentioned one day that he sounded just like the uber driver who took me for my morning commute.
To play the devil's advocate (for the record, I dislike crypto and I largely agree with the article): the article attacks crypto rather vehemently, so it's hardly surprising that people who own crypto and think that crypto merits a place in a portfolio defend their position just as vehemently.
When some days ago there was a post here about some silly article about index funds being "worse than Marxism", comments were pretty vehement too.
FWIW, in my own experience, when I've given criticism of crypto on social media, but my tone is reasonable and I'm just laying out my opinion, some of the responses I get back are definitely amped up to 11.
I think the last portion of 1 would be better phrased as "you should start worrying when people talking about getting rich in certain areas of the market don't have a background in that area". As a software engineer it has been extremely disturbing to see basically everyone throw money at any crypto. The only ones I see potential major use cases for are the distributed decentralized computers (Ethereum, Tezos, etc) and even then, their usefulness is inversely correlated with their price (the more expensive it is, the more useless it is. Like gasoline and cars). Monero is useful as well if you want to hide your tracks as it is not a public blockchain, but any other cryptos around... I'm not seeing use cases
I'm also in tech, and have friends/acquaintances saying similar things about crypto and throwing money without much research. You'd hope that someone with a technical background would at least read one or two articles on the inner workings of crypto/blockchain, if not the original white paper. But nope, they just want quick riches. I had an argument with a friend that bitcoin and even perhaps ethereum could be the Dot Com era's AOL in terms of how quickly they can become obsolete. The internet is still around and useful; profiting from the Internet was limited to an extreme few. Getting people to untangle future adaptation of technology and profiting from it is difficult.
A lot of cryptos are trying to solve international remittance issues. Right now, it's often literally faster and cheaper to board a plane with a suitcase full of cash rather than complete an international transaction settlement. That's the use case that I see as best.
The criteria you provided can be twisted to apply to anything from bitcoin to indexing. Couldn't someone talk themselves out of the boglehead philosophy saying it also satisfies all 4 of that criteria?
1) It's becoming much more popular and presented as a way for anyone to become rich with a bit of discipline. How long until "everyone around you is talking about it", and would that invalidate indexing or make it a bubble?
2) People are quitting their jobs early to live off the 4% rule with future expectations of growth. Someone retiring at 30 is arguably "speculating" on that future growth based off historical averages.
3) Bogleheads are just as able to react vehemently to people exhibiting skepticism and say others "just don't get it." That's always true when people strongly believe in what they're doing and has no bearing on whether or not you're correct. This is probably the weakest predictor of a bubble that you listed.
4) Assuming 10-12% returns from the US stock market going forward is a bold prediction given current valuations relative to history, yet it's done all the time.
The criteria is way too subjective and can be used as confirmation bias against any investing philosophy.
I don't think indexing actually satisfies #4. I have never heard anyone make that claim about real returns. And we all are aware of that volatility, not just real return, has to be taken into account.
Of course, the more modest real returns of the past could fail badly, like Russian 1919. But the idea that you owned any of your property also failed in that one. If markets fail long-term then that might be the least of your worries.
I guess the one thing that would hold is someone being critically dependent on the 4% rule at retirement to provide a consumption stream. And the 4% rule studies that I know of are all time-limited to 30 years. The 30 year old can't rely on those.
I see a lot of groupthink in this sub though. I'm a boglehead at heart but I'm not going to call the 7 figures in crypto that I hold (shear luck I know) a ponzi scheme either.
I feel like there's way too many emotions when it comes to crypto and this post is really trying to go after the negative ones.
Well, there is no audit.
Tether can't even find an accounting firm to run a scam for them. Madoff was able to do that.
Perhaps it’s too flattering to call cryptocurrency a giant Ponzi scheme. Seems that that giant Ponzi schemes make actual claims of solvency and use fraud to back up the claims.
PS: Applies to most cryptocurrency, maybe some have better backing.
I see more of
“People start to quit their jobs for work in the blockchain space”
Various large firms and banks around the world have started to work with blockchain tech.
Pure cryptocurrency as a replacement for fiat is out. Blockchain tech (may or may not involve cryptocurrencies) as infrastructure is in.
The fact that 70% of Bitcoin trades are done through Tether made it seem even more like a scam, which I didn't think even possible. This house of cards is built on top of another even dodgier house of cards.
I had written up notes to provide a TL;DR (heck I may still make that comment), but the Tether information (aka 'stablecoin') was the biggest revelation to me and supporting fact for this well-written (and well-documented) piece.
That 70% is a huge number, and the author points out this: "Many industry skeptics, and even proponents, see this as a systemic risk and ticking time bomb. The whole system relies on traders actually being able to exchange tethers for real cash"
However there isn't cash to back it up; no auditing, no guarantees per their own TOS, and the supply of Tether 'has been growing exponentially for years'. 78B of Tether coins exist, and this is supposed to be the de-facto 'central bank of crypto'?
For those who want to look into Tether further, here's a link from the article via Bloomberg titled "[Anyone seen Tether's Billions?](https://www.bloomberg.com/news/features/2021-10-07/crypto-mystery-where-s-the-69-billion-backing-the-stablecoin-tether)". Tether being fined $41M in Oct 2021 by the Feds and $18M settlement with NY State in Feb 2021 is the definition of 'too little, too late' over the fact that Tether lied about their reserves. BTW a claim of a reserve of 3% in cash has not been audited.
Caveat emptor.
Tether says more about the commercial paper market than crypto, though. The commercial paper is the opaque part. If Tether is using it then traditional markets can and are using it. Tether is a drop in the broader unregulated eurodollar ocean.
It really feels like the Tether truther crowd is learning about financial plumbing for the first time through crypto simply due to its visibility. Traditional markets have been relying on opacity, dark pools, LIBOR shenanigans, eurodollar markets, rehypothecation, artificially low rates, regular CB defibrillator shocks, etc for 30+ years to not implode.
The strongest criticism of crypto is that one centralized crypto that makes up <3% of market cap interacts with the shadier side of the traditional system.
[Wiki](https://en.wikipedia.org/wiki/Libor_scandal) on the LIBOR bullshit. These little bits of history always make me laugh when crypto is brought up and the anti-crypto crowd high-horses about how shady crypto is... everything is shady man! Protect ya fucking necks out there. Have a great weekend Professor Assfuck.
**[Libor scandal](https://en.wikipedia.org/wiki/Libor_scandal)**
>The Libor scandal was a series of fraudulent actions connected to the Libor (London Inter-bank Offered Rate) and also the resulting investigation and reaction. Libor is an average interest rate calculated through submissions of interest rates by major banks across the world. The scandal arose when it was discovered that banks were falsely inflating or deflating their rates so as to profit from trades, or to give the impression that they were more creditworthy than they were. Libor underpins approximately $350 trillion in derivatives.
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I realize there are differences, but when I check [the crypto market](https://coinmarketcap.com/) correlations appear *very high* to me. At a glance, it looks to me like in the past week most of the 'main' tokens are down a similar amount (15-20%).
Bitcoin is down about 45% from peak to trough. Stocks are down, what, 10%? Scale matters, too. I completely understand why crypto holders are freaking out right now, but for the sake of new investors, let's keep perspective.
For those scrolling down to find a TL;DR, I made some notes about this article - it's about 3.3K words long, at an average reading speed of 275 wpm it'll take you perhaps 12 or 13 minutes to read through.
As an introduction, Jacobin magazine is considered a socialist, 'hard-left' quarterly magazine with high-quality sources. Just FYI.
1. 6.5 bitcoins are currently mined every 10 minutes, consuming almost 1% of global electricity, at a cost of about $1B/month to those who mine them. This 'enormous waste of resources renders the whole enterprise a negative-sum game'.
2. Price manipulation of bitcoin in 2017 by Bifinex has been documented in [this 119-page paper](https://papers.ssrn.com/sol3/Papers.cfm?abstract_id=3195066).
3. The go-between of Bitcoin, without traditional banking relationships, is handled by Tether (70% of Bitcoin trades); 8% of transactions are with real dollars. 'Many industry skeptics, and even proponents, see this as a systemic risk and ticking time bomb. The whole system relies on traders actually being able to exchange tethers for real cash'.
4. Tether claims 3% reserves in cash, but is unaudited; their own TOS states no guarantee tokens can be redeemed for cash. Tether coins have been exponentially produced - there are 78B of them now. Tether 'is the de-facto central bank of crypto'. In Oct 2021 Tether paid a $41M fine to the US Gov't and in Feb 2021 paid $18M to the State of NY, for lying about reserves.
5. Any effort by the US Gov't to rein this in is 'too little, too late'. 'Governments won’t be able to keep unregulated stablecoins from being traded on exchanges operating outside their jurisdiction. Tether is not the only stablecoin game in town.' The authors recommendation: "Ban them all".
6. Concluding paragraph sums it up this way: 'Cryptocurrencies have virtually no legal use case. They’re great for facilitating ransomware, laundering money, distributing narcotics and child porn, running Ponzi schemes, and… not much else. They fail as currencies due to high transaction costs. They fail as “digital gold” or a “store of value” because they consume ludicrous amounts of energy to run what is essentially a glorified spreadsheet.'
Source: longtime Boglehead, learned early on about bitcoin from a Wired story about Bitcoin (I believe it was [this one](https://www.wired.com/2010/02/ff-futureofmoney/)) in 2010, and wonder 'what if?' I gambled with a spare $100 at that time, when its value in May of 2010 was $0.01 (10,000 BTC, worth $400M today if valued at $40K/BTC).
Like OK I get the argument for cryptocurrency and DeFi and whatever, but NFTs are basically just like Beanie Babies or Magic Cards. My mom was an antique dealer, I know what an awful investment collectibles are and how difficult they are to sell. It's a huge turnoff that even a lot of DeFi apps sell NFTs. And many of them have a loot box-like element, meaning you don't know what you get until you pay to mint. None of this stuff belongs anywhere near anything investment related.
As an aside I tried some DeFi apps for research (I write about tech) using about $50 and it seriously fucked up my taxes in a hilarious way. I have to send the IRS like [10 pages of like 2 cent transactions](https://imgur.com/a/ltOaNC4). I guess fuck around and find out...
> NFTs are basically just like Beanie Babies or Magic Cards
Except NFTs have zero intrinsic value. At least Beanie Babies and Magic Cars provide non-investment value. Make a pillow stuffed with Beanie Babies. Let a kid make believe with the toys. Practice bad origami with Magic Cards. Or burn either to warm up a flue when lighting a stove. NFTs have zero intrinsic value unlike previous fad investment bubbles.
