Crypto Collapse Crushes Hedge Funds that Touted Huge Gains for 2017

Are they causing the rout by trying to get large sums out of an illiquid market?

At the moment, cryptocurrencies and tokens are bouncing up and down in wild, double-digit gyrations by the hour. Bitcoin plunged below $9,300 and as I’m writing this is trading at around $9,800, down about 50% from its peak on December 17. Gone up in smoke in one month: $168 billion.

Ripple, the crypto that has recently been touted as the “next bitcoin” or “better than bitcoin,” plunged to $0.88 and is currently trading at $0.98, still down 76% from its peak on January 4. Gone up in smoke in two weeks: $110 billion.

Ethereum, after having plunged to $775, is now at $852, down 40% from its peak on January 13. Gone up in smoke in two weeks: $60 billion.

There are now over 1,400 of these “cryptocurrencies” and “tokens” out there, according to CoinMarketCap. Anyone can issue a new one. The supply is unlimited. On January 8, they were valued at $830 billion. Now they’re valued $472 billion. About $358 billion have been eradicated or transferred from those holding the bag to those that got out early.

Then there’s BitConnect, which is down 97% from $476 on December 28 to $14.39 currently, but bouncing wildly up and down. Nearly $4 billion evaporated, using the number cited by the Texas Securities Commissioner, which has entered an Emergency Cease and Desist Order. The Securities Division of the North Carolina Department of Secretary of State has issued a Temporary Order to Cease and Desist. Much of the operation has now been shut down.

“Gain financial freedom with a secure and practical alternative to centralized banking,” BitConnect said on its website. In the crypto-craze, people fall for anything.

So have crypto hedge funds triggered the collapse by trying to get their money out of an illiquid market?

An index by Eurekahedge that tracks nine crypto hedge funds soared 1,167% in 2017 through December 31 and over 17,000% since June 2013. So it’s understandable if, after this run-up, the funds might try to take some profits.

But the index does not yet include the collapse so far this year.

Other hedge funds, family offices, and wealthy individuals got caught up in the craze. They shoved serious money into a market with little liquidity, which propelled the market higher. But now if they try to get even a modicum of money back out, prices collapse — there being little liquidity.

Regulators have woken up. European Securities and Markets Authority Chairman Steven Maijoor told Bloomberg that bitcoin investors “should be prepared to lose all their money.” US regulators, including the SEC and North American Securities Administrators Association (NASAA), have issued similar warnings, adding fraud as one of the risks. Chinese and Korean regulators are cracking down on the crypto space, including trading, crypto mining, and crypto exchanges.

“I believe there is still a nontrivial chance bitcoin goes to zero,” fund manager Bill Miller mused at the end of October. One of his funds had over $50 million in bitcoin. So meanwhile enjoy the ride… He said this fund was up 72.5% for the year, at a time when bitcoin was around $5,800. So if he kept the bitcoin stake through the rest of the year, 2017 ended very strongly for the fund. 2018 is another matter.

Each day bitcoin does not go to zero, “that chance declines as more venture capital flows into the bitcoin ecosystem and more people become familiar with bitcoin and buy it,” he said.

In other words, what might keep bitcoin from collapsing is artificial demand by “venture capital flows” and other funds. But this artificial demand can disappear without notice. And then with all the cryptos out there, what’s left is no demand and unlimited supply.

On January 2, at the peak of the craze, it was reported that a VC fund of Peter Thiel — the don of the so-called PayPal mafia — had bought $15 million to $20 million of bitcoins whose value had ballooned to “hundreds of millions of dollars,” as The Wall Street Journal put it, citing “people familiar with the matter.” This leak is precisely the sort of hype designed to drive this scheme ever higher by showing that the smartest and richest are buying into it. There is a fundamental understanding by every participant that there is just one job that everyone needs to do for this to work: creating more artificial demand.

Bloomberg identified a few more hedge funds in the space, including:

Altana Digital Currency Fund, started in 2014, was up 1,496% in 2017. The fund also engages in “automated arbitrage, momentum trading and short-term, securitized bitcoin loans,” according to Bloomberg. It warned in November that clients should only invest an amount they can afford to lose.

Silver 8 Partners, a hedge fund focused on fintech, blockchain, and machine learning, started investing in cryptos in June 2015. In 2017, it made 750% “mostly due to bullish bets on digital assets,” according to Bloomberg.

Crypto Asset Fund, which was started up in July 1, 2017, is into various aspects of the crypto space. For the six months of 2017, it gained 805%. All it did in its short life was buy, buy, buy. That was the easy part. Now comes the hard part: get out in an illiquid market.

Global Advisors Bitcoin Investment Fund, formerly a commodities hedge fund, became “what it describes as the world’s first regulated bitcoin fund” in September 2014, according to Bloomberg. “It trades bitcoin and products related to bitcoin, such as the exchange-traded bitcoin products offered by XBT Provider. It also lends and borrows bitcoin.” It gained about 300% in 2017. In late 2017, it switched “to a more market-neutral arbitrage approach,” reducing its exposure to bitcoin and missing out on some of the gains late in the year, according to co-founder Daniel Masters, but likely also missing out on the carnage in January.

These and other funds and family offices have plowed large amounts of money into the crypto space in 2017; and with so little liquidity, they added fuel for the phenomenal price spikes last year, which lured even more funds into the space, driving prices up further.

With billions of dollars begging to be taken out of the market, every such move demonstrates just how illiquid the market is, and how impossible it is to take a hedge-fund-appropriate sum of money out without causing a plunge. For this scheme to work, they need to engineer another flood of money into the market so that the funds can get their money out. But the speculator’s saviors-of-last-resort – central banks – have shown no inclination to step in and bail those folks out.

Eleven days after I lambasted the outfit, the SEC steps in. Read… SEC Halts Trading in my Biggest “Blockchain Stock” Hero

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  140 comments for “Crypto Collapse Crushes Hedge Funds that Touted Huge Gains for 2017

  1. Rates says:

    Buy buy ….. bye.

    • Sergio says:

      In order to buy many of these altcoins in the US, you must buy bitcoin first. People buying Ripple are gambling twice.

      • Rates says:

        It’s a sort of derivative.

      • B says:

        It will be really interesting to see what happens when people/institutions go bankrupt having taken out loans or used credit to purchase crapto-coins.

        • Rates says:

          They’ll ask for a bailout although the crypto folks are supposedly anti government concentration. That’s the biggest joke of the whole thing. There’s a thread on Reddit where someone posted his experience losing 500K on BitConnect and him hoping for the government to step in.

    • van_down_by_river says:

      Buy buy … BUY!!!

      Bitcoin is up over 20% since this morning!!!

      There is such an enormous ocean of dollars (electronic Fed Reserve tokens) sloshing around the world looking to purchase any possible asset before it loses ever more purchasing power that it’s nearly impossible to value an asset in dollars. Wealthy investors have been unloading dollars for years and now people everywhere are panicking.

