Cryptocurrencies Collapsed

Ethereum down 52%, Ripple down 57%, EON down 70% in eight days.

A “collapse” isn’t when something edges down 1% in value or even 10% or 20%; it’s when something plunges 50% in a short time.

Ethereum has collapsed 52% in four weeks. The second largest cryptocurrency by market capitalization had surged from $0.95 at the end of 2015 to $8.21 by the end of 2016; a gain of 764% in one year. Then it surged to $400 by June 13, according to CoinMarketCap; a gain of nearly 5,000% in less than six month. Over the 18-month period, it multiplied by 421 times. That’s a 42,000% gain. No wonder hedge funds have piled into this madhouse. But in the four weeks since then, it has collapsed by 52% to $193.

And its market capitalization plunged from $37 billion to $18.2 billion. In other words, $18.8 billion, over half of that $37 billion in imaginary wealth, has been left behind in the imagination.

To be honest, a lot of “investments” these days are like this, but the dynamics here are on steroids, condensing the entire experience from years into weeks and days.

Ripple has collapsed 57% in seven weeks. The third largest crypto coin had surged from $0.006 on March 17 to $0.42 on May 17, to a market cap of $16.2 billion, having thus multiplied by a factor of 70. For percentage lovers, it skyrocketed by nearly 7,000% in just two months. Today it’s at $0.18. Down 57% in seven weeks! Its market cap has plunged to $7.1 billion – down $9 billion in seven weeks.

Bitcoin has plunged “only” 21% in one month. The granddaddy of crypto coins had soared to just about $3,000 by June 12, and a market cap of $48.5 billion. Since then, it has plunged 21% to $2,366 and a market cap of $38.9 billion. Another $9.5 billion down the drain in just a few weeks.

Between these top three crypto coins, about $35 billion in “wealth” has returned to the ether in two months.

However, Litecoin, the fourth largest crypto coin, is on a different schedule. Like Bitcoin, it already experienced a dizzying spike and subsequent collapse from October 2013 through May 2015, skyrocketing 2,500% in one month, from $1.90 to over $50 by November 28, 2013, only to collapse 99% to $1.40 by May 2015.

Then there was another spike, but smaller and briefer. And since March 2017, all heck has once again broken loose. This time, it soared from $3.80 on March 1 to just over $50 by June 20, then plunged, then recovered, then wobbled, and now is once again falling. Currently at $45.09, it’s down only 10% from its peak. Given how things went after the prior two spikes – total collapses toward nothingness – caution might be in order.

EOS collapses 70% in eight days. Another illustrative example further down the list, the 11th largest crypto coin by market cap came out of nowhere on July 1 via an “Initial Coin Offering” – similar to an IPO but without regulations, required disclosures, filings, etc. It’s a free-for-all. Unlike an IPO, an ICO offers no ownership of the company. The tokens are all you get.

Here’s a good analysis:

EOS is going to be one of the hottest ICOs on Ethereum network. Even though, Ethereum is just a place for EOS to fund (EOS will have its own blockchain like Omise Go), I expect Ether price will be supported because EOS will conduct its crowdsale for the whole year! Due to its crowdsale model, I expect that everyone who wants to buy tokens, will be able to do this. The most important promised feature of EOS is its scalability. The numbers are really amazing.

EOS shot up from $1 on July 1 to $5.40 on July 3. That day, there was this interesting analysis:, the developer of EOS, has been great with marketing, as even Reuters and the New York Times wrote about the token. These factors have helped the cryptocurrency nearly become one of the top 10 biggest cryptocurrencies by market cap, as according to data from CoinMarketCap, EOS is currently number 9 with a $747 million market cap, each token being worth $4.68.

Now it’s at $1.61, a collapse of 70% in eight days.

The hope is that dip buyers will soon be piling into all these tokens and make current holders whole again.

These price movements are like those of numerous highly regulated and even more highly touted IPOs. It just doesn’t play out over months and years, but over a few days. It’s a very concentrated form of nerve-tingling addictive fun that gets people to check their apps furtively every few minutes during even important meetings – and some of them disappear to the bathroom to vomit.

But the company behind EOS raised $185 million in real money. That’s serious business. EOS was the largest ICO ever. Days later it was surpassed by Tezos ICO, which raised $200 million in four days and continues to raise money but hasn’t started trading yet.

Whatever the company might be doing, buyers of ICOs are not getting any ownership in it. They’re getting the tokens and the hope that those tokens will fund their retirement and that they don’t ever have to sit through another shitty meeting again. Meanwhile, the company gets their real money.

There are now 970 of these tokens – 812 “currencies” and 161 “assets” – according to CoinMarketCap. Over 100 of them have been added over the past two months, as everyone and his dog can do ICOs and issue new crypto coins for others to buy with their real money. Getting people to buy them is another story, as attested to by hundreds of now worthless or nearly worthless crypto coins in the pile.

But once the hype takes, particularly if you get some googly-eyed writers at the mainstream media to fawn over it, it’s a miracle to behold.

Given the rocket-like price appreciation when there is concentrated buying, hedge funds are now touting their crypto coin investments. Throwing a few million real dollars at one of the smaller crypto coins can produce price surges of thousands of percent. And a few hundred million thrown at larger crypto coins, along with the requisite hype, can unleash real fireworks.

But trying to get those millions or billions (?) of dollars out? Big players have a hard time selling these coins in large quantities for real money: there are no market makers, and liquidity evaporates when the selling starts. Just as large buys cause price surges, large sales – as these buyers are trying to get out – reverse those surges. Hence the enormous swings, where billions of dollars in “wealth” are created in just days that then evaporate nearly as quickly.

But those who got in early and get out in time walk away with huge gains, at the expense of the later arrivals whose money allowed the early comers to exit. In this too, these tokens aren’t all that different from other overhyped investments. It just happens in a much shorter time-frame with much higher percentages. Since the tokens trade all the time, the nerve-tingling fun is 24/7, so you can get your shot of adrenaline in the middle of the night. And when your tokens get crushed, there’s always the hope that next time you look, they’ll be back up.

There are some factors in the stock market that are like a tsunami siren that should send inhabitants scrambling to higher ground. But this one will be ignored until it’s too late. Read…  Stock Market Tsunami Siren Goes Off

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  132 comments for “Cryptocurrencies Collapsed

  1. John says:

    “meanwhile the company gets their real money” — that’s the money shot Wolf

  2. Matt P says:

    Next time I have the urge to buy a lottery ticket, I’ll just look for a cheap ICO that’s around $1 or $2 and see how it plays.