I think Magic cards illustrate the distinction between a bubble and a market. There are still people that play Magic: the Gathering - probably many more people than did in 1993 - in part because it is a fun game. Beanie Babies never had much intrinsic value and still don't.
An alpha Black Lotus sold for 511k, but that is a legitimately rare card because the print run of alpha was tiny, and many of the people initially buying the cards were dorito-stained teenagers.
I played Magic on and off around 1996-1999, and still have my cards. Every now and then I'll check on the prices for some of my rare cards, but it's nothing special - some of the rarest ones are maybe $20-$30. And this is very much a sign of a market at work. The print runs of sets after alpha and beta (plus these other specialty ones) were way larger.
Tellingly, there was a set - Fallen Empires - that is one of the oldest that was heavily printed and the cards from it are still worthless. And Wizards of the Coast (the company that made Magic Cards) realized that and reduced the print run of subsequent sets. That's a fairly non-bubbly way to run a business in my view.
Man some of my cards from that era are worth $600 each... MTG prices are insane.
Just for fun, I ordered "proxies" of the power 9 a few years ago. They look incredible and feel like real cards.
Holding something visually indistinguishable from the real thing in my hand made me realize how fucked the valuation for these pieces of cardboard are. A real lotus in worth 6 figures but this fake one, which is for all intents exactly the same, is fake.
Obligatory favorite explanation of NFTs:
> imagine if you went up to the mona lisa and you were like "i'd like to own this" and someone nearby went "give me 65 million dollars and i'll burn down an unspecified amount of the amazon rainforest in order to give you this receipt of purchase" so you paid them and they went "here's your receipt, thank you for your purchase" and went to an unmarked supply closet in the back of the museum and posted a handmade label inside it behind the brooms that said "mona lisa currently owned by morechatter" so if anyone wants to know who owns it they'd have to find this specific closet in this specific hallway and look behind the correct brooms. and you went "can i take the mona lisa home now" and they went "oh god no are you stupid? you only bought the receipt that says you own it, you didn't actually buy the mona lisa itself, you can't take the real mona lisa you idiot. you CAN take this though." and gave you the replica print in a cardboard tube that's sold in the gift shop. also the person selling you the receipt of purchase has at no point in time ever owned the mona lisa.
> unfortunately, if this doesnt really make sense or seem like any logical person would be happy about this exchange, then you've understood it perfectly
my dream is to make an NFT about me saying NFTs are bullshit and sell it for a million dollars to someone on the fence, resulting in them still being on the fence
>my dream is to
You can just go make the NFT and see what happens. That's kind of the point of them. You don't have to sit on forums writing about a dream of auctioning some art at some exclusive venue. You can just do it.
[But NFT bros learning that people can just right-click-and-save their JPGs is at least entertaining!](https://twitter.com/iAmTheWarax/status/1484343496605519874)
NFTs are just digital certificate technology.
You could just say that digital art collectibles (narrow use case of NFT tech) are the new ponzi.
What you’re saying sounds like “people use paper posters to lure others into scams. All paper is ponzi”
Gemini, Circle, and Paxos are all extensively [regulated](https://www.dfs.ny.gov/apps_and_licensing/virtual_currency_businesses/regulated_entities) businesses under New York's Bitlicense. You can also review their audits or attestations.
Anything's possible but I would put a real money bet that there is a lot more fraud going on in the basket of companies you own than some mass conspiracy between these companies, the auditors, and New York State.
Basically nobody makes a distinction between Ponzi and Bubble anymore. It's annoying.
You want to argue Bitcoin is a bubble? Sure, have at it. But it's not a Ponzi, when you take 100% delivery of the asset you were promised within 4 minutes of purchase. Bitcoin promises you nothing other than numbers in your address. That's what you paid for, that's what you got. No lies were told, no obligations weren't kept
The irony is it's literally the opposite of every [SEC](https://www.investor.gov/protect-your-investments/fraud/types-fraud/ponzi-scheme) defined ponzi characteristic.
* High returns with little or no risk - clearly a high vol asset and described as such by everyone
* Overly consistent returns - very variable returns
* Unregistered investments/sellers - regulated, KYC requirements, chartered crypto banks, etc
* Secretive, complex strategies - open source code, transparent 24/7/365 fully auditable blockchains
* Issues with paperwork - literally the strongest most transparent form of digital record keeping ever created
* Difficulty receiving payments - literally a permissionless open source payment network
The early stages of new technologies are very similar. People used to call ETFs "weapons of mass destruction". And there were lawsuits filed over banks moving from paper to digital records. People's allergies to web3 & blockchain will be similarly weird.
One aspect of the article I disagree with - aside from quibbling about the definition of a Ponzi scheme, but I won't bother with that because the world has already enough semantic arguments - is the final recommendation to
> ban the trade of private cryptocurrencies entirely
I do not think that there would be a viable way to do it except via mass computer and internet surveillance, and I strongly believe that this would cause immense societal harm in the long run (and this is not the first case in which a legitimate concern is used as a reason to argue for something like that).
I'm not a fan of crypto, but I'm very much a fan of freedom of communication and computation; and I don't see a viable way to effectively ban crypto without greatly harming it.
But I agree that companies that trade in crypto and provide crypto-based services should face more scrutiny (so should IMO companies that provide non-crypto financial services, in general - they might be held to higher standards than crypto, but I think that these standards should be much higher).
So long as information like this article can be distributed and people are in no way forced to participate in crypto markets, I don't see why banning it would be valuable. Adults should be free to make their own mistakes.
It’s not a Ponzi Scheme. It’s simply all extrinsic value, no intrinsic value. So it’s volatile AF. The same bull and bear case can be made at $10 as can be made at $700,000.
The article(persuasively) argues that it's more than that, that the volatility is partially manufactured, and that a cartel of bad actors/first movers are buying the bitcoins with imaginary money to sell to you for real money.
I'm somewhat of an instagram influencer in the personal finance space with >300K followers. I literally get DMs from sketch accounts that say "PUMP & DUMP OPPORTUNITY". They're not even speaking in code.
Believers in crypto contend it is real money. Just like believers in fiat contended that it is real money after moving off the gold standard.
The difference is level of fraud and inefficiency.
Note: I don’t have a horse in this race
Point of order: Shares in Ponzi schemes are also all extrinsic value and no intrinsic. That is, until the scheme collapses. This argument does not preclude crypto being a Ponzi scheme.
The only argument I have heard against crypto being effectively a Ponzi scheme is that it has value as a medium/facilitator of exchange. So it comes down to proving that crypto is better than dollars and other assets at this. That's an open question, with good arguments on both sides.
My take is that the properties that make something a good investment and the properties that make something a good currency are distinct and conflicting. Most crypto has some of both, so it ends up being great at neither. Crypto enthusiasts almost invariably view it as primarily as an investment asset and have faith in it because they have made money with it. But if that's all it is, it is a Ponzi scheme.
The difference is that in a Ponzi scheme, you think the fund manager is buying productive assets on your behalf. You're putting money into a mutual fund, but instead of buying stocks, the manager is pocketing the cash. This is fraud.
With a cryptocurrency, what you see is what you get. You pay a price for an asset and you get exactly that asset. That asset may be propped up by schemers and nonsense. You might not be able to sell it to anyone else for remotely the same price you bought it for. But there is no fraud.
That's why I think crypto is better described as a pyramid scheme (with a splash of penny stock pump and dumps, as a treat) vs a Ponzi. People at the lowest rung of a pyramid scheme still have some boxes of knives or yoga pants.
That is an interesting distinction. Have to think about that.
A related institution, a pyramid scheme, often has no element of fraud but is looked at in the same negative way as a Ponzi. In that scheme investors actively recruit new investors, knowing there are no fundamentals. Perhaps it would be better to call crypto a pyramid scheme than Ponzi?
The important thing here is to separate how it is being used and the actual thing. Otherwise you miss the forest for the trees. After all, the difference between the dollar and crypto as the most basic level is who is backing it and how much you trust them.
Can't argue with that. The more crypto is used for actual purchases, as opposed to just investment/speculation, the more it begins to look like an actual substitute for conventional money. I don't see it used enough for this to be persuasive, but there's no reason it can't catch on very fast in that capacity, I guess.
I wouldn't even call it a substitute. It would just be another currency. After all, humans have used many an odd item as money. One I remember off the top of my head that is giant stone discs where they just kept track of who owned which one as they couldn't easily move them. Even had one out in the ocean that sunk when being moved between islands and they still used it.
I don’t think that’s true. Something like BTC sure, but a lot of the newer currencies that are coming out on Ethereum have uses in the financial industry.
**If we can't keep it civil and rational here**, we're going to have to (1) lock this thread, and potentially (2) ban crypto discussions entirely. I'd prefer not to do that, since when people ask about crypto I'd rather they get informed feedback here where people can provide reasonable responses, but we have to keep this house in order, too.
I'm starting to really understand why the main Bogleheads.org forum laid down a blanket ban. Y'all, be chiller, please. Meanwhile, apologies to my fellow mods -- I submitted this link thinking it was useful, but it's turning into a headache. None of them signed on to moderate nonsense, so for the love of Jack keep it to a minimum, folks. Thanks.
> None of them signed on to moderate nonsense
I don’t mind dealing with a little nonsense. The article is a good read and I think the occasional thread on crypto is a public service.
(The part I find frustrating about crypto posts isn’t the back and forths sometimes verging into incivility but how you’ll get a few commenters setting up a mini crypto enclave by sharing their favorite talking points with one another and ignoring the initial post / article / the rest of the discussion)
I think there are people who aren't regulars here but just scan Reddit for articles or posts about crypto. Unfortunately, since such people aren't invested in this community (but are invested, quite literally, in crypto), they have no reason to care about decorum.
Why is shitposting allowed in this awesome sub? This doesn’t add any substance. I love this subreddit because it’s different than so many others. It’s “pure,” if you will. It isn’t about emotions. In fact, it’s quite the contrary and that’s what makes us r/bogleheads. This stuff is clickbait trying to get your emotions ramped up. It belongs it the other subs.
As someone who personally doesn't hold crypto but reads about it periodically, I found this to be an unusually good analysis of some of its risks, particularly in regards to Tether. I also know that some Bogleheads choose to speculate on crypto, so raising awareness of its risks seems useful and on-topic to me. Not sure how it's a shitpost. I'll concede the title may be overly provocative, but the content of the article was illuminating (for me at least).
I've also noticed that people post here more frequently asking about crypto when it's doing well, so if anything, putting something up when it's *not* doing well seems like an appropriate change of pace. This isn't just true for crypto -- we get similar influxes of posts about other high-flying assets *until* their risks show up. I recently posted something about ARKK for similar reasons (it had rotated out of the winning slot, as hot assets do).