      Buy anything anyone will sell you in exchange for your confetti dollars – never mind the price – better to have anything at all then be left with worthless confetti dollars.

      Stocks, Gold, Real Estate… Anything! Buy anything you can for whatever price they ask. Confidence in the currency has been crushed and the time to search for value has passed – that ship has sailed. The everything bubble will not pop because it was the currency that was in a bubble.

      Thank Ben Bernanke for the destruction of our monetary system and by extension our society (hell, even Greenspan admits what Bernanke did was reckless and insane).

  2. Zarathustra says:

    If you read how a well known crypto exchange is pumping the price of Bitcoin with simple Tether creation out of thin air (this thing is not audited, mind you) and if this is true, then this manipulation is not very different from the ways of the FED and other central scamsters.

    The question is how long they can sustain this, since crapto markets want to go down hard.

    • Javert Chip says:

      Zarathustra

      Actually, the Fed is materially different:

      o US currency/debt is backed by the full faith & credit of the US government (who knows exactly what this means, but the US has never defaulted in 240+ years)), Bitcoin et al. is backed by nada, zip zilch.

      o The collection powers of the US government are significant (try not paying your taxes)

      o Almost any commercial transaction can be conducted in US dollars; a tiny %age can be done in Bitcoin (try negotiating a contract requiring a long-term payment stream in Bitcoins).

      o Yup, the Fed runs the printing press; however, faith in US currency is derived from the strength of the US economy. Faith in Bitcoin requires belief in some hidden computer elf, but lots of the coins keep “disappearing”, in addition to market price crashing.

      Trying to run to something different is not the same as running to something safe.The USA experienced a financial melt-down in 2007-8, and the government mobilized resources to recover (we can argue about how effectively); Bitcoin is having a similar meltdown – who’s coming to the rescue? Nobody.

      • RagnarD says:

        @JC
        I’m totally on board with naysaying bitcoin. But to say that people are buying the dollar based on the faith in the US economy? That may indeed be an illusion that people are playing in their own head. But anyone who looks at the math, which I gather youve probably seen, cannot rationally make a case for believing the dollars worth much more than toilet paper. This given the predilections of the voting public and 99% of their voting options.

        • Javert Chip says:

          RagnarD

          I didn’t intend to say the dollar is in perfect health.

          I was simply responding to equating the Fed with what I see as Bitcoin crapola.

          Actually, all any fiat currency has, ever has had or ever will have is confidence in the economy & political process backing it. If you tried to back currency with gold, the supply of gold only grows at about half the rate of global GDP.

          No system strikes me a “perfect for all situations”. Global GPD grows about 2.5-3.5%/year, physical gold supplies grow about 1.5%/year. At current prices, the world’s GDP is about $80T, the value of all gold is about $8T.

          There are a range of figures for the value of all global currencies, but a consensus is around $25-30T (again 100% of gold is about $8T).

          Somewhere along the line, you have to have trust; otherwise, you end up “bartering” that new BMW with dead chickens (or cows, etc)

      • van_down_by_river says:

        The U.S. dollar is backed by nothing – it’s a confidence game. Confidence schemes fall apart when the confidence is lost. Bernanke and Yellen were poor stewards of the confidence they were charged with maintaining. Now the precious confidence is as good as gone and with it the value of the currency.

        Every payday I sell my dollars for any asset people will give me in exchange. The dollar is a hot potato – drop it or get burned.

        • Kent says:

          The dollar is backed by the productive capacity and assets of the United States and many other nations around the world which are willing to trade in dollars. You can buy literally anything in the world with dollars.

          Which makes the dollar one of the most valuable assets in existence. The federal reserve monetized interest bearing assets, treasuries and securities, owned by large banks. Those dollars never left those banks.

        • Dave says:

          Try not paying your taxes and you will quickly learn that the dollar has value.

          The power masters/elite/shadow govt/wall st/CFR/masters of the world/ “they” are in control and are vested in the current system 100%, to the point that a revolution or uprising would be put down quickly and ruthlessly. “They” man all the switches, “they” vet any person who hopes to get elected to powers of position within the govt. “they” have facilitated the “regulatory capture” which now dictates terms and conditions in our society.

          This is how the dollar will maintain its preeminence

        • Michael Fiorillo says:

          The “full faith and credit” of the US government means, along with representing the productive capacity/potential of the US economy, that Men With Guns will show up if you don’t pay your taxes in US dollars.

          It makes for a convincing argument.

        • john says:

          I appreciate your ideas on barter. It is an exchange of tangible assets at (todays) valuation, regardless of what you think of the dollar. The bartered item you got in exchange, will have a future value, which is not (today) calculable. It only has value as an asset to you, i.e., not a possible future acquirer. However, you now have a ‘tangible’ asset. This compares favourably vs. a promise, which is the only thing that bitcoins possibly can promise.

        • Smingles says:

          “The U.S. dollar is backed by nothing – it’s a confidence game.”

          This is nonsense.

          The U.S. government owns hundreds of TRILLIONS of dollars of assets; land, mineral rights, fossil fuels, and infrastructure.

          That also ignores its taxation power and having the most powerful military in the world.

          There is plenty backing the U.S. dollar. Yours is a total know-nothing statement.

      • John Doyle says:

        well said!

      • JZ says:

        Chip, I think your conclusion “at some point one has to have trust/confidence” put you in a bad position. I hate to say this but in order to survive, trust NOBODY, especially people with power who can do things.
        You only trust “competition” in another word, “if you behave bad, I will either refuse to deal with you or use violence against you”. This is the only “thing” you can “trust”. After all, this is how this country was founded with the defused power since even the founders did NOT trust government and each other.
        Previously, if one central bank behaves bad, Incan hold other currencies. When all central banks do the same, what is the “competition”?
        There are all kinds of flaws about BTC, but nonetheless it is a “competition”. I am NOT suggesting you should trust BTC more than USD,
        but you should trust that the competition will make things better for people without power.

  3. cdr says:

    Funny stuff.

    Imagine what will happen after a couple of surprise rate hikes at the Fed.

    • van_down_by_river says:

      Anyone capable of first grade arithmetic can see rates can’t go up beyond a trivial level. If rates normalized and the government had to pay a more historically typical rate – say 6% – just the interest on the debt would exceed $1.2 trillion per year.

      If the Fed thinks “normalized” rates means 2% they are wrong. 2% is not normal. 2% rates are nothing short of debt monetizing. 2% is ultra easy yet achieving 2% is still “data dependent. The economy is said to be doing great and assets have gone hockey stick parabolic yet the Fed funds rate is just 1.375% – you gotta be kidding me.

      The U.S. government is defaulting through dollar devaluation and the Fed chairman is just an overpaid errand boy – anyone could do that job – it takes no special skills to rubber stamp money printing.

      • cdr says:

        Hysteria is entertaining, but reality is what you bet your money on.