    • OutLookingIn says:

      The old saying:
      “A fool and his money are soon parted”.

      Or the one attributed to W.C. Fields:
      “Never give a sucker an even break”.

  3. Contrarian Sam says:

    Instead of yet another cryptocurrency that is based on vaporware, how about a leveraged hybrid cryptocurrency that combines some aspect of vaporware with fractional holdings of a real commodity like Gold, Silver or another precious metal (or their futures if its problematic to hold physical commodity). This can be an alternative to fiat currency, yet hold some real residual value in the event of a crash. Thoughts?

    • Gary says:

      I think there’s one called bitgold.

      • Dante says:

        And Unity Ingot. Interesting concept.

      • Hardball says:

        no, bitgold is physical gold which you hold in a vault but can have it delivered home, too. you can convert into cash and make payments in gold electronically on this platform, but it’s not yet traded on some obscure exchanges like these cryptos

    • Kc says:

      Not surprised in etherum collapse real value was always in the technology not ether itself plenty of valuable private ether. Too many. Investors muddled these up.

      Several of these. Facta fincent put a lot away from us investors.
      The real issue is they are not easy to redeem. They might be backed 1:1 without a trusted redeemer they are worthless.

      A lot of bitcoin surge is because it is the only fungible one. Altcoin to bitcoin to gold

    • houtskool says:

      Or fully backed:

  4. andy says:

    A microscopic slice of bewildering insanity on generational scale.
    10-12 Trillion dollars will vanish from investment accounts bu the time it’s all finished.

  5. polecat says:

    ‘Coinpocalypse’ now ! lol

    ‘either’ IS the apt description …

    Hey ! … I gots this here digital coin I’ll sells ya … it’s called ‘PoofPence’ …
    Wanna buy in ??

  6. Hiho says:

    A bunch of suckers jumping from high buildings in 3, 2, 1…

    • milking institute says:

      Anybody remember the Pyramid schemes in the 90s and early 2000s? i used to go to big lavish parties,the streets jam packed with lexuses (lexi) and mercedes,the people that got in early made out like bandits. all you had to do was bring 3 friends with check books and voila,you where in the game. me,as usual late to the hype not only lost 2K but some friends as well. what i am trying to say is this whole crypto scheme brings back memories of easy riches and heartbreak. i’m not saying these thing can’t go ten fold from here,just don’t put up your rent money. silver and gold for me,has been around since before the roman empire and it’s on sale! LOL

      • robt says:

        Ha! I got stung for 100 dollars* in, I think, 1966. But I did move out of town shortly after – so who knows – maybe all my loot went into ‘undeliverable’.
        At least I considered it a crap shoot, with no high hopes.

        *that’s 1000 dollars today!

  7. Lee says:

    Crazy, isn’t it?

    How would one even buy these things?

    And if you bought, they went up, and sold how would you get cash in hand to use to pay for things such as gasoline?

    All a mystery to me.

    • alex in san jose says:

      i don’t understand ’em either. If I can’t hold it in my hand, how is it real? And to keep it, somehow, on a computer? I do all important calculations on paper – I can touch them, they’re real. As i like to say, counting is too important to trust a computer to do.

    • robt says:

      GDAX will transfer your funds to an FDIC bank (Thus their claim to be ‘FDIC insured’). Local Bitcoins you can meet someone on the corner with cash, or transfer funds to a bank, accept or offer gift cards, etc. Localbitcoins has a forum where traders discuss various methods to use, and not to use, and is replete with horror stories. Don’t use PayPal! Payments can be reversed after transfer of coins. Also, proof of bank deposits can be reversed, or falsified.
      discl: I don’t, and won’t, trade in coins of any type.

    • Dennis D says:

      I put 145.00 into xrp in early July cashed out and went to dgb, when all was said and done my 145 turned into 5085.00 in less than one month.
      Try it its fun..

  8. Crypto expert says:

    As I said previously, the crypto “currency” markets are heavily manipulated by people who set up many many dozens of dufferent accounts, start trading with themselves using bots at artificially increasing prices, drawing in suckers who believe these trades are at arms-length. Then they cash out. And repeat. It is beyond me how people fail to understand this. Wolf, I love your blog, you are clearly a smart guy. Why don’t you research this topic a bit further and blog about it? Thiswould really do a great service to all those naive speculators out there who get sucked in and end up with the bulk of the losses each time. This will never stop until the scam is brought fully to public attention. For what it is worth,
    I am a cryptography expert who actually understand the nitty gritty detail of Bitcoin and similar systems, up to and beyongd the ins and out of hash function security. The Proof-of-work e-“currency” fad is just not an emperor with no clothes, that emperor is a puppet of fraudsters. PS fake email address, I prefer not to get death threats from people who are heavily invested in Bitcoins etc, as is not unusual for anyone who has serious critique…

    • nick kelly says:

      ‘I am a cryptography expert who actually understand the nitty gritty detail of Bitcoin and similar systems,’

      And you want Wolf to study up on what he evidently thinks is Tulip Bulb. 105?
      You are preaching to the choir.

      If nitty gritty is wanted (we’ll have to see comments) and you know all about it, go for it.

      Personally I think the whole thing is a solution in search of a problem.
      And anything done online can be hacked.
      There has already been a major, virtual (but successful) theft of Bitcoin.

      • Crypto Expert says:

        This is beyond tulip bubble. I can start a new crypto ‘currency’ today, do a ‘ICO’, register or set up one or more online ‘exchanges’, and I can make my new currency miraculously shoot up in value. All I need to do is write a script that creates dozens, or hundreds or thousands, of what look like different identities (‘addresses’) and start buying and selling among these at fake prices that my little script is set to go up, mimicking a somewhat random walk lognormally distributed around an upward trend line (just like stock on public exchanges do). Then, like a fisherman who fishes where there is no fish but fakes catching fish, I wait for observers to offer to buy my spot, thinking they will cash a lot of fish. This kind of massively automated scam has never occured with the tulip bubble, obviously.

        • Wilbur58 says:

          Well then for god’s sake… do it!

          Show me and I’ll do it. We can do it together.