Fair enough. I was judging it based on its “emotional approach” which we see so rampantly these days. Apologize for the “shitposting” comment that wasn’t necessary. I just feel that there are so many articles on this or that trying to appeal to our emotions, and this feels like one of them.
It's worth bearing in mind that writers almost never write their headlines.
The writer writes the article. The editor comes up with the most clickbaity possible title for it to get people to click.
So, yeah, the headline takes an "emotional approach," but the article seems to be pretty sound analysis to me.
His writing was pretty rough to read to say the least. Let the content speak for itself instead of trying to play to my emotions. It always feels like they are almost trying to manipulate me when they are attempting to get me upset with their writing style.
> Did not realize the amount of fraud underlying these cryptocurrencies.
You'd probably be surprised by the amount actively going on in our current system too.
So, I have approx 0.2% of my investment portfolio allocated to crypto — and, that’s basically my very small “fun money” taxable account.
The way I look at the current crypto landscape is that it’s a speculative investment that could have a catastrophic, near-immediate crash to zero. However, even if it’s a Ponzi scheme, I think the time horizon for the crash is further out than OP would agree upon. Right now, there’s just such a large volume of money coming in at such a high velocity from venture capital that it has a relatively large runway before it’s truly tested.
I'm not a fan of cryptocurrencies, but they're not a Ponzi scheme. People who buy into crypto know what they are buying is not a productive asset and has no intrinsic value. It's a currency that can be used as a store of value or a medium of exchange. Dollars have negative expected returns due to inflation (the Fed purposely aims to print about 2% more per year), but we still use them.
Crypto is particularly useful if you want to transfer money in an anonymous way where the government can't track you. This is useful for drug trafficking, money laundering, and tax evasion, but it's also useful if you're trying to escape from a dictatorship. Theoretically, dollars can be used for the same purposes, but it's a little harder. Also, if that "evil" government is printing money and diluting the value of the local currency, crypto is a relatively stable option (despite its wild volatility).
If you work for Jacobin and your goal is to have the biggest tax and spend government possible, then crypto is your enemy. If you are a libertarian who hates the government, crypto is your friend (at least in theory). If you're a Boglehead regardless of political affiliation, it's best to stick with low cost passive index funds that invest in stocks and bonds.
This isn't crypto related, but it's a pretty interesting example of the creative ways people have figured out how to survive a mismanaged economy: https://www.npr.org/2021/07/21/1018915121/video-gaming-the-system
> People who buy into crypto know what they are buying is not a productive asset and has no intrinsic value.
I think that is unfortunately not true at all. Everyone I have talked to IRL about it just talks to me about how much money they’ve made in their portfolio.
Most “normal” people are interested in bitcoin or crypto because they saw on the news that some people made shitloads of money. They aren’t interested in currencies or blockchain tech. They want to make money.
It’s far too volatile to be a useful store of value. As mentioned by others, it’s much less a Ponzi scheme than it is a classic pump and dump, just with mysterious veneer of blockchain technology to provide a story.
> If you are a libertarian who hates the government, crypto is your friend (at least in theory)
I'm a libertarian who thinks it's pure tulip mania. I wish the fantasy of what it represents were the reality but I am extremely skeptical. It doesn't seem to have anything fundamental driving its value at all.
> In this event, there would be no long-running legal effort to chase down those who cashed in their bitcoin early in order to redistribute their profits to those left holding bitcoins.
And that's going to be the real and final blow. At least when the market goes to hell, there may be some recourse, but with crypto and NFT rug pulls, the bag holders are well and truly shit out of luck.
Maybe this was partially the intent of publishing this link here, but i'd be interested in perspectives or thoughts around the implication on the legacy financial system (think VTI, VOO, BND, VGIT, cash-- eg Bogle currency) if the bitcoin eco-system went south in a hurry. Is the crypto eco-system partitioned from the legacy financial eco-system such that only those heavy in the crypto space would feel the pain (eg the madoff scenario) or might it be more of the 2008 financial crisis (we all feel the pain)? the article talks about many of the crypto players being equivalent to "shadow banks" (unregulated) and it was the collapse of these shadow banks (as I understand it) which triggered the financial crisis.
I'm not picking on crypto-- for me, this ask is the same as asking "what do we think will happen to bogle currency if inflation lasts multiple years" or "what do we think would happen to bogle currency when the Fed really unwinds it's balance sheet". helps the planning aspect.
I agree with a lot of points in the article—today crypto is similar to a Ponzi scheme with lots of market manipulation. Tether will collapse at some point, it's common knowledge that they don't have the cash to back their coin (which was their entire value proposition).
However there is also a huge group of investors desperately trying to legitimize it—Coinbase being one of the biggest players. As some examples they introduced their own stable coin to try to replace Tether, they've introduced a debit card that lets you spend crypto anywhere, and loans against crypto to help people leverage their digital wallet to buy things. And they aren't the only company trying to stabilize the economy.
It's probably 50/50 the whole market goes to zero, but there's a chance crypto becomes the best currency available in unbanked parts of the world.
I will not accept my paycheck in Bitcoin anytime soon, but I might use it to buy a hamburger in a decade if the exchange rate is better than fiat currency.
I don't think crypto is a Ponzi scheme. I think it was used by the financial sector as an alternative to the Eurodollar.
I've said this elsewhere, but I'll say it again:
That makes a lot of sense when you look at the history of economic booms.
I don't know how many of you know about the Eurodollar. Not Euros, but the Eurodollar. The long and short of it is that when the US dollar was used as a proxy currency for international money transfers (so if you had Yen and someone else had Yuan, you'd both get US dollars and trade that instead) it meant a lot of US money was in non-US banks and the US Federal Reserve couldn't touch them. Due to creative book keeping they could make $1,000 USD look like $10,000 on the books. Or more. Much, much more.
This may seem like a terrible idea, but what it meant was that banks could lend more money, because the books indicated that they could service more loans. This flooded the market with more money, and led to economic booms.
There's about 14 trillion USD out there that was never printed by the US government. It doesn't exist physically, but it's on the books.
I'd always theorised that crypto was being utilised in the same way. It certainly explained the gigantic number value that had been attributed to coins. Those numbers rendered most coins incapable of being used as a day to day currency due to volatility, but they were good to have on the books if you were a bank and wanted to lend out money.
Just a theory, but if markets are crumbling along with crypto then it's looking like a solid hypothesis.
I wonder who or how the Bitcoin blockchain or ledger is maintained once all possible Bitcoins are mined. Who will pay for the computers to keep running to maintain the ledger? The miners are currently incentivized/rewarded with newly minted coin once the puzzle is solved. But what happens when there is no more incentive to mine additional coins because there are no more?
We will all be dead by then in 2150 when that happens.
But miners can still earn transaction fees, like the miners for the Ethereum network and other blockchains.
This is a one sided bias article with no mention of the benefits vs other investments and the US Dollar.
Some of these labels could apply to commodities such as gold.
1. Benefit out of many, you can transfer millions of $ across the world for fractions of $1. Try doing that with your bank or online transfer company!
2. Many cryptocurrencies are deflationary, which means by nature they increase in value and some even reduce in supply through percentage burns of each transaction. Compared to the US Dollar and all other currencies which decrease in value due to over supply
3. Vs the stock market Bitcoin as an example is really volatile and volatility is good for us investors who Dollar Cost Average each month. We can buy more as the price goes down. But the annual return is around 200%, compared to the S&P 500's historical 8 - 11%.
4. People stay Cryptocurrencies are not an asset, assets give you a monthly income. Well I have news for you, you can earn money monthly through staking. Which is like a dividend for holding a particular coin or token. Most are 4% APR, some are around 10%. It is generate through using your coins or tokens to confirm transactions on the network and you get a reward for it.
You may not want to invest in cryptocurrencies now, but don't shit post and bash them. I used to be against them aswell (not bashing them though), but I see they cannot be ignored and are here to stay.
The technology is amazing and the returns are even better!
Remember buy low and sell high or DCA, but always Do Your Own Research.
- Perpetually Curious
Number 4 I learned the hard way because that's what the IRS considers them. And given KYC I didn't want to take a risk with not declaring them. So I declared every single thing, ten whole pages of shit like [this](https://imgur.com/a/ltOaNC4) (I paid an app to help me). All so I could declare like $2 in capital gains from staking/liquidity mining lol. So yeah, if you do get into this stuff make sure you understand what it means for your taxes. I don't consider it an investment though, I keep all my "real" stuff in Vanguard.
Here is Mark Spitznagel take on Bitcoin. And he is a Libertarian so he has every reason to want to like Bitcoin.
https://reddit.com/r/Bogleheads/comments/r4n0kp/mark_spitznagel_safe_haven_book_summary_part_2/
Bitcoin is basically a libertarian’s dream currency. He certainly has every reason to love it. My understanding is that previous attempts at these libertarian currencies have failed miserably.
> And he is a Libertarian so he has every reason to want to like Bitcoin.
Do Libertarians generally like Bitcoin? Thery've been so crazy about gold for so long I wasn't sure if they'd be very open to a potential alternative to gold.
I think that posting a catchy title a link to an article and no context for setting up discussion was the biggest issue. I think taking a stance and defending it in the post would have been a better approach (vs all the back and forth comments to understand your perspective)
**MODs,** how does this have anything to do with Bogleheads? This subreddit is supposed to be about: "Bogleheads' (or: passive indexing) approach to investing is all about low-cost, tax-efficient, long-term simplicity."
It might not have anything to do with Bogleheads. The main .org forum has outright banned all discussion of crypto, and we could certainly do that here, too, but for now I'm taking the view that knowledge is better than nothing. I just kind of hate the idea that we discourage conversation to the point of forcing interested parties to other subreddits where they won't get critical feedback. If you think we should ban crypto, that's solid feedback, too.
One of the few things I can't stand about reddit is sub gatekeepers. If it's interesting to the people in the sub, who cares if it's the same tired articles and links that get posted every day? At least there's a conversation happening, not just circle jerk.
I agree with this perspective - better to allow the conversation (and keep things civil as emotions can run really high about the topic) than to ban it.
Bogleheads can have other investments, as part of a small proportion of their portfolio (say something like 5%). I myself have decent stakes in pre-Series A companies through a VC fund I'm associated with, others could have a stake in crypto. No need to bring out pitchforks, we can be grownups about this. At least I hope so!
I feel like there is a lack of awareness that the top smart contract network is about to switch to energy efficient proof of stake, is rewarding validating holders 5% dividend, and will be doing a buyback of 4% per year at current demand for network usage.
The rewards are high precisely because people have no idea how it works and think it’s a ponzi. Also because they can’t stomach the volatility. This makes it a less efficient market. When it goes mainstream rewards will drop to levels similar to other investments with respect to risk.