        Historically, interest rates have been high enough to compensate the lender for inflation and a risk premium, plus any premium the market can generate. Interest rates high enough for a reasonable saver to live off of have been the historical norm.

        Bernanke came up with the idea to replace savings with financialization and asset inflation for earnings. QE was the distribution method and driving force. Inflation was supposed to devalue the debt over time. Absolutely none of his ideas worked. He will go down in history, along with his central bank peers from other countries, and a few famous economists as important inflection points in massive financial failure … really bad ideas that became popular because a few could get filthy rich from them or countries could live off of printed money for a few years.

        I prefer to not conflate high debt balances with future shock. I prefer to start earning interest sooner than later and not be asked to subsidize the high cost of government spending indirectly. If it blows up, then it blows up. We’ll deal with it at that time. I suspect the quick buck crowd will have a great plan to kick the can when it happens.

        • Smingles says:

          “Interest rates high enough for a reasonable saver to live off of have been the historical norm.”

          No, they haven’t.

          1980 – 2007 was the only period where the 3-month T-bill (risk free rate) had a positive real return. And the only reason that was so, was because of ultra high interest rates in the 80s, and three decades of declining rates thereafter.

          1980 – 2007: real return of 2.11%
          1928 – 1980: real return of -0.19%

          It was an anomaly. I’m happy to see any -evidence- you have to the contrary, other than your oft-repeated but incorrect opinion.

        • cdr says:

          Smingles, if rates rise today to only 4%, the income from that, added to my social security, will allow me to live better than before I retired. If rates rise even higher, which is probable if they actually normalize, I will be able to live like a king.

          So will you. I remember your previous post about your savings and savings habits. The ‘miracle of compound interest’ will allow to to live the same or a better life when you retire from old age.

  4. bkennedy says:

    Good research. However I might want to invest sideways. Eg first bitcoin capital and only a very small amount because it is working on aligned blockchain evolutions. And in the US the banks most won’t fund cannabis ventures etc but the coin aptly named pot can be used. The question on my mind has always been the exit doors including potential tax because if you really think this is untraceable…don’t be a silly. Canadian Tire Money. and soon to be merged with Loblaws PC points. Optimim points for shoppers has always worked really well for me especially on those 20 times the points. With aph aprhia and leaf. Medreleaf as suppliers for online orders via shoppers drug mart for when Canada legalizes the Little green herb for recreational purposes. Maybe you can use those points to order on line???? Getting 14 loaves of bread stamped means you get a loaf for free so there have always been in tandem alternative currencies…but they don’t usually involve the hedge funds. as for the merchants accepting bitcoin like overstock. They must have real headaches setting so many coins for this or that. Airmiles is another one. These are loyalty cards but they do have considerable value. Just not the wild swings of the cryptos

    • van_down_by_river says:

      Little known fact:

      Loblaws PC points were started by CT’s CEO Bob Loblaw and 1/100 (1 cent) is called a BobLoblaw or 1 Blah Blah Blah.

  5. bkennedy says:

    The 14 loaves is a deal with Cobbs. Get the card stamped. And on Tues you get two stamps for each loaf. Hot oven bakery similar. But they have a really sweet deal that if you buy something doesn’t matter what you get your gourmet priced loaf of bread for two dollars. So if you add a dollar coffee or a fifty cent bagel you end up paying less and walking out with much more. Than had you not done the add on

  6. Tom says:

    Bitcoin: The ultimate wealth transfer.
    Advisory warning: The exits are crowded,please be patient and wait your turn.
    Did someone in the regulatory world yell fire?
    Unregulated world of crypto meet world regulation.

    • van_down_by_river says:

      Hmmm, the exits to get out of the dollar are looking more crowded than the exits to get out of bitcoin.

      If you want to exit the dollar in exchange for a modest home here in Seattle it will now take well over a million of those dollars, and you’ll be competing with lots of other people also seeking to dump their dollars for a tangible asset.

      1 bitcoin for 12,000 dollars = equals Even-Steven. They are both pretty much worthless. You can multiply a worthless token by any value you want but zero times anything is still zero and zero will always equal zero – Even-Steven.

  7. Ronnie says:

    “There is nought as queer as folk.”
    (Old northern English expression regaurding the stupidity of people)

    Pretend wealth in the clouds created by anyone, anywhere! Fake everything and Donald’s small hands on a huge red button….Vertural Tulips look like a buy.

  8. bev says:

    If you hedged with puts then you would be up now. Some hedge funds may have offsets in futures re or did I misunderstand the news about trading futures and cryptos?

    • van_down_by_river says:

      $1 billion in options were said to have expired today and the largest open interest was at 10,000 strike – so is it any surprise the price dipped down to make the calls worthless? The options market closed and the price rockets back 20%.

      The Bankers have arrived! (in case you forgot who runs this game). I’m shocked, shocked! to see gambling going on in this establishment.

      Bankers don’t care if an investment is real or tangible, they only care if it can be used as a tool to harvest wealth – they seem to care about bitcoin.

      • Javert Chip says:

        Question is, in this unregulated Bitcoin et al. never-never land, who is it that ensures the counter-party to your puts can complete the transaction?

        If you bought Bitcoin puts at $20,000, and it’s now trading at $11,300, that’s FANTASTIC (well, I mean ignoring the probably very high cost of the put…). Now try to actually collect from your counter-party.

    • John says:

      Ask yourself. The CME started futures trading. This is very big money. Bitcoin behaved accordingly.

  9. John Taylor says:

    One of our tile supplier sales reps bought into bitcoin a few years ago – he’s all pumped up about a $20,000 gain. My advice was to sell it while it’s hot and enjoy the proceeds.

    I have no idea what he’ll do, but most people don’t know what a pump-and-dump scheme is. People see these valuations as real liquid cash.

    The big fallacy is well said in this article- when you put in a lot of money into something illiquid, the value shoots up. In order to realize the gains, you need to get new buyers or the price will shoot down even faster when you sell. The real “value” of the underlying asset is often irrelevant- except that you can get in trouble with the SEC doing it with penny stocks, but it’s totally legit with unregulated crypto currencies.

  10. OutLookingIn says:

    As with the tulip mania, which gave modern economics the definition of a bubble, the current crypto madness will be studied ages into the future.

    Men go quickly mad in groups, but return to sanity slowly and then only one at a time. Don’t recall who said that, but is very descriptive of the crypto coin madness. Those that have lost wealth in their greed, are having to learn an old lesson again. There is no free lunch.

    • Javert Chip says:

      Charles Mackay:

      Men, it has been well said, think in herds; it will be seen that they go mad in herds, while they only recover their senses slowly, and one by one.

    • Smingles says:

      I don’t have a crystal ball, so maybe bitcoin will eventually reach new all time highs.