          I don’t begrudge Wall St. for speculation in markets. I begrudge it for taking over a government and getting others to pay when they lose. I begrudge it for municipal bond rigging, LIBOR rigging, money laundering, etc.

          The stock market ought to be ‘buyer beware’. The winners win and the losers lose.

          If you can get rich playing around with zeroes and ones, what on earth is stopping you? You like having a boss or something?

    • bmanj says:

      I’m not a crypto expert, far from it, but I know enough to realise they’re dangerous and a lot of naïve people will lose a lot of money.

      I don’t know why governments don’t join forces to ban cryptocurrencies.

      They’re akin to a pyramid / Ponzi scheme whereby the late stage “investors” transfer wealth to the early adopters – and that’s illegal.

      There’s rampant price manipulation whereby the same person bids up the price by being the buyer and seller – and that’s illegal.

      And they’re used to pay for illegal goods and services.

      The block chain technology – which I don’t understand – apparently has some very useful applications. But cryptocurrencies are a danger to society. Ban them.

      • Crypto Expert says:

        Blockchain is another fad. It is just the digital timestamping with the addition of public kes sdded to the hashes. For any trustworthy application, you want known parties that are regulated or under your control or oversight to do the ‘timestamping’ – not a bunch of anonymous ‘mining’ dudes whi can corrupt the entire system if they pool their resources to over 50%

        • ru82 says:

          spot on.

        • fajensen says:

          You are right but “The Market” demands deregulation and globalization.

          Block chain is the perfect tool for turning everything into a genuinely OTC market experience. It even scales.

      • tagio says:

        “I don’t know why governments don’t join forces to ban cryptocurrencies. ”

        Not in their interest to do so. For one, it competes with and suppresses upward pressure on the price of gold, which is like kryptonite to fiat systems. For another, they ultimately have to crash the credit system anyway, cryptos are a great way to make billions disappear overnight.

    • Lotz says:

      Christ another self proclaimed expert !

      Here’s your lesson for today the word HODL.

      HODL- An enthusiastic misspelling of Hold, prompting bitcoin users to avoid the temptation of selling off their coins once price starts rising.

      • Crypto Expert says:

        I actually have a PHD in modern crypto, and many scientific articles in top peer-reviewed conference proceedings. So, self-proclaimed, not at all. And what about you, a naive Bitcoin speculator, I take it?

        • nick kelly says:

          Which institution offers degrees in crypto?
          Which of course is distinct from doing a thesis on crypto for a PH.d in say, math.

        • Crypto Expert says:

          Yes, the PhD is in mathematics, the topic was cryptographic in nature. As was obvious to you from the shorter way of stating it. You have a PHD in nitpicking, I take it?

        • nick kelly says:

          In the three plus years I’ve been on this site, I’ve never before seen the word ‘expert’ in the ‘handle’

          If you say that you have to expect inquiry as to your qualifications. I know some experts, they let their expertise speak for them.
          YOU said ‘Ph.d in modern crypto.’
          There is no such animal.
          You didn’t answer the question: which institution?

          BTW: I post under my name.

        • Jim Graham says:

          You wrote: BTW: I post under my name.

          Any idea how many of us do that?

      • Crypto Expert says:

        On a related note, no reputable professional cryptographer I know believes in Bitcoin and its derivatives. Almost all the research on it is published by amateurs who, I suspect, are invested. The only exception are a few top cryptographers who have written on the theoretical model, which has nithing to do with practice – it us fine for a computer scientist to ponder about identities that are modelled as independent proof of work units, but one must keep in mind that people are nothing like that: one person can assume lots of these ‘identities’ and many people can collude. In practice, the theoretical assumptions needed for the systm to be secure do not hold at all.

        • Mike Earussi says:

          Anyone stupid enough to invest in a pipe dream gets exactly what they deserve. Human Nature doesn’t change, and the P.T. Barnum saying that there’s a sucker born every minute will always be valid. And for every sucker there’s a wolf to eat them.

        • Jacob says:

          I somewhat like the idea behind Bitcoin et al. But I can not imagine ever buying one of these “currencies”. For one, because it is not a currency and does not behave like a currency and is not for the most part marketed as such. A currency facilitates trade and it does not move markedly in value from one day to the next. With cryptocurrency, I may sell my bike today and buy a new car with the proceeds a little while later. It can also work the other way around and the “currency” I got is a little while later only enough to buy a cup of coffee. Except the coffeehouse doesn’t actually accept cryptocurrency as a form of payment meaning I actually have to trade the cryptocurrency for real currency before the trade with the coffeehouse can take place.

      • Crypto PhD says:

        If you would have a better understanding of Internet security and privacy than you seem to have of Bitcoin, you would be unlikely to use your real name.

    • Agreed says:

      Crypto, your first paragraph is EXACTLY what the NY FED and the countries’ 5 largest hedge funds (think revolving door w/Fed like Citadel) does with the US equity markets…Hell its what all the CB’s of the world are doing now…..Mystery buyers of US Treasurys popping up out of Belgium!? Please man this whole market is fake…..Silver prices are tick for tick inverse with usd/jpy…The entire MARKET is tick for tick with usd/jpy…
      Price discovery and free markets is fake news

      • kam says:

        Belgium is exactly what “swaps” are. I’ll give you $100 billion US dollars for 120 billion Euros. You hold my worthless promises on your books and I will hold yours.

        • fajensen says:

          Nevertheless, since 2008, as a reputable financial institution, I can borrow EUR at the ECB using your contract as collateral … it’s amazing that banks still manage to fail.

      • rj says:

        Exchanging FRN’s for constitutional money is not really speculation to me, more like a hobby.

        I find ebay to be as close to a free market as there is in the US, but it doesn’t offer leverage, so momo’s generally avoid it unless they’re buying something for real.

        There’s no way the CC companies will ever surrender their vig without a fight. Letting or encouraging these unicorn currencies to reproduce exponentially is certain to end this fad.

    • robt says:

      If Wolf, or anybody, was even inclined to write a blog to warn naive speculators it would do no good. The people that are caught up in manias are like members of a cult – no matter how much they’re warned against it, historically they never stop believing, often even after their last cent is gone.
      Anyway, from the Ethereum FAQ:
      “What is Ether?
      Ether is a necessary element — a fuel — for operating the distributed application platform Ethereum. It is a form of payment made by the clients of the platform to the machines executing the requested operations. To put it another way, ether is the incentive ensuring that developers write quality applications (wasteful code costs more), and that the network remains healthy (people are compensated for their contributed resources).”