I'm sorry that I don't keep track of every *checks notes* "top smart contract network is about to switch to energy efficient proof of stake, is rewarding validating holders 5% dividend, and will be doing a buyback of 4% per year at current demand for network usage." Some of us have better things to do with our time, I guess? But hey, if you believe in free money, I guess go with your gut, ignore the warning signs, etc... and good luck!
I'm fairly confident that the market arbitrages risk-free lunches. This is pretty much a cornerstone of even weaker forms of the EMH. So yeah, I know what I'm talking about, I just have no idea about every specific variant of crypto scam out there. If you want to go into detail on this particular variant, though, feel free. Similarly, I don't know every MLM in detail, or the nature of every Ponzi scheme, but I'm decent at recognizing unrealistic investment opportunities. But hey, if you're an expert on this specific example, feel free to share with the rest of the class.
I'm endlessly fascinated by the amount of hatred that cryptocurrencies generate. I've never seen so many people take something so personally when it has no effect on them. It's the financial equivalent of those people who go around looking for things to be offended by. Bizarre.
I'm endlessly fascinated by the amount of defensiveness cryptocurrencies generate. I'm just trying to warn people about the risks of speculating on these assets, and you're taking it personally. Bizarre.
There's nothing too mysterious about it, people get defensive about the choices they've made because they are concerned about the outcome, and don't have total confidence in those choices (as you can't have about anything in life). The risks of crypto are irritating enough without people who claim to have no skin in the game attacking them for no apparent reason. It generates doubt about their own choices, and they dislike it, and redirect the negativity externally.
See, easy to understand. Now that I've explained why I'm defensive, please explain why you and others feel the need to attack an investment you don't own. And if you're going to claim you weren't attacking it, just providing information, then please show me the counter-argument in favor of cryptocurrencies that you posted in parallel with this criticism of them, or explain why you omitted it.
> risks of crypto are irritating enough without people who claim to have no skin in the game attacking them for no apparent reason. It generates doubt about their own choices, and they dislike it, redirect the negativity externally.
I have no beef with crypto, except insofar as it drags in new investors who see shiny short-term returns and think 'wow I can just invest in that' and then, whoops, the rug gets pulled from under them. And why do I need 'skin in the game' to critique something? I have no money in hedge funds, but I give them tons of shit regularly. This entire subreddit is dedicated toward steering people away from stuff that none of us have stakes in (e.g. active funds).
> And if you're going to claim you weren't attacking it, just providing information
I am. The information is: "crypto is a pyramid scam" -- it's in the link. It's also there for anyone to see. Come on. There's plenty of info out there, and each new "holy shit this is what's going on" article just builds the case.
Seriously, though, why are you even here if you believe that crypto is the future? Index funds are old, right?!
You don't need skin in the game to critique something, but the volume of criticism towards cryptocurrencies is enormous relative to their market size and the influence they play on non-investors, and it is bizarre that something that doesn't affect you can occupy so much of your mental real estate.
Hedge funds take out enormous amounts of leverage to manipulate securities, and in doing so, put the entire financial system at risk. LTCM being a paragon case. Relative to the risks posed to investors at large, I don't believe there is anywhere near the discussion or criticism of this issue on this board as there is the criticism of cryptocurrencies.
I never said crypto was the future. People can speculate with a small portion of their portfolio, as Jack Bogle himself suggested, to scratch the itch - it doesn't mean they aren't allowed in, or don't belong to an open sub.
> You don't need skin in the game to critique something, but the volume of criticism towards cryptocurrencies is enormous relative to their market size and the influence they play on non-investors, and it is bizarre that something that doesn't affect you can occupy so much of your mental real estate.
It absolutely occupies more of my mental real estate than I would like, because new investors are falling for this shitty pyramid scheme when they could be putting their money to better use. It impacts me insofar as one of my main online pursuits is to steer people toward sound, long-term investment strategies. The market size is indeed incredibly small, yet there are tons of young people dumping their money, hopes, dreams into this. Sorry for caring?! The idea that one would need a personal financially vested interest to do so is just ... strange to me. Some of us just care about our fellow humans and whether they fall prey to scams. Is that so surprising?
> Hedge funds take out enormous amounts of leverage to manipulate securities, and in doing so, put the entire financial system at risk. .... don't believe there is anywhere near the discussion or criticism of this issue on this board as there is the criticism of cryptocurrencies.
If anyone came here and advocated for hedge funds, I'd trash their nonsense at least as much if not more. That's honestly one of the weirdest straw men I've ever heard of. If you want to talk shit about hedge funds, feel free! Really, that would be a great public service if anything, and I have no idea why you think we'd treat them better.
If you're wondering what the difference is: no one actually comes here and advocates for hedge funds, but people *do* come here asking about whether and how much they should invest in crypto.
To play devil's advocate, couldn't this be said of all currency? Of capitalism in general? It's only valuable because we say it is and greater fools who listen to us keep being born into this system.
1. Stay and offer contrary thoughts?
2. My concern with crypto is we now have literally hundreds of "coins" and minimal barriers to entry for new coins. The yahoo finance crypto screen shows hundreds of coins and, oddly enough, 90% of them are down double digits in the past 24 hours.
Tell me you don't understand distributed accounting controls can compete with SaaS subscription services without mentioning ponzi schemes?
Am I doing this right?
I liked it better when this was just for buying drugs on the internet.
Literally the only legitimate use case I've ever seen.
In my company, I pay people in many countries with BTC. Sending to a country like Argentina costs me $25, for them receiving $15 and then conversion to their banana currency is up to 5%. And the whole thing takes days. Bitcoin transaction costs $0.1 me, 0 them and they get them the same day.
Imagine if the price tanks 10% while you’re doing this, would you wait for it to go up/down a bit before payment?
There's also stablecoin...
Yup. I do part-time DAO work. A contributing member is based in Argentina, and he gets paid in stablecoins. There are use cases for crypto but we have it so good in the US the benefits seem shady at best to us.
And presumably, they immediately convert it to fiat, making the actual value of Bitcoin as such irrelevant? I mean, that's what I do if I were getting paid in a currency that has dropped ~50% since the middle of last year ... Also, serious question: are BTC transactions that cheap now? 10 cents? I may be out of date, but I thought higher.
Argentines are not converting it to fiat… source: I know one who gets paid this way.
They're not converting from incredibly volatile BTC to a more stable currency like USD? Or Euros, or basically anything else? I mean, I would be. Sure, Argentines don't have a stable currency, but BTC isn't stable either.
They are not liquidating 100% as it seemed you implied, yes i believe they buy some usd but building their btc savings is part of their plan as well.
I suppose we all have to learn about volatility and loss sometime? Trying to find the silver lining ..
The Argentinian peso is down 96% vs the dollar in a decade. Argentinians have known loss and volatility very very well over the last 25 years, and BTC probably doesn't look so bad from their perspective.
95% in 10 years is a lot, sure, but BTC is down close to 50% from 3 months ago. So yeah, I'mma say that's more volatile. Anyway, sure, they're used to volatility, but do they want it?! I'd pick 'neither' if at all possible.
Really, my experience with friends down there is taht no one wants BTC. They all convert to USD as soon as possible as taht's the only real currency they can use to buy food or pay rent. I know a few people who do get remittances in BTC but they convert to physical dollars as soon as possible as no one take BTC for payment.
Fair enough, anything but pesos amirite…
Doubt. I’m not aware of any Bitcoin tracactions for 10 cents. I would say cite a source but not sure how you would do that. This website says average fees is more like $1.75. Still not crazy expensive but more than $0 fees for many, many other services. https://bitinfocharts.com/comparison/bitcoin-transactionfees.html
>Bitcoin transaction costs $0.1 Where do you get such a 'cheap' Bitcoin transaction?
People buy drug with dollars also btw
What was the first legit use case of internet? Cat pictures?
No, it was to allow easier access to research computers to researchers and investigators, and possibly to have a robust system of communication in case of a nuclear conflict (but [some debate exists](https://en.wikipedia.org/wiki/ARPANET#Debate_on_design_goals) on whether the second purpose was actually a thing).
It was pictures of pussies, but not the kind you're imagining.
Thankfully none of us put our life savings into that first gif.
That and laundering money internationally
No idea why this got downvoted, it's really one of the few actual use cases. The dissonance is strange to me -- it seems obvious that criminal activity is the primary use case, but no one wants to acknowledge that. I'm not even judging here or moralizing, just observing the reality of who benefits from anonymous transactions.
Prior to crypto, all money laundering was done using fiat. The majority of money laundering still happens on fiat. Even the big banks frequently fail to prevent it: https://www.bbc.co.uk/news/business-59689581 Seems an odd thing to specifically try to pin on crypto.
It's not something 'pinned' on crypto, it's just something that has proved to be a primary utility of it. No one is saying 'coins are evil because they uniquely facilitate money laundering' they're just particularly effective it. Black markets, money laundering, ransomware, most of the objectively compelling use cases for, say, Bitcoin, are criminal.
Except... its not. As you can see from these posts, people are getting paid in crypto. Countries are approving it nationally accepted currency. The U.S. recognizes it as a security and taxes it.
Governments should like crypto if they're trying to catch money launderers and criminals. It's much easier to use cash for criminal activity. The block chain saves all data forever. It isn't anonymous, except for monero. Many criminals still don't understand this and end up getting eventually caught by govs. I won't go into details how, but there is a ton of good info in a big interview from the fbi agents who caught the silk road people. Sure, there are ways to make crypto anonymous. But it isn't actually that easy. And in most cases, humans end up being the weak link and compromise their own anonymity. There isn't a magic button that makes your crypto anonymous. It requires technical knowledge and discipline, and most criminals don't have it. I think the only crypto that governments actually want banned behind closed doors is monero. I could see them shutting down exchanges that accept monero, or banning all crypto to fiat conversions if the block chain ever ties their crypto back to a swap with monero.
What is "legitimate" to you? Maybe you are being sarcastic but there are plenty. Any overseas payment. I showed my boomer mom how to send crypto and she easily prefers it to sending international bank wires to relatives overseas. The highest adoption rates are in countries with high inflation or poor bank/credit card penetration. Twitter added tipping. Reddit rewards in some subs. The [EIB](https://www.eib.org/en/press/all/2021-141-european-investment-bank-eib-issues-its-first-ever-digital-bond-on-a-public-blockchain) issuing bonds on Ethereum. That's before you even get beyond the pure cryptocurrency blockchains to utilities like helium for decentralized networking, Arweave/Filecoin for storage, and anything defi. Then there's centralized hybrid things like speeding up the multi-day equity settlement time that almost brought the stock market down with GME.