      But to me, the bubble officially topped out when my girlfriend was watching E! Hollywood News and they were talking about bitcoin. It was literally right when it was at the all time highs a month or so ago. I had lots of friends buying in then, too, and I’ve never seen a more clear picture of ‘irrational exuberance’ in my life.

      That, and the fact that it’s biggest cheerleaders are a bunch of man-children on Reddit…

  11. David Calder says:

    I’m old enough to remember American GI’s using Monopoly money in the South Pacific during WW2 until the locals caught on. As far as I know no one lost their heads unlike today’s suckers in this everything bubble..

    • d says:

      I only got the stories from the peopel the American Scum did that to.

      Which is why their great grandchildren, still hate, and always rob, Americans.

      What goes around, Etc.

      • Javert Chip says:

        Please provide a verifiable source for your claim.

        WWII Japanese were brutal in their take-over of local populations of the Pacific Islands. As a result, almost all native populations strongly supported defeat of the Japanese, and willingly & actively cooperated with the American or Australian forces.

    • Sergio says:

      That’s pretty shameful to scam the locals.

      • Javert Chip says:

        Sergio

        Yup, that would be shameful – if it was true. I’ve asked d & David Calder to provide verifiable sources for their accusations (I can’t find any on GOOGLE or my reading of WWII history).

        An individual would also have tone scum to make such unsupported accusations.

    • Coaster Noster says:

      Do a search on John Frum. All the material flowing into the Pacific Islands, was “from America”. A whole religion sprouted, worshipping “John Frum” and his return with moar fabulous mountains of goods.

    • Javert Chip says:

      David Calder

      Please provide a verifiable source for your accusation.

      I’ve read tens of history books about WWII in the Pacific and have never heard of your “Monopoly money” story. A 15 minute GOOGLE search does not turn up any stories of WWII US military personnel Monopoly money scams.

      Legitimate military script was often referred to as “Monopoly money”.

      • Michael Fiorillo says:

        Likewise, have never, ever heard tell of this before.

        Also, chocolate and cigarettes provided to GIs were more valuable as currency in the aftermath of the war.

      • David Calder says:

        My 6th grade teacher in the 1950’s told us the story that when the first of the construction battalions began work they were able to pass off actual Monopoly money to the natives on some of the more remote islands. He was a combat soldier but too many years have passed to remember if he was Army or Marine but I’m sure he wasn’t the one to have passed bogus money because he would have arrived after the Seabees or before them in an island assault when money of any type would have been worthless. He could have been passing of scuttlebutt but it resonated with 6th graders only a few years after the war.. My point was these bitcoins or any crypto will end up having the same value as worthless monopoly money..

        • Javert Chip says:

          David Calder

          I have no doubt some guy scammed some other guy on some Pacific island at sometime.

          The problem with your 6th grade teacher’s anecdotal and unverifiable accusation (aka fake news, 1950’s vintage) is it implies the practice was widespread (remember all the Pacific island natives that are supposed to still hate Americans in this story).

          I’m calling BS on this one.

  12. Miggy says:

    I am bullish Bitcoin into 2019. I am not buying this crackdown from governments as “we are concerned about Joe Public and his speculation habits”.

    I am sure it is just the way I think but too much attention from governments to think this thing is going away. I also believe the beginnings and trial are different than the narrative and there MAY be larger purpose for the idea in mind.

    You really can buy time. One Bitcoin please.

  13. JungleJim says:

    I predict, that when the smoke clears, we will all be Marxists, not Karl, Groucho. This situation calls for a man of the stature of Rufus T. Firefly. Only he would have the intelligence and gravitas to lead us out the morass. Only he would have the courage to revoke Ben Bernanke’s birth certificate..

  14. ru82 says:

    Most people I know who bought Cryptos are in their 20s. They are not aware of the dot.com pump and dump with lots of promises.

    I just had a bad feeling as a lot of these crypto exchanges allowed big leverage…up to 300%. When prices are going up, leveraging looks like a smart idea.

    Now what do these exchanges do when the the tide turns and they have a lot of leveraged accounts?

    Anyway…I know some twenty somethings who bought 10K of Cryptos the past year. If we have any type of recession in the next year or two they will have to sell their most liquid assets first which will be crytpos?

    • Rates says:

      I work out with a personal trainer in his 20s. He is big into Cryptos. He’s now reading books related to past financial crises as part of his “education”. When I told him that the lesson of the books is that the 4 most expensive words in the English language is “this time it’s different” he replied: “this time it’s truly different”.

      I rest my case.

      • David Calder says:

        In a way he is right. The bubbles this time are beyond anything that came before and not just in one thing like tulips but in virtually everything.. That’s different!!

        • Baritone Woman says:

          As it has been said: history doesn’t repeat itself, but it often rhymes.

      • Jon says:

        I have a friend who says the same thing. He’s up like 10k. Started buying early last year. He diversifies among the cryptos and says this technology is the future. It’s going to change the world and he’s just going to keep buying until he can retire years down the road when every cryptocurrency is 10-100x what it is valued now…..I still haven’t bought any.

        • Javert Chip says:

          Unless your friend only bought 1 coin, how on earth can he only be up $10,000? Buying early last year, Bitcoin was about $1000 – it’s $11,500 as I type this – did he only buy 1.000000 Bitcoin?

        • Smingles says:

          @Javert

          I’m guessing he’s bought “alt” coins, like Ethereum and Litecoin (in addition to dozens of others).

          You can also buy fractions of a bitcoin, I believe. So he could have done that.

      • elysianfield says:

        ” 4 most expensive words in the English language is “this time it’s different” he replied”

        Rates,
        I have two words that are vastly more expensive…”trust me….”

    • Javert Chip says:

      Who is providing leverage to these highly skilled & experienced “twenty somethings”?

      • van_down_by_river says:

        Credit card offers in the mail and offered on campus, student loans, borrow against 401… there is credit everywhere. Getting credit to buy bitcoin is not a problem – Ben Bernanke made sure of it.

        My niece brought a bitcoin millionaire friend to Thanksgiving dinner – he bought his bitcoin four years ago with student loan money.

      • Old Engineer says:

        The banks issuing their credit cards.

      • Kent says:

        My pension fund :(

  15. Jermaine says:

    Central Bankers will be having a field day when that $500B comes flooding back into Fiat… they will be thrilled to supply more of their “coin”

    • Javert Chip says:

      A big chunk of that $500M is going POOF! into thin air.

      If you bought at $100, and surfed the wave to $19,000, your paper gain was a spectacular $18,900! Absolutely splendid.

      If you’re riding it down to $10,000, $9,000 of your paper gains just ween POOF! into thin air.

      • Jon says:

        Still up 1,000%

        • Javert Chip says:

          Jon

          I’m a physicist & retired CFO – I’ve spent a LOT of time looking at numbers to see if they mean anything.

          Your 1,000% is meaningless. My Berkshire Hathaway stock is up over 330,000%. If you cherry-pick your start & end points, you can just about come up with any number you want.