      Maybe you can make sense out of the above. Ethereum seems like shareware and ether seems like money, or maybe just coins you create that get sold for money. Or something.
      Ethereum is a ‘non-profit’ that solicits donations. Apparently you can get a Unicorn for donating. A Unicorn is a commemorative token.
      And here’s how to set up your own coin – have fun, or at least a good head spin. If you figure it out, maybe you get a Unicorn too, or a good fleecing, or maybe you could fleece someone you don’t know that could never find you:

  9. fledermaus says:

    The crypto coin thing has always baffled me. It’s not like there places to spend them on actual goods or services. Even if you own them in large quantities before the price pops, there aren’t going to be a bunch of other suckers paying the inflated price in the sort of quantities you would need to sell. It seems that the only people who would “invest” in these things are people trying to catch a falling knife, or people who want to sound savvy and in the know at parties

    • polecat says:

      Sign of a new ‘permanently high plateau’ .. ??

    • Rates says:

      I think cryptocurrencies are BS, but at the same time when people mention that there are no businesses accepting them, it’s also BS.

      Come on man, you use the Internet no? Just type in Google before making statements.

      • ru82 says:

        Supposedly…..No, Big Companies Aren’t Really Accepting Bitcoin

        In other words, Dell, Expedia, Microsoft, and Time, Inc. don’t actually “accept” bitcoins, per se. They accept U.S. dollars. It’s their bitcoin processing partners who accept bitcoin. They, in turn, make money on transaction fees (in the case of Coinbase), or by selling their software and services as a subscription (in the case of BitPay).

        BitPay, which has partnered with Microsoft, Newegg, and other merchants, confirmed to MONEY that the majority of its major clients ask that their bitcoins be instantly converted to cash. “I would say as a general trend most of our larger business do choose a settlement in 100% U.S. dollars because that’s how they do their accounting and finance,” said Tony Gallippi, co-founder and executive chairman of BitPay.

        But make no mistake, just because Dell and the like are letting their customers pay in bitcoin doesn’t mean they believe in the currency. It’s just that intermediary services have made it possible to accept bitcoin without really accepting it. If anything, that shows corporations still don’t trust bitcoin with the one thing a currency needs to do: hold its worth.

  10. Rates says:

    The irony with these stupid currencies is that that the real money is still made on an existing currency. Whatever happened to the whole idea of store of value etc.

    “Abandon all hope, all ye enter here”

    • Really? says:

      “Real money?” Where can you get some? Surely you don’t mean the fiat stuff used globally today.

      Think about it. Aren’t these crypto currencies just another form of fiat?

      • nick kelly says:

        Since ALL currencies are fiat (i.e. not convertible to gold at a fixed rate) it is meaningless to refer to ‘fiat currencies’. It’s like saying ‘all air breathing mammals.’
        The Swiss franc was the last gold- backed currency, In a referendum, it narrowly lost that status. Does that mean currency issued by Switzerland is worthless? This is equivalent to saying the undertakings or promises of the Swiss state are worthless.

        What’s your definition of real? Is it something you can touch, eat, drink etc.?
        Place US $ or yen or euros on the table and away you go. What’s not real?

        Currencies, like law, are social constructs. Gold, with few intrinsic uses, is valuable because people value it. Its value is by agreement. If the element vanished overnight, apart from finance, what would be the difference?
        If copper vanishes, big difference.

        • Wilbur58 says:

          Sorry to nitpick, Nick, (and no alliteration intended), but I believe gold conducts electricity better than copper. It’s just more scare and expensive to mine, right?

          So intrinsically, gold is the more conductive metal. It’s the scarcity and perceived beauty that might make it appear less useful than copper.

        • ru82 says:

          Wilber58. Silver is the best conductor. Copper is second and gold is 3rd.

          Now Silver and Copper will oxidize. The unique beauty of gold is that it will not oxidize. A thin oxide layer is enough to ruin an electrical contact. That is why high end audio will have gold plated connectors and the copper cables will have oxygen free cladding .

        • Wilbur58 says:

          Hi Ru82,

          Thanks for the correction. I guess I had heard or read wrong.

          Is it safe to say then that we don’t have silver wiring all over the place because of scarcity / beauty?

        • Troy Ounce says:

          Funny, you’re arguing against the use of gold and silver as money for 4000 years. And since when must money be useful to become money?

        • Dan Romig says:

          Ortofon makes phono cartridges that have silver plated copper wiring in their ‘split pole pins’ for maximum conductivity. The 2M Bronze cartridge with a Fine Line stylus will be my next replacement cartridge for my Linn table and arm.

        • nick kelly says:

          During WWII copper was in such short supply that when miles and miles of wire were needed for the Manhattan Project, Fort Knox disgorged many tons of silver to use instead.
          It was later reclaimed and melted.

          Among gold’s other attributes: it is the most ductile and I believe the most malleable. It can be drawn into the thinnest wire and pounded into leaf so thin it is translucent. This is done by pounding between rabbit skins.

          But its most important (non- aesthetic) property is its density, it is 50% more heavy than lead.
          Unlike silver, it can’t be counterfeited by alloying, or drilling a bar and replacing the cavity with a plug of appropriate weight.

          Once the volume is known, the weight would detect any attempt to substitute any other metal.

          I can’t recall if plutonium is even more dense, but no naturally occurring metal is.

        • Nick, “Since ALL currencies are fiat (i.e. not convertible to gold at a fixed rate) it is meaningless to refer to ‘fiat currencies’.”

          Historically, currencies were usually NOT fiat, so “fiat currency” is a meaningful distinction between the current “dollar” and the previous “dollar”.

          P.S. The fact that economists failed to rework their entire discipline when Nixon changed the fundamental nature of the currency is yet more proof that econ isn’t a science.

      • Hiho says:

        No, the point is that they are not even currency. According to almost all economic textbooks, money is defined by a list of properties which we all know (store of value…).

        However, that is bullshit, just as the entire universe of junk economics. I prefer the mmt definition. You can pay taxes with it? Then it is money.