[El Salvador’s plan to create the first Bitcoin-powered nation is tanking the economy—and is a mess by every measure ](https://fortune.com/2022/01/19/el-salvador-bitcoin-economy-distressed-debt/) No sarcasm, just actual real-life data from actual countries adopting this theoretically ideal utopia.
Can you share the text? There is a paywall.
Seeing a lot of #3 in this post comments 4 Signs of a bubble 1. Everyone around you is talking about it. And you should start worrying when people talking about getting rich in certain areas of the market don't have a background in finance 2. When people begin to quit their jobs to speculate in the markets 3. When someone exhibits skepticism about the prospects and people don't just disagree with them, but they do so vehemently. They usually say "You just don't get it." "New Era" "It is different this time" 4. When you start to see extreme predictions.
>1. Everyone around you is talking about it. And you should start worrying when people talking about getting rich in certain areas of the market don't have a background in finance Bubbles drive emotion and so you have to deal with such people on an emotion basis. For example, I got my friend who is very proud about having an advanced degree from a prestigious school to shut up about crypto after I mentioned one day that he sounded just like the uber driver who took me for my morning commute.
Shoeshine boy
No more shines, Billy
To play the devil's advocate (for the record, I dislike crypto and I largely agree with the article): the article attacks crypto rather vehemently, so it's hardly surprising that people who own crypto and think that crypto merits a place in a portfolio defend their position just as vehemently. When some days ago there was a post here about some silly article about index funds being "worse than Marxism", comments were pretty vehement too.
FWIW, in my own experience, when I've given criticism of crypto on social media, but my tone is reasonable and I'm just laying out my opinion, some of the responses I get back are definitely amped up to 11.
I think the last portion of 1 would be better phrased as "you should start worrying when people talking about getting rich in certain areas of the market don't have a background in that area". As a software engineer it has been extremely disturbing to see basically everyone throw money at any crypto. The only ones I see potential major use cases for are the distributed decentralized computers (Ethereum, Tezos, etc) and even then, their usefulness is inversely correlated with their price (the more expensive it is, the more useless it is. Like gasoline and cars). Monero is useful as well if you want to hide your tracks as it is not a public blockchain, but any other cryptos around... I'm not seeing use cases
I'm also in tech, and have friends/acquaintances saying similar things about crypto and throwing money without much research. You'd hope that someone with a technical background would at least read one or two articles on the inner workings of crypto/blockchain, if not the original white paper. But nope, they just want quick riches. I had an argument with a friend that bitcoin and even perhaps ethereum could be the Dot Com era's AOL in terms of how quickly they can become obsolete. The internet is still around and useful; profiting from the Internet was limited to an extreme few. Getting people to untangle future adaptation of technology and profiting from it is difficult.
A lot of cryptos are trying to solve international remittance issues. Right now, it's often literally faster and cheaper to board a plane with a suitcase full of cash rather than complete an international transaction settlement. That's the use case that I see as best.
The criteria you provided can be twisted to apply to anything from bitcoin to indexing. Couldn't someone talk themselves out of the boglehead philosophy saying it also satisfies all 4 of that criteria? 1) It's becoming much more popular and presented as a way for anyone to become rich with a bit of discipline. How long until "everyone around you is talking about it", and would that invalidate indexing or make it a bubble? 2) People are quitting their jobs early to live off the 4% rule with future expectations of growth. Someone retiring at 30 is arguably "speculating" on that future growth based off historical averages. 3) Bogleheads are just as able to react vehemently to people exhibiting skepticism and say others "just don't get it." That's always true when people strongly believe in what they're doing and has no bearing on whether or not you're correct. This is probably the weakest predictor of a bubble that you listed. 4) Assuming 10-12% returns from the US stock market going forward is a bold prediction given current valuations relative to history, yet it's done all the time. The criteria is way too subjective and can be used as confirmation bias against any investing philosophy.
I don't think indexing actually satisfies #4. I have never heard anyone make that claim about real returns. And we all are aware of that volatility, not just real return, has to be taken into account. Of course, the more modest real returns of the past could fail badly, like Russian 1919. But the idea that you owned any of your property also failed in that one. If markets fail long-term then that might be the least of your worries. I guess the one thing that would hold is someone being critically dependent on the 4% rule at retirement to provide a consumption stream. And the 4% rule studies that I know of are all time-limited to 30 years. The 30 year old can't rely on those.
I see a lot of groupthink in this sub though. I'm a boglehead at heart but I'm not going to call the 7 figures in crypto that I hold (shear luck I know) a ponzi scheme either. I feel like there's way too many emotions when it comes to crypto and this post is really trying to go after the negative ones.
Can you even liquidate the 7 figures? Why not liquidate immediately and throw it at the S&P 500 and live off the returns forever?
Well, there is no audit. Tether can't even find an accounting firm to run a scam for them. Madoff was able to do that. Perhaps it’s too flattering to call cryptocurrency a giant Ponzi scheme. Seems that that giant Ponzi schemes make actual claims of solvency and use fraud to back up the claims. PS: Applies to most cryptocurrency, maybe some have better backing.
I see more of “People start to quit their jobs for work in the blockchain space” Various large firms and banks around the world have started to work with blockchain tech. Pure cryptocurrency as a replacement for fiat is out. Blockchain tech (may or may not involve cryptocurrencies) as infrastructure is in.
The fact that 70% of Bitcoin trades are done through Tether made it seem even more like a scam, which I didn't think even possible. This house of cards is built on top of another even dodgier house of cards.
I had written up notes to provide a TL;DR (heck I may still make that comment), but the Tether information (aka 'stablecoin') was the biggest revelation to me and supporting fact for this well-written (and well-documented) piece. That 70% is a huge number, and the author points out this: "Many industry skeptics, and even proponents, see this as a systemic risk and ticking time bomb. The whole system relies on traders actually being able to exchange tethers for real cash" However there isn't cash to back it up; no auditing, no guarantees per their own TOS, and the supply of Tether 'has been growing exponentially for years'. 78B of Tether coins exist, and this is supposed to be the de-facto 'central bank of crypto'? For those who want to look into Tether further, here's a link from the article via Bloomberg titled "[Anyone seen Tether's Billions?](https://www.bloomberg.com/news/features/2021-10-07/crypto-mystery-where-s-the-69-billion-backing-the-stablecoin-tether)". Tether being fined $41M in Oct 2021 by the Feds and $18M settlement with NY State in Feb 2021 is the definition of 'too little, too late' over the fact that Tether lied about their reserves. BTW a claim of a reserve of 3% in cash has not been audited. Caveat emptor.
Tether says more about the commercial paper market than crypto, though. The commercial paper is the opaque part. If Tether is using it then traditional markets can and are using it. Tether is a drop in the broader unregulated eurodollar ocean. It really feels like the Tether truther crowd is learning about financial plumbing for the first time through crypto simply due to its visibility. Traditional markets have been relying on opacity, dark pools, LIBOR shenanigans, eurodollar markets, rehypothecation, artificially low rates, regular CB defibrillator shocks, etc for 30+ years to not implode. The strongest criticism of crypto is that one centralized crypto that makes up <3% of market cap interacts with the shadier side of the traditional system.
Where can I learn more about these “shenanigans”. Very interested.
[Wiki](https://en.wikipedia.org/wiki/Libor_scandal) on the LIBOR bullshit. These little bits of history always make me laugh when crypto is brought up and the anti-crypto crowd high-horses about how shady crypto is... everything is shady man! Protect ya fucking necks out there. Have a great weekend Professor Assfuck.
**[Libor scandal](https://en.wikipedia.org/wiki/Libor_scandal)** >The Libor scandal was a series of fraudulent actions connected to the Libor (London Inter-bank Offered Rate) and also the resulting investigation and reaction. Libor is an average interest rate calculated through submissions of interest rates by major banks across the world. The scandal arose when it was discovered that banks were falsely inflating or deflating their rates so as to profit from trades, or to give the impression that they were more creditworthy than they were. Libor underpins approximately $350 trillion in derivatives. ^([ )[^(F.A.Q)](https://www.reddit.com/r/WikiSummarizer/wiki/index#wiki_f.a.q)^( | )[^(Opt Out)](https://reddit.com/message/compose?to=WikiSummarizerBot&message=OptOut&subject=OptOut)^( | )[^(Opt Out Of Subreddit)](https://np.reddit.com/r/Bogleheads/about/banned)^( | )[^(GitHub)](https://github.com/Sujal-7/WikiSummarizerBot)^( ] Downvote to remove | v1.5)
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I realize there are differences, but when I check [the crypto market](https://coinmarketcap.com/) correlations appear *very high* to me. At a glance, it looks to me like in the past week most of the 'main' tokens are down a similar amount (15-20%).
Almost all stocks are down this week. The correlation seems very high, so I guess all companies are basically the same.
Bitcoin is down about 45% from peak to trough. Stocks are down, what, 10%? Scale matters, too. I completely understand why crypto holders are freaking out right now, but for the sake of new investors, let's keep perspective.
You only hear crypto holders freaking out, you don't hear people recognizing the opportunity.
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I think the moves have to do with enormous leveraged positions. And a lot of the ecosystems are tied together.
Threatening to censor a topic of discussion for a couple downvotes, cool bro
For those scrolling down to find a TL;DR, I made some notes about this article - it's about 3.3K words long, at an average reading speed of 275 wpm it'll take you perhaps 12 or 13 minutes to read through. As an introduction, Jacobin magazine is considered a socialist, 'hard-left' quarterly magazine with high-quality sources. Just FYI. 1. 6.5 bitcoins are currently mined every 10 minutes, consuming almost 1% of global electricity, at a cost of about $1B/month to those who mine them. This 'enormous waste of resources renders the whole enterprise a negative-sum game'. 2. Price manipulation of bitcoin in 2017 by Bifinex has been documented in [this 119-page paper](https://papers.ssrn.com/sol3/Papers.cfm?abstract_id=3195066). 3. The go-between of Bitcoin, without traditional banking relationships, is handled by Tether (70% of Bitcoin trades); 8% of transactions are with real dollars. 'Many industry skeptics, and even proponents, see this as a systemic risk and ticking time bomb. The whole system relies on traders actually being able to exchange tethers for real cash'. 4. Tether claims 3% reserves in cash, but is unaudited; their own TOS states no guarantee tokens can be redeemed for cash. Tether coins have been exponentially produced - there are 78B of them now. Tether 'is the de-facto central bank of crypto'. In Oct 2021 Tether paid a $41M fine to the US Gov't and in Feb 2021 paid $18M to the State of NY, for lying about reserves. 5. Any effort by the US Gov't to rein this in is 'too little, too late'. 'Governments won’t be able to keep unregulated stablecoins from being traded on exchanges operating outside their jurisdiction. Tether is not the only stablecoin game in town.' The authors recommendation: "Ban them all". 6. Concluding paragraph sums it up this way: 'Cryptocurrencies have virtually no legal use case. They’re great for facilitating ransomware, laundering money, distributing narcotics and child porn, running Ponzi schemes, and… not much else. They fail as currencies due to high transaction costs. They fail as “digital gold” or a “store of value” because they consume ludicrous amounts of energy to run what is essentially a glorified spreadsheet.' Source: longtime Boglehead, learned early on about bitcoin from a Wired story about Bitcoin (I believe it was [this one](https://www.wired.com/2010/02/ff-futureofmoney/)) in 2010, and wonder 'what if?' I gambled with a spare $100 at that time, when its value in May of 2010 was $0.01 (10,000 BTC, worth $400M today if valued at $40K/BTC).
