Wall Street Piles into Cryptocurrencies, Others Speak of “Biggest Scam Ever”

I don’t remember ever having seen crazier times of more pandemic proportions.

“It is the biggest scam ever, such a huge gigantic scam that’s going to blow up in so many people’s faces. It’s far worse than anything I was ever doing,” explained Jordan Belfort concerning ICOs (initial coin offerings) of cryptocurrencies. The former penny-stock broker portrayed by Leonardo DiCaprio in The Wolf of Wall Street should know: He spent 22 months in the hoosegow for securities fraud and money-laundering.

Just about anyone can call themselves a startup, make promises of future products or services, and sell digital tokens to raise funds. These digital tokens become tradable cryptocurrencies. Buyers do not receive any ownership of the startup, which is what traditional startup investors get. Instead they’re usually promised something in the future, such as free access to the service once available. It doesn’t really matter what the promises are because people buy the tokens to get rich, hoping that they’re getting into the hottest cryptocurrency on the ground floor. ICOs are not regulated and anything goes.

So far this year, there have been 202 ICOs that have raised just over $3 billion, according to the Financial Times.

Including those ICOs, there are now about 1,000 cryptocurrencies with a total market capitalization of around $170 billion, from bitcoin on down. Hundreds have fizzled, their value has evaporated, and trading activity has died. Whoever bought them has now become the end user of a useless digital token.

“Promoters [of ICOs] are perpetuating a massive scam of the highest order on everyone,” Belfort told the FT, though he conceded that many promoters may not have “bad intentions.”

[H]e said the techniques employed by ICO salespeople appeared to be similar to the “pump and dump” tactics used by boiler-rooms: get supply, promote aggressively, leak a little into the market, stir interest — perhaps via celebrity endorsements — then sell the rest before the price collapses.

“Everyone and their grandmother wants to jump in right now,” he said. “I’m not saying there’s something wrong with the idea of cryptocurrencies, or even tulip bulbs. It’s the people who will then get involved and bastardize the idea.”



But cryptocurrencies is where volatility is, and traders yearn for volatility in an era when stock markets only go up but without volatility. They yearn for big price swings, and they get those in cryptocurrencies, when prices jump or plunge in the high single digits and occasionally in the double digits in a single day. And so Wall Street has discovered cryptocurrencies, according to the Financial Times:

Proprietary trading firms, which bet their own capital in markets from stocks to futures, are wading into bitcoin, ethereum, and other cryptocurrencies better known as a playground for small speculators and a haven for money-laundering.

DRW of Chicago, one of the world’s largest proprietary trading companies, has led the charge. About a dozen of its more than 800 employees buy and sell bitcoin at a subsidiary named Cumberland Mining, which was established in 2014.

Other firms have followed, including Jump Trading, DV Trading and Hehmeyer Trading + Investments, according to industry executives.

“The volatility in asset classes is at all-time historic lows – everywhere except for cryptocurrencies; so there’s obviously a lot of interest in this space,” Garrett See, CEO of DV Chain – the cryptocurrency affiliate of DV Trading – told a trading industry conference in Chicago last week.

Proprietary trading firms have jumped in, amassing large inventories and making markets for hedge funds, family investment offices, and wealthy individuals, according to the FT:

Such firms are renowned as high-frequency traders, using computing firepower and telecommunications hardware to execute deals in millionths of a second. But in cryptocurrency, they are conducting many of their trades with tools such as email, Skype and phones.

“The flavor of the counterparties has definitely shifted pretty dramatically in the last year,” DRW CEO Don Wilson told the FT.

DRW has long-term holdings of cryptocurrencies, giving it stocks to be able sell to buyers. In March 2015, it bought 27,000 bitcoins that the US government had confiscated in a case involving a drug marketplace called Silk Road, according to a report by Coindesk. Worth $7.6 million at the time of the auction, the sum would now be valued at about $160 million.

And there are tantalizing tidbits, according to the FT:

Hehmeyer, led by a longtime Chicago futures executive Chris Hehmeyer, was advertising a job opening for a “crypto trade engineer” who has a “passion for cryptocurrencies and the role they play in global markets.”

“It is exploding,” Hehmeyer said. “It’s a rapidly growing set of instruments, unlike anything we have ever seen. There are risks but we are cautiously in.”

I, on the other hand, don’t remember ever having seen crazier times of more pandemic proportions than these, and this whole craze is another shining manifestation.

US Treasury securities with maturities of two years or less have taken a beating, and their yields have been soaring, but the yield spread has collapsed to the lowest level since early in the Financial Crisis, and even the Fed is worried. Read… US Treasury Rates Hit Nine-Year Highs




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  141 comments for “Wall Street Piles into Cryptocurrencies, Others Speak of “Biggest Scam Ever”

  1. KONSTANTINOS SP
    Oct 23, 2017 at 12:23 am

    What has gone wrong with the traditional lotteries and bets?