        • robt says:

          The Emperor Constantine maintained the privatization of tax collection in the Roman Empire. The catch was that the citizen could pay his taxes to the collector in debased coin (copper coin with a silver wash, whereas the original issue of coins were almost 100% silver) at face value, however the tax collector could not submit debased coin to the State in payment but had to submit revenue collected in face value gold coin.
          Government is never stupid when it comes to ‘money’. Notice the official US Mint gold and silver coins are marked with ludicrously low face values – 50 dollars for a 1 oz Gold Eagle, 1 dollar for a 1 oz Silver Eagle. Of course, originally the face value of the gold and silver were equivalent to the content of the metals.

        • nick kelly says:

          An English penny from mid- 17 hundreds is bigger than a modern silver dollar and about a quarter of an inch thick. Even though its only copper (or alloy) you are getting quite a chunk of metal, which apart from the King’s image made it a store of value.

      • Hiho says:

        Besides, all these outcry about “ooh € $ are also fiat” is just zerohedgers et. Al. Trying to convince themselves that their holdings of cryptotulips have some kind of intrinsic value and thefore they have not been cheated once again when pursuing their dreams of joining the rentier class.


  11. Bobber says:

    The lure of big money makes men forget about the odds and the fundamentals. The thought of having a $50M yacht, packed with girls in bikinis, is all that matters.

    • Crazy Horse says:

      Now that’s a real store of value! (the harem)

    • kam says:

      A girl in a bikini that is worth having is not going to be on a $50 million dollar yacht. Short term rental only benefits the renter. The rest are fools.

  12. Camerons says:

    Casinos open 24/7 around the world with no regulations, taxing, laws…
    This is has to be the reincarnation of the tulip mania. It’s kind of a digital tulip version. With Tulips at least one could enjoy the bulbs for a while.
    I don’t know that I could even label these so called coins fictitious capital. Creators/Players probably think that if central banks can create money out of thin air why can’t cryptocurrencies? The difference is that central banks dilute real currencies/monies whereas these “coins” dilute nothing because they are made of nothing backed by nothing. Real negative interest rates can do magic.

    • David, by the lake says:

      Real assets, like land I can farm (ok, extensively garden), and skills/tools, like being able to brew beer or make cheese, and social capital, like a network of friends and neighbors with whom I can exchange produce and labor, make far more sensible investments and are much better stores of value. I cannot fathom this world around me sometimes.

      • RD Blakeslee says:

        I’m with you.

        But are invested in cattle futures, March 2018.

        The calves arrive then.

      • TJ Martin says:

        ” I cannot fathom this world around me sometimes ”

        Trust me when I tell you ….. those who think they can … are fooling/deluding themselves or have become addled by one substance or another .

        • RD Blakeslee says:

          TJ, I agree.

          But I think one can get a better handle on one’s personal world, if it is deliberately limited and insulated from the “larger world”, so to speak.

          For example, there has been no experience in my life more warming and humbling than seeing a newborn calf up under mama for its first breakfast on a subzero morning. It lived, where you and I would have frozen to death.

          In that moment, understanding is primordial and nothing else matters.

      • polecat says:

        I have my Honey right here …. all 50 lbs of ‘er …. no need for a bikini either cuz my bees don’t wear em !

        Upon reflection, I suppose you could refer to honey as ‘BitBee ?? ….. considering how many trips it takes a bee, flying through the ether, to make a teaspoon of it ! But hey, at least they produce a tangible product.

    • kam says:

      If, by magic, you mean destroy economic signals to producers, then yes, it is magic. Black magic.

      When Monetary Policy is bent on creating money and credit faster than you can earn it, then only those closest to the money/credit spigot benefit while all others are left in the dust.

      A Welfare state at the top and the bottom, while the producers in the middle walk away from the rigged game. Stagnation, no real economic growth, no earnings to pay back “rents” to the money/rentier class and no earnings to tax to pay for those that live at the bottom tier.

  13. VegasBob says:

    It’s all a series of PONZI schemes…

  14. R2D2 says:

    But I don’t think all the valuation vanishes; I think a major part of the valuation is transferred from suckers to the creators of the ponzi scheme or the early adapters. It’s a great method of wealth transfer, and I wouldn’t be surprised if Wall Street crooks are pulling a lot of the strings.

    • Wolf Richter says:

      Yes, it’s a wealth-transfer scheme. But if the value of the token goes to zero (as many have already done), no net wealth is created. It’s a zero-sum game. And in the end, the value vanishes.

      To use a very simplified example.

      Person A creates Acoin and sells it to person B for $100. Person B sells it to Person C for 200, who sells it to Person D for 300. Now there are no more buyers and the value goes to zero.

      What happened with the money?

      Person A (the creator of the coin) put in nothing and walked out with $100 profit from Person B.

      Person B put in $100 walked out with $200 from Person C – makes $100 profit.

      Person C put in $200 and walked out with $300 from Person D – makes $100 profit.

      Person D put in $300 and lost it as value went to zero.

      So all participants combined put in $600 and got out $600. It’s a zero-sum game in the end. No value was created. But Person D’s wealth of $300 was transferred to Person A (creator), Person B, and Person C. They got out in time. Person D paid the price.

      Then, of course, there are expenses involved. So it’s not even a zero-sum game.

      • Chris says:

        Excuse me, Wolf: I’m confused. i. “and got out $ 600”, what do you mean?

        ii. “But Person D’s wealth of $300 was transferred to the creator, Person A, Person B, and Person D.” The creator got $ 100 for nothing, nada. And you mean “C”, not D.

        iii. Indeed, person D is holding the bag and loses everything.

        Like the issuer of a bond, once its placed, he got the money and could forget the bond’s fate. (I can’t see how the issuer benefits from subsequent price hikes, unless he will keep on selling “coins”, which is his privilege.

        Q: where is the VALUE coming from? Usefulness, hype, irrational exuberance? The coins are backed by nothing… They were basically worthless and will return to that status when the market realizes the worthlessness.

      • Stevedcfc72 says:

        Hi Wolf,

        Hope you’re well.

        Thanks for the description above reference the zero sum game.

        Using that description it does sound theoretically like a Pyramid scheme.

        Person A Creator makes his money

        Person B – Hedge Fund Companies make their money

        Person C – A few lucky people make a small profit

        Person D – General Public take the losses when the value falls to zero.


      • Thor's Hammer says:

        All depends upon where you are on the food chain.

        Wo Fat bribes a banker in China to loan a trillion yen to build a new city.