          I can read financial statements, so I can relate BRK performance to underlying business performance (yea, yea, I know financial statements aren’t “perfect”); however, there is NOTHING underlying Bitcoin performance…

          …except (my best guess) money laundering & highly inexperienced & gullible speculators gambling on Bitcoin.
          Money launderers are used to losing 50% of their illegal gross cash (normal cost of business); 20-something speculators probably aren’t.

      • IdahoPotato says:

        Besides, I an actually see stuff in my house made by Berkshire companies – Duracell, Tyvek, Fruit of the Loom.

        Not just unicorns and fairy dust.

    • Jim Graham says:

      One would bet that all of the “missing” bits of coins have already turned into USD, other “safe” currencies or REAL hard investments, even if they are subject to the “losses” from the coming bursting of bubbles….

  16. MCH says:

    Wonder if Peter Thiel is still holding bitcoins. It would be hilarious if he got suckered like the common joe… but I wouldn’t bet on it.

    • fozzie says:

      As a wealthy VC he’s said that he puts money into lots of things and while only a few succeed, those few give him an ROI many times over. $15 – $20 isn’t a huge amount for him.

    • Wolf Richter says:

      Given all the billions he has, a few hundred million in evaporated gains don’t really matter :-]

      • RagnarD says:

        I could see thiel having gotten in, but just more like pre 2014 than late 2017.
        But issac Newton got taken by the south sea bubble…

  17. Obosrantos says:

    It seems all these coins are mostly “fraud”. And block chain technology, if developed, will be used by banks one way or another, i.e. no decentralized fin tech is possible, since the key word is CONTROL. Otherwise, chaos …. No?

  18. Tom kauser says:

    they said people were using credit cards to buy bitcoin…..

  19. Tang says:

    This bitcoin fast turning to bitshit is an ocean of cesspools.
    It is now at different degrees of diahoerra and soon an avalanche of shit will race down the slopes engulfing those worshippers and those singing praises.
    Wealthy interest groups are into ways and means to get the small flies dabble into the cesspools so that they can make a quick exit with their start up money.
    Transactions in the bitcoin exchanges are anonymous right? Before the small flies can come to their senses the bitshit ecosystem will turn beyond recognition.
    Yes many main media participate in singing the bitshit songs. Because they are being paid handsomely by interest groups.

  20. Jon says:

    Ripple up over 50% from the weekly lows. Bitcoin back above 11k. Ethereum back above 1k.

    • Javert Chip says:

      I’m amazed there are over 1,400 digital currencies. Just trying to get an accurate quote on Bitcoin (which I’m assuming has largest market share) is difficult – simultaneous price quotes vary by as much as 5%.

    • Wolf Richter says:

      Jon, now you see how totally nuts this is!!

      • cdr says:

        Yes, but did the Winklevoss twins cash any out or do they expect it to run past $30,000 or much more if they just wait a little longer? Heroes or suckers?

  21. Night-Train says:

    This whole cryptocurrency thing has broken my brain. Wolf has done a good job following and explaining the phenomenon, but the concept is still eluding me. At my age it probably doesn’t matter because I no longer chase leprechauns and unicorns.

    I think I will just hang on to my coin collection. Who knows what a Mercury Dime may be worth soon.

    • Javert Chip says:

      Night Train

      I’m in the same boat.

      Sometimes a pet rock is just a rock. People enjoy the novelty until they don’t, and the value goes to zero, No harm, no foul.

      Except I believe a lot of Bitcoin froth is money laundering. If true, “innocent” (aka: silly-assed) speculators are simply bloody hunks of raw meat in the shark tank.

      States are legalizing marijuana sales (a free people ought to have the right to do this) , but the Fed is not allowing them access to banks. This just seems like a taylor-made recipe for forcing billions into money laundering.

      • Old Engineer says:

        And the more people they deny access to banks and to cash the more of the economy that goes underground. And bitcoins are probably a more practical substitute currency than boxes of Tide.

      • Night-Train says:

        I hadn’t thought about it from that perspective.

        Thanks

      • elysianfield says:

        States are legalizing marijuana sales (a free people ought to have the right to do this) , but the Fed is not allowing them access to banks. This just seems like a taylor-made recipe for forcing billions into money laundering.

        Javert,

        I see something a bit more sinister. Anyone in any state with a Marijuana plant being knowingly grown on their property is subject to RICO laws and loss of their property. both real and physical.

        This is current Federal Law….

    • Robert says:

      I have several thousand Mercs from my youth. Never sold even one yet, but I WILL when necessary. Interesting thing, until reading your post I never really think about them. So, this morning I did. Here´s what a common-date Merc is worth :

      http://www.coinflation.com/silver_coin_values.html

      BTW, if they went to $10.00 each — well then — I would have to sell 1000 of them right away, just because.

      One more thing, people have said to stackers like us, and they say it often, ¨How would you sell them when the time comes?¨ Too easy.

      Those of us who stack (meaning bullion coins) know how to sell them easily and quickly. Mercs too.

  22. LouisDeLaSmart says:

    ///
    The basis of any monetary system is trust. As a matter of fact the word credit comes from latin credere – to trust or to believe. To avoid this situation , let’s call the situation fiat currency, nations have resolved to backing with hard currency…gold. The chemical nature of gold is unique in that it can be found in it’s raw form naturally and does not need much refining, explaining it’s omnipresence in the history of mankind. And it also glitters. Hence, human kind has universally accepted gold as a form of payment, which is nothing more then again…trust. Though Gold is a limited resource, we have been mining it for the last 5000 years and somehow we keep finding more.
    ///
    To claim crypto is a money laundering scheme for evil villains … well the bad guys are doing just fine with the dollar, aren’t they?
    ///
    I think we have to make a difference between speculative and user-designer supported crypto. Bitcoin is here to stay, most of the rest will be obliterated as easy as it came. The price will eventually stabilize somewhat higher then it was previously and they will keep rolling.
    ///
    The problem with bitcoin are currency stability, currency flow and conversion transaction. If money is not used it is not a currency, and if it’s lacks stablility it cannot be used. The conversion transactions have to be regulated, bitcoin needs to ask where the money comes from.
    ///
    Good luck bitcoiners, fortune favors the brave…or maybe it doesn’t.
    ///
    I own no Bitcoin or crypto, but I would hate to see a good idea go down the drain.
    ///

    • Michael Fiorillo says:

      I can see some validity to the argument that the Blockchain is here to stay – I don’t yet see why a new form of accounting will Change Everything, though that’s a topic for another time – but why is Bitcoin here to stay?

      Contrary to the hype we’ve been fed, it’s not truly anonymous, has long transaction/clearing times, and very high transaction costs (to say nothing of the fact that you can’t readily spend it and cannot pay taxes with it), so why should we believe it’s going to Rule?