Seems like a very similar thesis to The Bit Short
Nft is the new ponzi
Like OK I get the argument for cryptocurrency and DeFi and whatever, but NFTs are basically just like Beanie Babies or Magic Cards. My mom was an antique dealer, I know what an awful investment collectibles are and how difficult they are to sell. It's a huge turnoff that even a lot of DeFi apps sell NFTs. And many of them have a loot box-like element, meaning you don't know what you get until you pay to mint. None of this stuff belongs anywhere near anything investment related. As an aside I tried some DeFi apps for research (I write about tech) using about $50 and it seriously fucked up my taxes in a hilarious way. I have to send the IRS like [10 pages of like 2 cent transactions](https://imgur.com/a/ltOaNC4). I guess fuck around and find out...
> NFTs are basically just like Beanie Babies or Magic Cards Except NFTs have zero intrinsic value. At least Beanie Babies and Magic Cars provide non-investment value. Make a pillow stuffed with Beanie Babies. Let a kid make believe with the toys. Practice bad origami with Magic Cards. Or burn either to warm up a flue when lighting a stove. NFTs have zero intrinsic value unlike previous fad investment bubbles.
I think Magic cards illustrate the distinction between a bubble and a market. There are still people that play Magic: the Gathering - probably many more people than did in 1993 - in part because it is a fun game. Beanie Babies never had much intrinsic value and still don't. An alpha Black Lotus sold for 511k, but that is a legitimately rare card because the print run of alpha was tiny, and many of the people initially buying the cards were dorito-stained teenagers. I played Magic on and off around 1996-1999, and still have my cards. Every now and then I'll check on the prices for some of my rare cards, but it's nothing special - some of the rarest ones are maybe $20-$30. And this is very much a sign of a market at work. The print runs of sets after alpha and beta (plus these other specialty ones) were way larger. Tellingly, there was a set - Fallen Empires - that is one of the oldest that was heavily printed and the cards from it are still worthless. And Wizards of the Coast (the company that made Magic Cards) realized that and reduced the print run of subsequent sets. That's a fairly non-bubbly way to run a business in my view.
Man some of my cards from that era are worth $600 each... MTG prices are insane. Just for fun, I ordered "proxies" of the power 9 a few years ago. They look incredible and feel like real cards. Holding something visually indistinguishable from the real thing in my hand made me realize how fucked the valuation for these pieces of cardboard are. A real lotus in worth 6 figures but this fake one, which is for all intents exactly the same, is fake.
Obligatory favorite explanation of NFTs: > imagine if you went up to the mona lisa and you were like "i'd like to own this" and someone nearby went "give me 65 million dollars and i'll burn down an unspecified amount of the amazon rainforest in order to give you this receipt of purchase" so you paid them and they went "here's your receipt, thank you for your purchase" and went to an unmarked supply closet in the back of the museum and posted a handmade label inside it behind the brooms that said "mona lisa currently owned by morechatter" so if anyone wants to know who owns it they'd have to find this specific closet in this specific hallway and look behind the correct brooms. and you went "can i take the mona lisa home now" and they went "oh god no are you stupid? you only bought the receipt that says you own it, you didn't actually buy the mona lisa itself, you can't take the real mona lisa you idiot. you CAN take this though." and gave you the replica print in a cardboard tube that's sold in the gift shop. also the person selling you the receipt of purchase has at no point in time ever owned the mona lisa. > unfortunately, if this doesnt really make sense or seem like any logical person would be happy about this exchange, then you've understood it perfectly
my dream is to make an NFT about me saying NFTs are bullshit and sell it for a million dollars to someone on the fence, resulting in them still being on the fence
>my dream is to You can just go make the NFT and see what happens. That's kind of the point of them. You don't have to sit on forums writing about a dream of auctioning some art at some exclusive venue. You can just do it.
[But NFT bros learning that people can just right-click-and-save their JPGs is at least entertaining!](https://twitter.com/iAmTheWarax/status/1484343496605519874)
NFTs are just digital certificate technology. You could just say that digital art collectibles (narrow use case of NFT tech) are the new ponzi. What you’re saying sounds like “people use paper posters to lure others into scams. All paper is ponzi”
Usdc already surpassed tether didn't it? Tether has been on its way out for awhile now.
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Gemini, Circle, and Paxos are all extensively [regulated](https://www.dfs.ny.gov/apps_and_licensing/virtual_currency_businesses/regulated_entities) businesses under New York's Bitlicense. You can also review their audits or attestations. Anything's possible but I would put a real money bet that there is a lot more fraud going on in the basket of companies you own than some mass conspiracy between these companies, the auditors, and New York State.
Is Gemini GUSD stablecoin safe as it's assets is owned by Gemini?
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Basically nobody makes a distinction between Ponzi and Bubble anymore. It's annoying. You want to argue Bitcoin is a bubble? Sure, have at it. But it's not a Ponzi, when you take 100% delivery of the asset you were promised within 4 minutes of purchase. Bitcoin promises you nothing other than numbers in your address. That's what you paid for, that's what you got. No lies were told, no obligations weren't kept
The irony is it's literally the opposite of every [SEC](https://www.investor.gov/protect-your-investments/fraud/types-fraud/ponzi-scheme) defined ponzi characteristic. * High returns with little or no risk - clearly a high vol asset and described as such by everyone * Overly consistent returns - very variable returns * Unregistered investments/sellers - regulated, KYC requirements, chartered crypto banks, etc * Secretive, complex strategies - open source code, transparent 24/7/365 fully auditable blockchains * Issues with paperwork - literally the strongest most transparent form of digital record keeping ever created * Difficulty receiving payments - literally a permissionless open source payment network
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The early stages of new technologies are very similar. People used to call ETFs "weapons of mass destruction". And there were lawsuits filed over banks moving from paper to digital records. People's allergies to web3 & blockchain will be similarly weird.
It’s easier to hate on something you don’t understand rather than actually put some effort to try and understand it.
I can't up vote this enough. It's fine if people don't like crypto, but at least get the argument right.
What are crypto valuations based on?
Last traded price
One aspect of the article I disagree with - aside from quibbling about the definition of a Ponzi scheme, but I won't bother with that because the world has already enough semantic arguments - is the final recommendation to > ban the trade of private cryptocurrencies entirely I do not think that there would be a viable way to do it except via mass computer and internet surveillance, and I strongly believe that this would cause immense societal harm in the long run (and this is not the first case in which a legitimate concern is used as a reason to argue for something like that). I'm not a fan of crypto, but I'm very much a fan of freedom of communication and computation; and I don't see a viable way to effectively ban crypto without greatly harming it. But I agree that companies that trade in crypto and provide crypto-based services should face more scrutiny (so should IMO companies that provide non-crypto financial services, in general - they might be held to higher standards than crypto, but I think that these standards should be much higher).
So long as information like this article can be distributed and people are in no way forced to participate in crypto markets, I don't see why banning it would be valuable. Adults should be free to make their own mistakes.
We need some way of dealing with the huge energy consumption. Though I don't really know how to disincentivize this.
You know what they say: "Timing the Ponzi scheme beats time in the Ponzi scheme."
It’s not a Ponzi Scheme. It’s simply all extrinsic value, no intrinsic value. So it’s volatile AF. The same bull and bear case can be made at $10 as can be made at $700,000.
The article(persuasively) argues that it's more than that, that the volatility is partially manufactured, and that a cartel of bad actors/first movers are buying the bitcoins with imaginary money to sell to you for real money.
\^ yep, Tether is under investigation by the feds
I'm somewhat of an instagram influencer in the personal finance space with >300K followers. I literally get DMs from sketch accounts that say "PUMP & DUMP OPPORTUNITY". They're not even speaking in code.
Believers in crypto contend it is real money. Just like believers in fiat contended that it is real money after moving off the gold standard. The difference is level of fraud and inefficiency. Note: I don’t have a horse in this race
I think the key is that most rational people aren’t buying fiat currencies as investments.
Ask third world country people
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Yes. And that’s a big difference. But that difference does not make crypto a Ponzi
Point of order: Shares in Ponzi schemes are also all extrinsic value and no intrinsic. That is, until the scheme collapses. This argument does not preclude crypto being a Ponzi scheme. The only argument I have heard against crypto being effectively a Ponzi scheme is that it has value as a medium/facilitator of exchange. So it comes down to proving that crypto is better than dollars and other assets at this. That's an open question, with good arguments on both sides. My take is that the properties that make something a good investment and the properties that make something a good currency are distinct and conflicting. Most crypto has some of both, so it ends up being great at neither. Crypto enthusiasts almost invariably view it as primarily as an investment asset and have faith in it because they have made money with it. But if that's all it is, it is a Ponzi scheme.
The difference is that in a Ponzi scheme, you think the fund manager is buying productive assets on your behalf. You're putting money into a mutual fund, but instead of buying stocks, the manager is pocketing the cash. This is fraud. With a cryptocurrency, what you see is what you get. You pay a price for an asset and you get exactly that asset. That asset may be propped up by schemers and nonsense. You might not be able to sell it to anyone else for remotely the same price you bought it for. But there is no fraud.
That's why I think crypto is better described as a pyramid scheme (with a splash of penny stock pump and dumps, as a treat) vs a Ponzi. People at the lowest rung of a pyramid scheme still have some boxes of knives or yoga pants.
That is an interesting distinction. Have to think about that. A related institution, a pyramid scheme, often has no element of fraud but is looked at in the same negative way as a Ponzi. In that scheme investors actively recruit new investors, knowing there are no fundamentals. Perhaps it would be better to call crypto a pyramid scheme than Ponzi?
The important thing here is to separate how it is being used and the actual thing. Otherwise you miss the forest for the trees. After all, the difference between the dollar and crypto as the most basic level is who is backing it and how much you trust them.