        Wo Fat hires a contractor(s) to build the new city for a half trillion, leaving out the re-bar and sheetrock.

        Wo Fat send #1 Son to Vancouver with a few hundred thousand legally obtained loonies in his pocket to buy Lamborginis and blow.

        Soon thereafter a half trillion in Bitcoin materialize in the Panamanian trust account of #1 son. (who is blocked from converting them without daddy’s approval)

        As soon as the Bitcoin are exchanged for dollars or loonies , skyscrapers begin to grow on the Vancouver skyline.

        And yet people argue that Bitcoin have no use value. Try to perform the same operation with gold “real money”.

      • Matt P says:

        It’s actually a net negative game since those who create the coins spend ever increasing amounts on electricity and computer hardware to mine them. This doesn’t even mention the labor lost writing the code for the coins.

      • R2D2 says:

        Thanks for the explanation Wolf. Now, I get what you mean by valuation going to zero.

      • d says:

        Just a new version of pump AND DUMP. Or Ponzi/Pyramid

        Depending on how you term it.

  15. Suzie Alcatrez says:

    I want a WolfStreetCoin!

    • milking institute says:

      Yeah Wolf,time to monetize this operation,THE WOLFCOIN! just add a pay pal option and let er rip!

      • alex in san jose says:

        That’d be great and hilarious. A 1-oz. silver round with a Wolfstreet design. I’d buy one.

        • nick kelly says:

          There was a private mint on Salt Spring Island just off Van Isle.
          It mostly minted silver coins. It is legal to do that. You can even have a denomination but in Canada you can’t use Queen’s Pic.
          I guess this to show its not Canadian currency.
          I wonder if you could use a deceased Royal?
          Anyway some of their stuff has nice art work and is collected.

          They have one with a pot plant.

  16. Tom Stone says:

    It must be one hell of a big turnip truck and one hell of a bad driver.

  17. Krupt says:

    Can we at least stop calling these “currencies”!? At best they’re currency laundering tools. At worst they’re ponzi-schemes.

  18. John Barnes says:

    The tech bubble blew up in spectacular fashion and yet here we are on the internet with a full blown tech economy and a literally changed world.

    Cryptocurrencies will blow up but only a fool would think they are not here to stay.

    I look at many of these tokens and am reminded of all of the ridiculous dot com start ups.

    • alex in san jose says:

      John Barnes – I live in the epicenter of “tech woo” and yeah, all the silly names … one downtown is called Electric Cloud, of course the Reddit cloud-to-butt filter would make it Electric Butt which is much more entertaining. Robotics is pushed hard to kids here; all the kids are building robots.

      Everyone’s got a startup. I just sold a lab incubator to some Russian gal up in SF who sent me a message, she hopes it works OK because it’s for her startup. I was in “TechShop” today looking at how they could be useful for *my* startup. I just made friends with a guy who liquidates the equipment left over from failed startups.

  19. Patience says:

    Central banks have printed so much currency around the world that everyone is trying to place it into assets that aren’t manipulated. It’s just one more “safe” haven that will turn into a bubble. Most everything else is already there.

    Confidence is becoming lost in currencies as they print out of control, or actually just add digits on a screen.

  20. Jim Graham says:

    The BIG LONG CON….. It is NOT a Ponzi or pyramid scheme – it is worse and will become to be known as the BitCoin Con.

    “””Given the rocket-like price appreciation when there is concentrated buying, hedge funds are now touting their crypto coin investments..”””

    What in the world is a hedge fund doing in crypto – UNLESS they started the “investment” to rip off the great unwashed……??

    I know nothing about “mining” where crypto is involved.

    HOWEVER I do know what “pump and dump” shysters do and how they accomplish it. Those crooks would (maybe ARE) do just what we see in the crypto market – – a long con. BUT – to go one step further (not likely) and erase the ability of many victims to seek redress. BUY BACK AT THE BOTTOM and then bail, leaving few, if not any, to seek redress..

    As far as why the governments putting a stop to the scheme is not done – the CASH has to appear somewhere sometime – and when it surfaces they can collect some taxes on it. Or grab it all…

    In the end the crooks will end up with the CASH to stick into things that are real – stocks and bonds (even the “fiat” ones), real estate bought at todays high prices and sold at a “loss” to one of their henchmen when that market crashes, take the “loss” on their tax return and have none of THEIR money tied up in all the dealings. IF all their investments take a real 50% hit (or worse), they had next to nothing out of THEIR pocket and they keep ALL THE CASH that is left after the big crash…..

    Does that scenario make sense? It does to me….

    IF I were a crook I would be proud to have this con named after me!!

  21. Patrick says:

    This is the week that Blockchain died and it’s all over for Bitcoin & Ethereum.

    If you believe the statement above then there’s no need to worry about having missed the boat; you’re all set to watch from the sidelines and gawk while fools lose their money. If not then what are you waiting for…these are on sale.

    • Frederick says:

      Yup Gold and Silver are true value and really undervalued right now especially Silver 80 to 1 Gold/ Silver ratio

  22. Kf6vci says:

    Amazing, what BELIEVERS can conjure up in their minds! Money for nothing… No “full faith” of a country or a state standing behind these currencies.

    Private people have created tokens, but those need to be earned by babysitting an hour or something.

    BITCOIN can be traded as CDF with a leverage of 500. Now t h a t’s a wild speculation!

  23. I hate cryptos they made me money says:

    interesting comments

    I actually hated the cryptos so much I bought some along with some physical gold and silver.

    The craptos were soooo bad that they dramatically outperformed my holdings of real physical gold or silver.

    What other stuff do you lot hate? I want to make more money.

    It reminds me of the goldman sachs thing – bad is really good and good is really bad

    • TJ Martin says:

      Either you had the sense to set reasonable cap limits having done a Hit & ( take the money and ) Run strategy .. or you’re pulling the wool over our eyes . Question is .. which is it ?

    • Frederick says:

      Hold onto your metals and they will shine Sell your cryptos and add to your Silver hoard IMO anyway

    • Smingles says:

      What was the point of this post? Other than to brag about how much money you allegedly made?

      Quite the thin skin.


  24. hiho says:

    Looking on the bright side of this matter, I think it is wonderful that all this speculative, greedy and freely stupid money gets sucked in these ridiculously obvious virtual scams, instead of futher blowing bubbles in tangible assets such as housing or essential commodities.