      • LouisDeLaSmart says:

        ///
        The accounting doesn’t need to change, but it would help keep financial transparency which will build trust of government entities allowing it to flow into the market, making it a currency. Governments…if they can’t tax it, they don’t like it.
        ///
        Bitcoin specifically because their community is very strong and dedicated to making it work (there might be more out there, but I haven’t seen them around). Think of it as iPad, iPhone and other Apple products. They are not the best overall product yet they get away with charging 2-3x the market value because people believe in the product. The Bitcoin community…they believe in their product, and their idea. And have been believing for 10-ish year now. Credere – to trust…in this case to trust in oneself.
        ///

        • Michael Fiorillo says:

          Maybe it’s me, but I’m having some trouble grasping this simultaneous “anonymous” and “transparent” discrepancy.

          If my Bitcoin wallet sends your Bitcoin wallet a payment, there’s a record of that, which can then be traced when you (inevitably, lest your Bitcoin remain functionally isolated and sterile) cash out.

          Where’s the anonymity?

          Think about it: central banks and law enforcement are hot to eliminate cash, which is truly anonymous, yet seem to have limited problems with Bitcoin.

          Funny, that.

        • Smingles says:

          Yes the problem with this is the vast majority of people who are buying into bitcoin, tron, dogecoin, litecoin, et al. don’t actually “believe in the product” because they can’t actually explain the product.

  23. milosz says:

    so,

    lack of volatility in equity markets: blinkered central bank intervention. absurdly lopsided valuations. p/e ratio at comically asymmetrical highs. will surely lead to an epic, horrific crash.

    volatility in crypto markets: THIS MARKET IS SO BROKEN LOOK AT HOW VOLATILE IT IS.

    maybe pick one? isn’t the phenomenon we are witnessing just the interplay of the current historically unique, hyper-asset-inflated economic environment and a market where all means of price discovery HAS NOT been suppressed? yes, there’s many suckers and morons and bagholders in this market. please name a market that is not full of suckers and morons and bagholders (i believe on wall street these are actually called “pension fund managers”). yes, there’s garbage and fraud in this market. please name a market that is NOT full of garbage and fraud. at least here, the market can still behave like a market. but somehow that is a terrible, insane thing? OH WOW BITCONNECT WAS VALUED AT FOUR BILLION BUT THEN IT TURNED OUT TO BE FRAUD AND NOW IT’S ZERO. holy crap that’s never happened in the entire history of asset valuation.

    no one on earth knows how crypto is going to end up playing out. even the most insane bien-pensant techno-chiliasts agree on that. on the other hand, the tulip comparison is patently absurd — only someone in willful ignorance of the underlying facts could make it (but it does play incredibly well with the butthurters, who are falling back to a position of moral superiority to assuage the intense pain caused by people who JUST DON’T DESERVE IT getting rich).

    there is an enormous speculative bubble around crypto — just as there is one in real estate, stocks, and a bunch of other garbage. but complaining about volatility in the middle of a speculative bubble while also complaining about suppression of volatility in the other markets i think is disingenuous (if not straightforwardly moronic). speculative bubbles have been a fixture of capitalism more or less since capitalism was invented, and violent valuation swings are part of the price discovery process. what is the endgame of all the whinging about the crypto bubble? government, please help?

    • Michael Fiorillo says:

      Stocks represent potential corporate profits, and can provide an income stream.

      Real estate can provide housing, food or timber/resource production, as well as an income stream.

      Aside from a fascinating instance of collective madness, what exactly does Bitcoin provide?

      • milosz says:

        what value does gold provide? what value does the us dollar provide?

        what value does a bank ledger provide?

        what value do wire transfers provide?

        if you have even a rudimentary understanding of the underlying system and really believe there is no value proposition whatever to an inflation-proof, decentralized system that allows you to securely access or transfer funds, i can’t really help you. we’ll have to agree that we do not agree.

        is the crypto bubble crazy and stupid: yes, this is obvious.

        is there a value proposition to crypto: yes, also obvious. just as amusing as watching the absurd excesses of the crypto bubble has been watching the tidal wave of commenters (many of them ostensibly libertarian) repeating, endlessly, the same incantations.

        • Michael Fiorillo says:

          Yes, we’ll have to agree to disagree, since

          – Gold has thousands of years of use as a monetary entity.
          Does Bitcoin?

          – The dollar is accepted in exchange for virtually any product
          on earth, and is the only medium accepted as payment for
          tax obligations. Is Bitcoin?

          – The ledgers of a chartered and regulated bank protect its
          customers from theft and fraud. Does Bitcoin? (I’m trying to
          keep the smirk off my face with that one.)

          – At this point, even wire transfers are cheaper and faster
          than Bitcoin.

          – As for inflation-proof, it’s irrelevant for now, since Bitcoin is
          so unstable that is cannot accurately be called a medium of
          exchange, and in fact it isn’t, unless you’re looking to
          purchase drugs, guns or child pornography.

          – Securely transfer funds? You’re kidding, right? Ask the
          hapless rubes who were standing outside Mt. Gox with
          sandwich boards, begging for their money back, how
          “secure” it is.

          The Blockchain may very well have broad functional uses, although I still fail to see why a new form of accounting is going to Change The World, but I’m, at least glad that you agree with me that this bubble is “crazy and stupid.”

          But also quite entertaining.

  24. fajensen says:

    So have crypto hedge funds triggered the collapse by trying to get their money out of an illiquid market?

    Well DuH – No need to get the money out when there are the futures to play with by manipulating an illiquid asset via insider trading. It’s the raison d’être for Unregulated Markets. Maybe 1500 people owns 90% of the BTC ever mined, 400 of those probably know each others email or phone numbers. They would be stupid not to rig the market.

    The pricing behind Bitcoin works like this:

    Me and my dropout neighbour JimBob have 1000 Bitcoin we acquired ages ago for shit & giggles a while back when discussing The Collapse with crazy cousin Jack, who grows his own weed out in the forest and is always paranoid.

    Now, we have grown into older, wiser, colder people. We want to do something in life. Maybe we took an investment class online.

    There is talk about Bitcoin, so, applying our skillz, JimBob buys 5 BTC of me for 15000 USD. In return – ’cause we are not millionaires and stuff here – I get JimBob’s truck. So we are even.

    Except – now we have 995 BTC which are worth 14925000 USD. On top of all that sudden goodness, JimBob has 15000 USD cash, I have a working truck. What’s not to like?.

    With bitcoin futures coming along we can finally Collect, have our (hashish)cake and it it too, see?

    We can now convert the fluctuations from our own insider trading into real, taxable, capital gains and be proper folks. Of course the sharks will also be attracted, eventually they will be the ones gaming the BTC futures market. For now, they are bit-players due to the BTC market structure.

    • Javert Chip says:

      fajensen

      So where is the insider trading in your story?

    • Tom says:

      You could look at this another way :That is that inflation has hit bitcoin to the tune of 50% in just three weeks. What would the msm say if this happened to the dollar?