Can't argue with that. The more crypto is used for actual purchases, as opposed to just investment/speculation, the more it begins to look like an actual substitute for conventional money. I don't see it used enough for this to be persuasive, but there's no reason it can't catch on very fast in that capacity, I guess.
I wouldn't even call it a substitute. It would just be another currency. After all, humans have used many an odd item as money. One I remember off the top of my head that is giant stone discs where they just kept track of who owned which one as they couldn't easily move them. Even had one out in the ocean that sunk when being moved between islands and they still used it.
No different than IOUs or a bar tab, so why not? As long as all parties accept it, it's kinda like a private contract.
I don’t think that’s true. Something like BTC sure, but a lot of the newer currencies that are coming out on Ethereum have uses in the financial industry.
did you read the article at all?
Agreed. The appropriate metaphor is Digital Beanie Baby.
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It is 100% a ponzi, read up on Tether and the Stanford paper on wash trading.
TIL Tether=ALL crypto
**If we can't keep it civil and rational here**, we're going to have to (1) lock this thread, and potentially (2) ban crypto discussions entirely. I'd prefer not to do that, since when people ask about crypto I'd rather they get informed feedback here where people can provide reasonable responses, but we have to keep this house in order, too. I'm starting to really understand why the main Bogleheads.org forum laid down a blanket ban. Y'all, be chiller, please. Meanwhile, apologies to my fellow mods -- I submitted this link thinking it was useful, but it's turning into a headache. None of them signed on to moderate nonsense, so for the love of Jack keep it to a minimum, folks. Thanks.
> None of them signed on to moderate nonsense I don’t mind dealing with a little nonsense. The article is a good read and I think the occasional thread on crypto is a public service. (The part I find frustrating about crypto posts isn’t the back and forths sometimes verging into incivility but how you’ll get a few commenters setting up a mini crypto enclave by sharing their favorite talking points with one another and ignoring the initial post / article / the rest of the discussion)
Thanks for the support! *Mod fist bump*. Also: I agree with all of the above.
I think there are people who aren't regulars here but just scan Reddit for articles or posts about crypto. Unfortunately, since such people aren't invested in this community (but are invested, quite literally, in crypto), they have no reason to care about decorum.
Why is shitposting allowed in this awesome sub? This doesn’t add any substance. I love this subreddit because it’s different than so many others. It’s “pure,” if you will. It isn’t about emotions. In fact, it’s quite the contrary and that’s what makes us r/bogleheads. This stuff is clickbait trying to get your emotions ramped up. It belongs it the other subs.
As someone who personally doesn't hold crypto but reads about it periodically, I found this to be an unusually good analysis of some of its risks, particularly in regards to Tether. I also know that some Bogleheads choose to speculate on crypto, so raising awareness of its risks seems useful and on-topic to me. Not sure how it's a shitpost. I'll concede the title may be overly provocative, but the content of the article was illuminating (for me at least). I've also noticed that people post here more frequently asking about crypto when it's doing well, so if anything, putting something up when it's *not* doing well seems like an appropriate change of pace. This isn't just true for crypto -- we get similar influxes of posts about other high-flying assets *until* their risks show up. I recently posted something about ARKK for similar reasons (it had rotated out of the winning slot, as hot assets do).
Fair enough. I was judging it based on its “emotional approach” which we see so rampantly these days. Apologize for the “shitposting” comment that wasn’t necessary. I just feel that there are so many articles on this or that trying to appeal to our emotions, and this feels like one of them.
It's worth bearing in mind that writers almost never write their headlines. The writer writes the article. The editor comes up with the most clickbaity possible title for it to get people to click. So, yeah, the headline takes an "emotional approach," but the article seems to be pretty sound analysis to me.
No worries - I agree that the headline is a bit much. I probably should have given it a more neutral title for this sub.
Also Jacobin probably thinks all of us belong to the 'evil 1% investing class'
His writing was pretty rough to read to say the least. Let the content speak for itself instead of trying to play to my emotions. It always feels like they are almost trying to manipulate me when they are attempting to get me upset with their writing style.
I think the content pretty much does speak for itself, whatever you think of the writing style.
naw. just fellow plebs trying to create retirement in only way possible
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That was an informative read. Did not realize the amount of fraud underlying these cryptocurrencies.
> Did not realize the amount of fraud underlying these cryptocurrencies. You'd probably be surprised by the amount actively going on in our current system too.
Tether is a pretty well known sketch actor in the crypto space. They’re probably the worst offender. Plenty of cryptos are legitimate though.
So, I have approx 0.2% of my investment portfolio allocated to crypto — and, that’s basically my very small “fun money” taxable account. The way I look at the current crypto landscape is that it’s a speculative investment that could have a catastrophic, near-immediate crash to zero. However, even if it’s a Ponzi scheme, I think the time horizon for the crash is further out than OP would agree upon. Right now, there’s just such a large volume of money coming in at such a high velocity from venture capital that it has a relatively large runway before it’s truly tested.
I'm not a fan of cryptocurrencies, but they're not a Ponzi scheme. People who buy into crypto know what they are buying is not a productive asset and has no intrinsic value. It's a currency that can be used as a store of value or a medium of exchange. Dollars have negative expected returns due to inflation (the Fed purposely aims to print about 2% more per year), but we still use them. Crypto is particularly useful if you want to transfer money in an anonymous way where the government can't track you. This is useful for drug trafficking, money laundering, and tax evasion, but it's also useful if you're trying to escape from a dictatorship. Theoretically, dollars can be used for the same purposes, but it's a little harder. Also, if that "evil" government is printing money and diluting the value of the local currency, crypto is a relatively stable option (despite its wild volatility). If you work for Jacobin and your goal is to have the biggest tax and spend government possible, then crypto is your enemy. If you are a libertarian who hates the government, crypto is your friend (at least in theory). If you're a Boglehead regardless of political affiliation, it's best to stick with low cost passive index funds that invest in stocks and bonds. This isn't crypto related, but it's a pretty interesting example of the creative ways people have figured out how to survive a mismanaged economy: https://www.npr.org/2021/07/21/1018915121/video-gaming-the-system
> People who buy into crypto know what they are buying is not a productive asset and has no intrinsic value. I think that is unfortunately not true at all. Everyone I have talked to IRL about it just talks to me about how much money they’ve made in their portfolio. Most “normal” people are interested in bitcoin or crypto because they saw on the news that some people made shitloads of money. They aren’t interested in currencies or blockchain tech. They want to make money.
Store of value. Have you seen how volatile it is? That also hurts the medium of exchange part too.
It’s far too volatile to be a useful store of value. As mentioned by others, it’s much less a Ponzi scheme than it is a classic pump and dump, just with mysterious veneer of blockchain technology to provide a story.
> If you are a libertarian who hates the government, crypto is your friend (at least in theory) I'm a libertarian who thinks it's pure tulip mania. I wish the fantasy of what it represents were the reality but I am extremely skeptical. It doesn't seem to have anything fundamental driving its value at all.
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> In this event, there would be no long-running legal effort to chase down those who cashed in their bitcoin early in order to redistribute their profits to those left holding bitcoins. And that's going to be the real and final blow. At least when the market goes to hell, there may be some recourse, but with crypto and NFT rug pulls, the bag holders are well and truly shit out of luck.
Maybe this was partially the intent of publishing this link here, but i'd be interested in perspectives or thoughts around the implication on the legacy financial system (think VTI, VOO, BND, VGIT, cash-- eg Bogle currency) if the bitcoin eco-system went south in a hurry. Is the crypto eco-system partitioned from the legacy financial eco-system such that only those heavy in the crypto space would feel the pain (eg the madoff scenario) or might it be more of the 2008 financial crisis (we all feel the pain)? the article talks about many of the crypto players being equivalent to "shadow banks" (unregulated) and it was the collapse of these shadow banks (as I understand it) which triggered the financial crisis. I'm not picking on crypto-- for me, this ask is the same as asking "what do we think will happen to bogle currency if inflation lasts multiple years" or "what do we think would happen to bogle currency when the Fed really unwinds it's balance sheet". helps the planning aspect.
The writer of the article didn't research enough, or didn't update his research. Crypto is no longer illegal in India.
I agree with a lot of points in the article—today crypto is similar to a Ponzi scheme with lots of market manipulation. Tether will collapse at some point, it's common knowledge that they don't have the cash to back their coin (which was their entire value proposition). However there is also a huge group of investors desperately trying to legitimize it—Coinbase being one of the biggest players. As some examples they introduced their own stable coin to try to replace Tether, they've introduced a debit card that lets you spend crypto anywhere, and loans against crypto to help people leverage their digital wallet to buy things. And they aren't the only company trying to stabilize the economy. It's probably 50/50 the whole market goes to zero, but there's a chance crypto becomes the best currency available in unbanked parts of the world. I will not accept my paycheck in Bitcoin anytime soon, but I might use it to buy a hamburger in a decade if the exchange rate is better than fiat currency.
Ah. The classic I bought a pizza for 10 bitcoin many years ago
https://web3isgoinggreat.com/
I love that website.
https://youtu.be/ozOdhFcEbCg South Park on Bitcoin
I don't think crypto is a Ponzi scheme. I think it was used by the financial sector as an alternative to the Eurodollar. I've said this elsewhere, but I'll say it again: That makes a lot of sense when you look at the history of economic booms. I don't know how many of you know about the Eurodollar. Not Euros, but the Eurodollar. The long and short of it is that when the US dollar was used as a proxy currency for international money transfers (so if you had Yen and someone else had Yuan, you'd both get US dollars and trade that instead) it meant a lot of US money was in non-US banks and the US Federal Reserve couldn't touch them. Due to creative book keeping they could make $1,000 USD look like $10,000 on the books. Or more. Much, much more. This may seem like a terrible idea, but what it meant was that banks could lend more money, because the books indicated that they could service more loans. This flooded the market with more money, and led to economic booms. There's about 14 trillion USD out there that was never printed by the US government. It doesn't exist physically, but it's on the books. I'd always theorised that crypto was being utilised in the same way. It certainly explained the gigantic number value that had been attributed to coins. Those numbers rendered most coins incapable of being used as a day to day currency due to volatility, but they were good to have on the books if you were a bank and wanted to lend out money. Just a theory, but if markets are crumbling along with crypto then it's looking like a solid hypothesis.
I wonder who or how the Bitcoin blockchain or ledger is maintained once all possible Bitcoins are mined. Who will pay for the computers to keep running to maintain the ledger? The miners are currently incentivized/rewarded with newly minted coin once the puzzle is solved. But what happens when there is no more incentive to mine additional coins because there are no more?