    We cannot live inside a bitcoin or eat them (as far as I know). So from this point of view it would be even healthy to have more of these ponzi-schemes to attract money that otherwise would (further) inflate the price of real-tangible things we need to survive.

    For all I care, every single of those “investors” can lose their shirts. It’s not that I am going to cry. That’s what happens when greed blinds someone and he/she tries to go for the windfall.

    • edible investments says:

      cryptos have been likened to the wild wild west, many dangers many opportunities.

      interesting to see that even new ideas still have room for the continuance of planet ponzi ‘s old world charms like ponzi schemes.

      Although I thought ponzi schemes were set up on purpose for enrichment of the founders?
      I will admit I have been enriched nicely but I was a bit late to the party (btc at $30/40 mark) and have had nothing to do with the creation of said ponzi.

      Maybe I could get in earlier eg launch my own coin call it ponzi coin
      nah too much effort when I’ve easily made good money from just old fashioned investment in a backed by zero crapto (sorry I mean’t backed by zero and 1’s)

      • Hiho says:

        I say ponzi because of 2 reasons:

        1) it is a zero sum game.

        2) early players’ earnings are paid by people who join later.

        Ponzi is as ponzi does.

  25. Manuel Barradas says:

    Did any of you readers of Wolf for a second thought Central Banks Cartel would do nothing about Crypto’s ?

    They got in the game. Bought as crazy with fake fiat and blew Cryptos from the inside.

    No moneys lost (just fiat), and still no competition to their fiat cartel.

    We gave CBs the power to do this (and worst) as we morally accepted QE

    • Hiho says:

      Not need for cb to intervene. Ponzi schemes always end, it is a matter of time.

      • edible investments says:

        which coins are a ponzi scheme ?
        or are all 900+ coins ponzi ‘s

        It’s a lot to wade through,
        be handy to know which are dodgy so I can steer clear of them

        • Wolf Richter says:

          You can make a lot of money on a Ponzi scheme if you get out in time.

          Whether or not these or any tokens are Ponzi schemes may be the wrong question to ask. Even those hundreds of tokens that are now worthless or nearly worthless might have made some people money if they got out in time. So your questions should be: when should I get out? Of course, only the future will answer that question with hindsight.

    • edible investments says:

      Sometimes it might be difficult to tell if the cb’s get involved – wild movements have been the norm in most cryptos

      Some people on crypto forums reckon it can be done, others think because of the way whole crypto system works its a lot harder or impossible to do.
      (makes an interesting read)

      I was expecting the cb etc, to smash the cryptos a few years back. Perhaps they are too late to the game or haven’t figured it yet?

      If the cartel does strike, sooner or later some one is going to get upset about their beloved coin get hammered and figure a way of dealing with that issue either with a modification or new coin.

      The crypto world is very young, potentially it is only the start.

    • Dan Romig says:

      Manuel, I was born about half a century after President Wilson and Senator Aldrich met with Mr. Warburg, House, Morgan, Vanderbilt, Schiff and Rockefeller at Jekyll Island in 1910 to plan the Federal Reserve Banking System which eventually merged into the ‘Federal Reserve Act’.

      President Wilson signed the Owen-Glass Act into law on 23 December 1913 and gave control of the issuance of the dollar to a private cartel of banks.

      I, Dan Romig, did not give power to the Central Bank of the USA, nor did I morally accept the Fed’s Quantitative Easing.

      But, as just one of over 300 million citizens living in the USA, there’s nothing I can do to stop what has happened, and that’s the appeal of Bitcoin.

      • RD Blakeslee says:

        It’s also the appeal to order one’s life to be as independent of money as possible.

  26. mike kelly says:

    They have value to people circumventing controls on currency transfer. esp Chinese. They then change to cash and buy real property in a different country.

    • Frederick says:

      If that’s truly happening why would sovereign govts allow such behavior to continue Are they truly powerless to stop it

  27. mvojy says:

    Cryptocurrency is like a roach motel, you can check in but you can’t check out

  28. R cohn says:

    Just a few questions for the crypto currency experts
    Where do you trade the various cryptocurrencies?
    What type of account do you have to open to trade them?Is money is these accounts segregated?
    Are these accounts or exchanges regulated by any agency of any government.?
    How long does it take to get money out of an account once you liquidate a position?
    I always pay the required tax on any gains that I make.
    How are these cryptocurrencies taxed.Are they capital gains ?Are they considered collectibles?
    Will trading these cryptcurrencies be looked at as money laundering or trading on the black market and be subject to criminal penalties?

    From my understanding these cryptocurrencies are not backed any government.While the dollar bill that I am holding states that “it is legal tender for all debts,public and private.” these cryptocurrencies are not.
    What happens legally to disputes between parties when cryptocurrenceis are involved?
    Supporters of cryptocurrencies argue that mathematical algorithms limit the number than can be mined , unlike fiat currencies .But a number of different cryptocurrencies have appeared.Is there any limit on other cryptocurrencies?
    Thank you

    • Petunia says:

      I don’t buy crypto so I don’t know the answer to some of your questions but I have been following the topic for awhile. Here are some answers:

      Cryptos are not backed by govts. They are not legal tender.

      There are never any disputes between parties because they are no recourse transactions. You never get your money back.

      In cryptos that are limited in number, you can still divided them and there is no limit to division except on a computer. Bitcoin’s limit is 21M coins but they can be divided down. Other cryptos have other limits.

      Cryptos are not illegal but the US will want their cut of your gains if they find out. I understand they will be asking officially if you leave or enter the country.

      There are many ways to buy these currencies including ATMs that sell Bitcoin. Check for them in your area. Hong Kong has some well known exchanges including some that claim they are backed by gold.

      As far as I know ,the exchanges that trade the coins have no regulation and some have disappeared with account balances. I think the Mt. Gox trial is ongoing right now.

  29. wratfink says:

    Bitcoin, gold, silver, pork bellies…

    These are all speculative commodities. You take a risk with every investment or there would be no reward.

    Yes, bitcoin is a commodity priced by the amount of the electricity used to mine it. At this time it takes a tremendous amount of computing power to mine it. Most miners are located in China close to the cheap power sources.

    • ru82 says:

      From my little understanding of crypto’s is you need honest miners to make the transactions works?