  25. Dave says:

    Lots of these bitcoin shills are also believers in the global warming myth. Of course, bitcoin mining entails the production of huge quantities of ‘greenhouse’ gasses, but let’s not let destruction of the environment get in the way of naked greed.

    • Jon says:

      You’re saying you don’t believe in climate change?

      And nothing comes close to the detrimental effect animal agriculture has on the planet. Nothing.

      • Michael Fiorillo says:

        Perhaps, but at least that animal agriculture provides food for human beings.

        What does Bitcoin provide, relative to its immense energy footprint, outside the closed system of Bitcoin itself?

  26. Bill says:

    The crypto segment represents an emerging technology that is experiencing a frenzy of experimentation within a largely unregulated space. Many believe crypto technology represents the latest chapter of an exponentially accelerating pace of valuable scientific development. To be sure the crypto space has seen its share of seemingly obvious early hucksters like BitConnect — social media has testimonials of life-savings losses — and other problems due to lack investment prudence and adequate liquidity, among other things. But there is fascinating and reputable cutting edge work being done in the sphere that merits close and continued attention. It is not hard to find.

    • Duke De Guise says:

      Granting every (unsupported) premise you state, that provides no guarantee of Bitcoin’s (or any other crypto’s) value or continued existence.

  27. Dave says:

    It’s interesting to note that China, a country where people have real jobs and produce real things, and once an enthusiastic adopter of bitcoin, has shut down exchanges and is phasing out mining. They also ban pornography. I guess they feel compulsive wanking and playing bitcoin are not particularly productive activities for their citizenry to engage in.

    • RD Blakeslee says:

      “They”

      That one word embodies all the difference from what we at least purport to ascribe to our constitution and its limitations on governance.

      At least ostensibly, “they” don’t decide those matters; individuals at liberty do.

  28. RD Blakeslee says:

    For those crashing the fiat currency price of the cryptos by trying to convert their crypto holdings to fiat; I hear there is a secondary market in Holland that exchanges tulip bulbs for cryptos.

    At a good “price”, too!

  29. Jon says:

    Crypto and blockchain is here to stay.

    The highs are not in yet. Not even close.

    Old ppl just can’t wrap there head around it.

    Millennials now out number baby boomers.

    Millennials don’t trust banks or Fiat.

    It’s millennials world now. Adapt.

    • Duke De Guise says:

      “It’s the millennials world now.”

      Not as long as they have all that student loan debt around their necks.

      • farmboy says:

        It will be interesting to see what happens when society realizes that they won’t pay it back since they now have their own money. Expect the boomers to be forced to pay dearly for assistance in their old age. Their US$s likely will be close to worthless.

        • Michael Fiorillo says:

          Their dollars may end up close to worthless, but it’s highly unlikely that Bitcoin will have anything to do with that.

        • Javert Chip says:

          One teeny tiny problem:

          If you have non-forgivable student debt, and you have lots of assets (call them USD, British pound, bitcoins, gold bars, euros…), if “inspired”, courts can attach & transfer or liquidate said assets.

          Still noe free lunch.

  30. Mortadell says:

    Jon, that’s what I’ve been saying for ages.
    My generation just don’ t realize how fast things change, for good or bad.
    I’m not sure about the cryptos but I think the blockchain will survive and thrive.

    Just one heads up to you and your millennial buddies; I live in a swanky part of town populated by youngsters, hipsters and the like.
    Last time the power went out they were all at my house wondering why I had food, power etc.

    Went down to the gas station with a large quantites of small bills in hand. The guy gave me everything I wanted.
    The rest stood around looking like deer in the headlights.
    A little education goes a long way.

    Long live the WolfStreeters!! (Sounds like a gang doesn’t it?)

    • Kent says:

      “My generation just don’ t realize how fast things change, for good or bad.”

      What change? I live in a house. I have furniture and bedding. I watch tv shows on occasion. I cook food. And it eat. I work for a living. I drive a car to and from work. I have fun on the weekends with friends. We boat, play golf, ride motorcycles, drink beer, have bbqs. I go to the movies on occasion. Sometimes a play or concert. I mow the yard and maintain the home. I talk to people on the phone. I pay bills. My father and grandfather did these things.

      Where is this magical world of the future that millennials live in? Did they finally get jet packs and flying cars?

      • farmboy says:

        Kent The best you had was the the encyclopedia Brittanica and the MSM like National Geographic with its religious ideals that could not be questioned, Today we have the freedom to learn from the most brilliant and out of the box thought leaders from News to Health and History biology on and on. In short we have access to almost free and vast amounts of information that would have been unimaginable 20 years ago.

        And now lets hope we also get the power that comes with owning our own money.

      • Jon says:

        Kent just got owned lol.

        Look, the world is changing and it’s doing so very fast. Adapt or die. Blockchain is the future. Cryptos are here to stay, at what price is unknown but it doesn’t matter. Just wait for the next 10-15 years….With AI integration…. The baby boomers will all be in senior living homes overweight and with health problems from eating too much meat and dairy and praying to a God in heaven that doesn’t exist. Millennials are solving all the problems the baby boomers caused.

        • Kent says:

          “Millennials are solving all the problems the baby boomers caused.”

          Why can’t you or farmboy actually mention some thing that has actually made a dramatic change to our life? Heck, video games came out 40 years ago, and the internet almost 30. Both created by boomers of course.

        • Javert Chip says:

          Jon

          If memory serves (and it does), 18 year-old millennials were able to vote starting in 1998…Obama came along in 2008.

          The national debt has more than doubled while millennials have been voting for the idiots we (all) send to congress.

          Jon, you seriously need to go look in the mirror – you & your cohort are complicit.

        • fajensen says:

          “Adapt or die.” – hah! If that is the thinking, millennials should join this millennium and amount to something.

          See, When I need the sage and per-definition peaceful advice of a radical Islamic scholar, living in year 700 AD and getting year 700 outcomes, I know which mosque to join.

        • ru82 says:

          Bitcoin is not money. Some guy named Satoshi says an encrypted computer file is money and a lots of drug dealers and money launders believe him. Now that belief has spread. IMHO…Crypto block chain files are just a transaction ledger. It is not money until the government says it is.

          I have a bunch of files encrypted on my computer. There not block chains but they are encrypted files. I think I will call them crypto s instead of zipped files. I guess I should see if any millinels want to buy them.

          Anyway….I am pretyy sure the IRS says cryptos are an asset. Assets take many shapes or forms. A car, a house, land or even other digital assets that can be sold for a profit such as digital photo picture, a digital movie, a song, etc. You just have to report your capital gains when you sell or trade the asset.

          One day a block chain may be money but it probably cannot be money created by a lot of anonymous people. Otherwise you will have every “Joe the plumber” creating cryptos.

        • MaryR says:

          What problems have millenials solved?
          Why the ignorant intergenerational attacks?
          What have they fixed ( besides frozen windows 10 computers)?