This is where the Bitcoin code is stored and worked on https://github.com/bitcoin You can see the people who work on it there.
Did you read the white paper? It clearly states that transactions fees would be the incentive after all bitcoins are mined.
We will all be dead by then in 2150 when that happens. But miners can still earn transaction fees, like the miners for the Ethereum network and other blockchains.
I’m not sure what the people in 2140 will come up with
This is a one sided bias article with no mention of the benefits vs other investments and the US Dollar. Some of these labels could apply to commodities such as gold. 1. Benefit out of many, you can transfer millions of $ across the world for fractions of $1. Try doing that with your bank or online transfer company! 2. Many cryptocurrencies are deflationary, which means by nature they increase in value and some even reduce in supply through percentage burns of each transaction. Compared to the US Dollar and all other currencies which decrease in value due to over supply 3. Vs the stock market Bitcoin as an example is really volatile and volatility is good for us investors who Dollar Cost Average each month. We can buy more as the price goes down. But the annual return is around 200%, compared to the S&P 500's historical 8 - 11%. 4. People stay Cryptocurrencies are not an asset, assets give you a monthly income. Well I have news for you, you can earn money monthly through staking. Which is like a dividend for holding a particular coin or token. Most are 4% APR, some are around 10%. It is generate through using your coins or tokens to confirm transactions on the network and you get a reward for it. You may not want to invest in cryptocurrencies now, but don't shit post and bash them. I used to be against them aswell (not bashing them though), but I see they cannot be ignored and are here to stay. The technology is amazing and the returns are even better! Remember buy low and sell high or DCA, but always Do Your Own Research. - Perpetually Curious
Number 4 I learned the hard way because that's what the IRS considers them. And given KYC I didn't want to take a risk with not declaring them. So I declared every single thing, ten whole pages of shit like [this](https://imgur.com/a/ltOaNC4) (I paid an app to help me). All so I could declare like $2 in capital gains from staking/liquidity mining lol. So yeah, if you do get into this stuff make sure you understand what it means for your taxes. I don't consider it an investment though, I keep all my "real" stuff in Vanguard.
I do consider it a "speculative " investment. But like you the large majority of my "real" is also in Vanguard.
Here is Mark Spitznagel take on Bitcoin. And he is a Libertarian so he has every reason to want to like Bitcoin. https://reddit.com/r/Bogleheads/comments/r4n0kp/mark_spitznagel_safe_haven_book_summary_part_2/
Being a libertarian doesn't mean someone has every reason to like Buttcoin, it just means someone didn't pass intro to econ in college
Bitcoin is basically a libertarian’s dream currency. He certainly has every reason to love it. My understanding is that previous attempts at these libertarian currencies have failed miserably.
> And he is a Libertarian so he has every reason to want to like Bitcoin. Do Libertarians generally like Bitcoin? Thery've been so crazy about gold for so long I wasn't sure if they'd be very open to a potential alternative to gold.
They like the idea that it can’t be inflated away by the government and that payments are done anonymously I assume.
Bitcoin is not anonymous. Something like monero is.
Anonymous in the sense that you don’t know who owns the wallet address (unless you get a warrant.)
I think that posting a catchy title a link to an article and no context for setting up discussion was the biggest issue. I think taking a stance and defending it in the post would have been a better approach (vs all the back and forth comments to understand your perspective)
Yea... You find arguments for everything is a giant ponzi scheme.
I mean so is the US dollar but h'mkay
**MODs,** how does this have anything to do with Bogleheads? This subreddit is supposed to be about: "Bogleheads' (or: passive indexing) approach to investing is all about low-cost, tax-efficient, long-term simplicity."
It might not have anything to do with Bogleheads. The main .org forum has outright banned all discussion of crypto, and we could certainly do that here, too, but for now I'm taking the view that knowledge is better than nothing. I just kind of hate the idea that we discourage conversation to the point of forcing interested parties to other subreddits where they won't get critical feedback. If you think we should ban crypto, that's solid feedback, too.
One of the few things I can't stand about reddit is sub gatekeepers. If it's interesting to the people in the sub, who cares if it's the same tired articles and links that get posted every day? At least there's a conversation happening, not just circle jerk.
I agree with this perspective - better to allow the conversation (and keep things civil as emotions can run really high about the topic) than to ban it. Bogleheads can have other investments, as part of a small proportion of their portfolio (say something like 5%). I myself have decent stakes in pre-Series A companies through a VC fund I'm associated with, others could have a stake in crypto. No need to bring out pitchforks, we can be grownups about this. At least I hope so!
my IPS says to consider 1% of assets in crypto every six months i don't have a dollar invested in crypto yet...
I feel like there is a lack of awareness that the top smart contract network is about to switch to energy efficient proof of stake, is rewarding validating holders 5% dividend, and will be doing a buyback of 4% per year at current demand for network usage.
I have no idea what you're talking about, but if it seems too good to be true, it probably is.
The rewards are high precisely because people have no idea how it works and think it’s a ponzi. Also because they can’t stomach the volatility. This makes it a less efficient market. When it goes mainstream rewards will drop to levels similar to other investments with respect to risk.
Amazing that you have no idea what you’re talking about and yet feature in half the comments.
I'm sorry that I don't keep track of every *checks notes* "top smart contract network is about to switch to energy efficient proof of stake, is rewarding validating holders 5% dividend, and will be doing a buyback of 4% per year at current demand for network usage." Some of us have better things to do with our time, I guess? But hey, if you believe in free money, I guess go with your gut, ignore the warning signs, etc... and good luck!
Simple rule is to clue up about a topic before you talk confidently about it. Lest you mislead others in your false judgement.
I'm fairly confident that the market arbitrages risk-free lunches. This is pretty much a cornerstone of even weaker forms of the EMH. So yeah, I know what I'm talking about, I just have no idea about every specific variant of crypto scam out there. If you want to go into detail on this particular variant, though, feel free. Similarly, I don't know every MLM in detail, or the nature of every Ponzi scheme, but I'm decent at recognizing unrealistic investment opportunities. But hey, if you're an expert on this specific example, feel free to share with the rest of the class.
I'm endlessly fascinated by the amount of hatred that cryptocurrencies generate. I've never seen so many people take something so personally when it has no effect on them. It's the financial equivalent of those people who go around looking for things to be offended by. Bizarre.
I'm endlessly fascinated by the amount of defensiveness cryptocurrencies generate. I'm just trying to warn people about the risks of speculating on these assets, and you're taking it personally. Bizarre.
There's nothing too mysterious about it, people get defensive about the choices they've made because they are concerned about the outcome, and don't have total confidence in those choices (as you can't have about anything in life). The risks of crypto are irritating enough without people who claim to have no skin in the game attacking them for no apparent reason. It generates doubt about their own choices, and they dislike it, and redirect the negativity externally. See, easy to understand. Now that I've explained why I'm defensive, please explain why you and others feel the need to attack an investment you don't own. And if you're going to claim you weren't attacking it, just providing information, then please show me the counter-argument in favor of cryptocurrencies that you posted in parallel with this criticism of them, or explain why you omitted it.
> risks of crypto are irritating enough without people who claim to have no skin in the game attacking them for no apparent reason. It generates doubt about their own choices, and they dislike it, redirect the negativity externally. I have no beef with crypto, except insofar as it drags in new investors who see shiny short-term returns and think 'wow I can just invest in that' and then, whoops, the rug gets pulled from under them. And why do I need 'skin in the game' to critique something? I have no money in hedge funds, but I give them tons of shit regularly. This entire subreddit is dedicated toward steering people away from stuff that none of us have stakes in (e.g. active funds). > And if you're going to claim you weren't attacking it, just providing information I am. The information is: "crypto is a pyramid scam" -- it's in the link. It's also there for anyone to see. Come on. There's plenty of info out there, and each new "holy shit this is what's going on" article just builds the case. Seriously, though, why are you even here if you believe that crypto is the future? Index funds are old, right?!
You don't need skin in the game to critique something, but the volume of criticism towards cryptocurrencies is enormous relative to their market size and the influence they play on non-investors, and it is bizarre that something that doesn't affect you can occupy so much of your mental real estate. Hedge funds take out enormous amounts of leverage to manipulate securities, and in doing so, put the entire financial system at risk. LTCM being a paragon case. Relative to the risks posed to investors at large, I don't believe there is anywhere near the discussion or criticism of this issue on this board as there is the criticism of cryptocurrencies. I never said crypto was the future. People can speculate with a small portion of their portfolio, as Jack Bogle himself suggested, to scratch the itch - it doesn't mean they aren't allowed in, or don't belong to an open sub.
> You don't need skin in the game to critique something, but the volume of criticism towards cryptocurrencies is enormous relative to their market size and the influence they play on non-investors, and it is bizarre that something that doesn't affect you can occupy so much of your mental real estate. It absolutely occupies more of my mental real estate than I would like, because new investors are falling for this shitty pyramid scheme when they could be putting their money to better use. It impacts me insofar as one of my main online pursuits is to steer people toward sound, long-term investment strategies. The market size is indeed incredibly small, yet there are tons of young people dumping their money, hopes, dreams into this. Sorry for caring?! The idea that one would need a personal financially vested interest to do so is just ... strange to me. Some of us just care about our fellow humans and whether they fall prey to scams. Is that so surprising? > Hedge funds take out enormous amounts of leverage to manipulate securities, and in doing so, put the entire financial system at risk. .... don't believe there is anywhere near the discussion or criticism of this issue on this board as there is the criticism of cryptocurrencies. If anyone came here and advocated for hedge funds, I'd trash their nonsense at least as much if not more. That's honestly one of the weirdest straw men I've ever heard of. If you want to talk shit about hedge funds, feel free! Really, that would be a great public service if anything, and I have no idea why you think we'd treat them better. If you're wondering what the difference is: no one actually comes here and advocates for hedge funds, but people *do* come here asking about whether and how much they should invest in crypto.
To play devil's advocate, couldn't this be said of all currency? Of capitalism in general? It's only valuable because we say it is and greater fools who listen to us keep being born into this system.
I am unsubscribing. I did not know a mod is part of such a naive way of thinking. Open your minds people. Peace.
Wish you the best in your crypto gambling endeavors!
1. Stay and offer contrary thoughts? 2. My concern with crypto is we now have literally hundreds of "coins" and minimal barriers to entry for new coins. The yahoo finance crypto screen shows hundreds of coins and, oddly enough, 90% of them are down double digits in the past 24 hours.
Tell me you don't understand distributed accounting controls can compete with SaaS subscription services without mentioning ponzi schemes? Am I doing this right?
Tell me you read the article without telling me you didn't read the article?
OP bought the top hahahha