      So we need to put a lot of faith into the Chinese miners. :)

      • Bad Joke? says:

        There are about five dominant miners for Bitcoin. Any three of them can collude to completely break the whole system. Since at least three are young Chinese dudes, and in all likelihood the sons of members of the Chinese Communist Party who are putting some of their possibly corrupt wealth to use for their kid’s mining power, you should begin to get an idea of the feasibility of collusion. It sounds like the start of a bad joke: “Three Chinese kids meet in a pub…” Guess who will have the last laugh.

  30. Eating Potash says:

    Distributed public cryptocurrencies are great in theory, and can be in practice.

    Hype trains could ruin anything.

    Just look at property bubbles.

    Anyone rushing to buy all the condos going spare as btl?
    Why not?
    It’s not because they’re a scam, it’s because human nature has inflated the prices to stupid levels and the writing is on the wall.

    It’s the same with with crypto currencies.

    The hype train has ruined btc recently, with expensive transfers and exchange spreads cropping up to cash in on the hype, meaning I used CC as it was cheaper than the ~7% to buy btc and then 2% ish to transfer.
    2 years ago you were looking at 1-2% all in, while the price bobbed around £150.
    I don’t even bother using btc now, too slow and expensive.

    I’ll admit all these new coins and ICOs are probably cons played on the hype train, and good for them if idiots are easily parted with their money.
    They’re mostly non usable too. I only see btc accepted if any, so that alone leaves all the others as pointless speculative poo.

    But btc was never meant to be what we see right now.

    It’s been solid, robust, a great place to keep some wealth as a hedge, useful for online purchases and donations, cheap fast way to send money anywhere in the world etc.

    It blows everything else out of the water as a way to spend money at a distance.
    As close to digital cash in the post as we’ve seen.

    If you’re stupid enough to speculate on it and get burned fine.

    But don’t judge btc on idiots losing money on it.
    Judge it on everything but the speculation and stupid human nature.

    I’ve got quite a bit in btc and I’d happily see it go back to near zero *if* it meant btc becomes useful again.
    Cheap to buy, small spreads, fast cheap transactions etc.

    What I had in there was small change and it’s gone to the moon, but it’s also gone to shit on the way!

    As for the crypto ‘experts’ above, lol.

    It’s like a chemist saying they’re an expert on alchemy, so they know a lot about gold markets and investments.

    Cryptography is just a way to keep addresses safe in btc.
    There will always be a way to do that programmatically.

    For all intents and purposes btc is just hiding a virtual acorn in a virtual forest, and only you know where it’s squirrelled away for safe keeping or passing on the location.

    Crypto is just a tool to make it work, and crypto will always be made to work for intended purpose by actual crypto experts.

    • Crypto Expert says:

      Crypto experts analyze the security of systems. As such, when a crypto expert tells you Bitcoin and its many cousins are completely insecure in practice, you may want to take note. No, the attack has nothing to do with cryptanalysis or sophisticated new algorithms to break number-theoretical primitives; it is as simple as observing that nothing stops miners from colluding, among others. Nothing? Well, regulation and anti-pooling measures that are verifiable. But such measures render the whole design of Bitcoin useless, one would be much better off appointing a bunch of regulated parties in that case and using threshold key sharing systems among them. That would also solve the terrible performance of Bitcoin.

      • Potash Something says:

        Did you read my last scentence?

        The colluding miners was always known about and understood as a vector that isn’t new, but it was also part and parcel of the *entire point* of btc, that being decentralised and peer owned.
        I had a work friend dabbling with mining and stuff in 2007 or so, and even he mentioned mining pooling risks (forget what he was mining but he had 2 Radeon GPUs in a box)

        Now btc has been gamed by miners (or mining pools initially) to get the reward, not to break btc and thus make it worthless.

        Centralising it would make me walk away. Fees, regulation, costs.
        I may as well just use the bank or PayPal again.

        The solution is simple, evolving the software to encourage distributed mining again.
        All these alt coins are that, finding a better solution to fit the needs. Many are probably ponzi too, so buyer beware.

        Just as it already has and continues to do, btc will evolve.

        Anyone coming close to breaking btc’s security makes it lose its value, making their endeavour pointless.

        So while the people maintaining btc want to keep their wealth in it, or miners getting their income, it’ll be made to work.

        When they go against what people want as a utility (what btc was years back and what’s made it survive and grow to where we are today) it’ll fork or be usurped by a better coin.

        Either way, decentralised utility is all people want.

        Cryptography lets that happen.

        The tech is irrelevant in so much as it just changes to fit the need.

        Btc is not about the tech, btc is all about decentralised utility.

        Break that (by mining collusion, centralisation, regulation) and btc goes the way of the dinosaur.

        If you lose money, tough titties.
        That is the risk of having your freedom. Freedom to use your brain or be a dumbass.

        If you don’t like that risk run back to gov fiat, yay!

        • Crypto Guy says:

          Some day someone may figure out how to do a truly decentralized currency in a secure manner, but I am not holding my breath. Even kf we get to a cyborg future where each human will have implanted within a powerful chip that cannot be removed and is “guaranteed” to meet certain constraints (such as being resistant to pooling of chip computing power), people will find other ways to subvert that. The biggest danger to our world are people who believe technology can solve anything. In any case, if a solution will be found, it will not look anything like Bitcoin and its cousins – their flaws are simply too foundational.

  31. Ash something says:

    Software evolves.

    It’s never perfect but it keeps chugging and doing what it needs to do.

    I agree with your sentiment, but I think it’s trumped by a desire for participants to have a distributed ledger based way to make transactions.

    Technology won’t solve everything but while people want X, they’ll do their best to achieve X despite a myriad of possible pitfalls.

    Btc arrived because of a need and people got on board with that.

    Just look at central bankers and gov who want perpetual growth of debt.
    It’s fraught with pitfalls yet they’re using every trick and mechanism to do it and make it work for now.

  32. Jim Graham says:

    Has anyone read >>>>> Initial Coin Offerings Seen Topping Early Stage Venture Funding

  33. Kye Goodwin says:

    I’ve been following Bitcoin for a few years but in the last few months I’ve discovered Modern Money Theory. The MMT people have a solid explanation of what makes any currency accepted and valued: You can pay your taxes with it. Until a major country accepts one of these cryptocurrencies for tax payment, they’ll all be unstable at best, and that’s never going to happen, because this would undermine the sovereignty of any national government.

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