          Cryptos are in a giant unregulated bubble…

          BTW We overweight useless boomers did so little:
          -ending the draft for unjust wars
          -fighting for and winning the right to vote at age 18
          -becoming activists in the civil rights, voting rights, gender equality and women’s rights movements
          -becoming activists in the environmental movement
          -working and supporting ourselves from age 18 or younger
          -ushered in an era of material affluence
          -ended the existing era of political suppression with the free speech movement
          – brought in an era some of the most fabulous music ever heard
          -Paid some of the highest tax rates ever due to the debt hangover from WWII etc, plus huge social security tax increases to fund ours, our parents, and grandparents retirement ( without complaint)
          – risked our careers and safety by marching in the streets, voting, and organizing and sometimes suing corporations or the government for our (your) rights.

          Much of the above took place well before many of us reached the age of 30…we were not sitting on the couch watching TV or playing games (video or other) in our 20’s.

          We also failed, unlike some of our progeny, to whine about the state of the world our parents handed to us, recognizing that the world they inherited was no better than ours and that our parents suffered deeply through the great depression and WWII.

          Instead of whining, we took action. Although many of our best leaders were assassinated, we did not give up. Unfortunately, our government is no longer responsive to the will of the majority (perhaps it never was)…and this is the major battle ahead.

          Some of the best people I have met are Millennials and I hope they will be the ones to change the world for the better, like many of the boomers and preceeding generations. We always stand on the shoulders of those who came before us. To think otherwise is to live in ignorance.

      • Jon says:

        Javert Chip,

        Who cares about national debt in highly flawed fiat money when baby boomers have destroyed the Earth probably beyond repair unless millennials use technology to save it somehow.

        Baby boomers have swung the pendulum too far to one side with all their inefficiencies and incredibly wasteful way of living (oil, single use plastic, animal agriculture, suburbia, golf courses, etc etc etc) and we are now trying to bring it back.

        • RD Blakeslee says:

          Ain’t neo-religious hellfire sumpin, folks?

        • MaryR says:

          Jon,

          Well the monetary system does matter since the cryptos are not actually a part of it. Thus, cryptos are not legal tender for all debts public or private, but fiat money is….

          Off topic, but responding yet again to misinformation here…when I was a child in the 1950’s signs were up in Aquatic Park, in San Francisco, forbidding swimming due to severe contamination. Water/ sewer projects fixed this.

          My first trip to LA in the 1960’ s shocked me, due to the severe smog that left the sky brown whether day or night. Certain rivers in the eastern US regularly burst into flames due to contamination with chemicals.

          Contrary to your opinion, the environment in the US has improved in many aspects, at least you can breathe the air, swim in SF Bay if you don’t mind 58* water….and we don’t appear to have flaming rivers.

          We do have serious local and global problems in the environment, however, planet earth will survive. The real question is will our environmental niche survive (plant, animal, oceans, climate, soils, and atmosphere) upon which we depend.

          In other words, the earth will be here, the question is, will humans be here?

          Our flawed system is not due to the boomer generation, it is due to Capitalism wherein profits are privatized and negative externalities are socialized (paid for by all).

          Until economies hold Capital responsible financially and criminally for all negative externalities on a long time scale (say at least 100 years) nothing will change.

          If a culture and economy of social responsibility (personal,corporate, government) takes hold, we will have hope that we can save our ecological niche and humans may survive for millenia ahead.

          Perhaps this is the key project for all generations to work on together.

          Peace to all.

  31. C Jones says:

    So many times I hear this argument that ‘fiat currency has no intrinsic value’, that ‘fiat currency is not backed by anything’. This is plain wrong: all fiat currency has real value: It settles a tax obligation with the issuing government. An obligation that all economically active entities have. Furthermore if you are a bank (or other relevant financial institution) a fiat currency settles a reserve obligation at the issuer’s central bank. Both of these – taxes and reserve obligations – are enforced by law. Punishable by fines and/or prison time. That’s the underlying creator of demand for fiat currency. You can go off and do whatever you want in stocks, in USDs, in EURs, in bonds, in gold, in cryptocurrencies … but at the end of the year you owe the government tax and you can only pay it in their currencies.
    Governments are of course superslow to react, which is why believers misinterpret this current sense of freedom it enjoys. But no govt will ever surrender monopoly of the ccy. So crypto ccys will end up on the receiving end of regulation. In fact, it could end up being the most regulated asset in the world because since no sovereign owns it everyone can regulate it. Or looking at it another way Since it must be maintained on multiple servers in multiple locations these host countries could all individually & simultaneously regulate it.

    • Kent says:

      i will take that a step farther. Commerce only happens because of state regulation. If I give you $5000 for your old car and you refuse to give me the car, I can call the state and they will send someone to force you to give me the car, or at least give me my money back.

      All the state has to do is say that they won’t enforce a transaction in a crypto-currency and it immediately becomes worthless.

      The “full faith and credit” really means that the state stands behind a transaction in its currency. And the state has no reason to destroy the value of its currency unless it is overly indebted, in its own currency, to a foreign entity.

      • C Jones says:

        Totally agree.

        Consumers want recourse out of a currency and actually they are prepared to pay fees for it.

        Forgotten your bitcoin password? All your wealth is lost. This is ridiculous. Like beyond insane ridiculous. Made a typo and wired to the wrong person? Tough. This is equally ridiculous.

        Fees are there in banking for a reason – recourse. Maybe they are set too high but the zero recourse on offer with bitcoin is undesireable and unwanted.

    • ru82 says:

      Also….The U.S. fiat currency does have backing. The U.S government has $265 Trillion in assets . These assets are national Parks , buildings , ships, roads, bridges, offshore and alaska oil fields, minerals ,etc.

  32. https://www.sciencedirect.com/science/article/pii/S0304393217301666

    This art suggests there was fraudulent activity in Bitcoin trading, aw shucks, really. Its pay to read so if you have a few extra Bitcoins laying around.

    If the bubble bursts a lot of people who are leveraged up are going to liquidate stocks, real estate, and default on loans and credit card bills. Depending on how deeply involved major institutions have become will the Fed save their ass this time? I think they will only because of their hubris and their secret desire to possess the technology for themselves.

  33. Gershon says:

    To the crypto bubble-chasers: you ain’t seen nothing yet.

  34. raxadian says:

    I am gonna say this, this is basically gambling. Only the house seems to be losing a lot too.

  35. EH says:

    It will be great if u mention about the notorious tether (coded:usdt). Bitfinex claim this so called token to be pegged against us dollar! And the quantity in circulation ballon to 1.65B. Basically bitfinex=”fed” with one caveat. Bitfinex’s term states: “there is no contractual right or other right or legal claim against us to redeem or exchange your Tether for money…”

    • Michael Fiorillo says:

      Quite a departure from, “This note is legal tender for all debts, public and private,” isn’t it?

      No thanks, I think I’ll pass on this one…

Comments are closed.