    • Frederick
      Oct 23, 2017 at 12:44 am

      Better ask Gershon

    • hendrik1730
      Oct 23, 2017 at 12:54 am

      Still there. Crypto’s are just another tax on stupidity and greed.

    • cdr
      Oct 23, 2017 at 1:58 pm

      Until bitcoin, I thought gold was a farce as an example of ‘real money’. Today, it’s ‘Bitcoin … making gold look legitimate.’

      Of course, if Bitcoin goes out of favor, one of the other new competitors will take over. So what if Mt Gox has issues. You can exchange bitcoins for bongo-buck-coins or one of the other dozen or two competitors to bitcoin. The exchange rate will be favorable relative to the original buy in, assuming anyone wants the imaginary computer money you originally bought.

      Bitcoin … making tulips look legitimate.

      or Bitcoin … taking tulips to the Fifth Element

      or Bitcoin … not convertible into the other imitation Bitcoins unless you got in at the start.

      100 years from now, blockchain will be institutionalized as a concept, like ISAM or a distributed database management system. Bitcoin will be legend as the goofiness that made tulips look conservative.

      • milking institute
        Oct 23, 2017 at 9:19 pm

        “until bitcoin i thought gold was a farce….” Your ignorance of history is quite stunning. Gold has been a “Farce” since way before the Roman empire and even pre dating the Mayan and Egyptian cultures. it has and always will be “Money” until the day Humans figure out how to produce it in a Lab. it is the ultimate “finite” currency after all Dollars,Euros and Remimbie’s are long gone and forgotten and resting besides the Deutsch Marks,Italian Liras and French Francs. so please do not equate it to some three year old digital scam. Gold is,and always will be INSURANCE. ask some “gold bugs” in Venezuela about their dumb investments. on reflection,the few smart kids holding Bitcoin in Venezuela are surviving just fine i imagine (understatement). nothing wrong with that,i did very well with penny stock scams in the 90s,of course i had no idea they where scams!

        • cdr
          Oct 24, 2017 at 8:25 am

          Toilet paper has move value than Venezuelan currency. And it’s more useful than gold. If gold is so perfect, why did it fall 1/3 in value a couple of years ago? I know, central bank conspiracies and the tri-lateral commission.

    • chris Hauser
      Oct 26, 2017 at 8:35 pm

      um, they are priced in currencies that are in general use. interesting.

      o brave new world, and all that.

  2. truth always
    Oct 23, 2017 at 1:33 am

    In as much as I admire your work Wolf, this has become a daily theme in this country.

    Good news stocks are up, bad news stocks are up.

    We have entered the age of either or both mass stupidity or massive central bank induced financial distortions that it hurts to think how f**ked up the whole situation is.

    This is so much worse than both the dot-com and housing bubble combined with no end in sight.

    Only if mainstream media gave Trump a rest for 10 % of its time and focused on it that people might demand answers.

    OTOH maybe they have discovered the equivalent of quantum mechanics in the financial world which the rest of us don’t yet know of.

    Am I the only one who feels everything in Murica is turning fake? Fake news , fake economy, fake figures… America the fake go bake a cake after having a sake.

    • TJ Martin
      Oct 23, 2017 at 9:14 am

      1) As for which … both . In somewhat equal measures IMHO

      2) Substantially worse on the best of days but all things meet their end once the crushing weight of reality and fact falls upon them . To rephrase a pop culture idiom . The end is eminent … resistance is futile

      3) Your comment on the media’s ongoing celebrity obsession is reasonably accurate though in reality both require equal time as one has a direct effect/impact on the other

      4) What they’ve created is the ultimate Potemkin Village * not only deluding those they intended to … but themselves as well as they descend into an abyss of their own making . Suffice it to say abject greed like fame is a drug / addiction .. rivaling the worst actual substances ( legal or illegal ) available . Toss in the fact that many on Wall Street / Silicon Valley are imbibing in one or more substance and you’ve got yourself the toxic mix of the last two centuries

      5) Everything fortunately is not fake , not even most of it , but the fact is much of it is genuine fertilizer that we’re being fed like mushrooms in a basement in this Kafkaesque * moment in history we’re in . The sad fact though is that many of us are buying into it ( re; number 4 )

      In conclusion the historical record shows us that all empires must fall more often from within than due to anything external . The only question is how does the empire fall ? With grace as the Etruscans did maintaining their influence and somewhat diminished power for centuries after their fall or in a pile of rubble left forgotten to the annals of history ?

      * To those not acquainted with them apologies for the literary and historical references but in reality they are the best and most accurate concise descriptions available and well worth the effort to look up .

      • John
        Oct 23, 2017 at 10:19 pm

        I’d tend to disagree with you on your point:

        Everything fortunately is not fake , not even most of it , but the fact is much of it is genuine fertilizer that we’re being fed like mushrooms in a basement in this Kafkaesque * moment in history we’re in .

        If you know of Karl Rove, you surely know that most of what you are fed is 100% fake.

    • RangerOne
      Oct 23, 2017 at 9:55 am

      Everything seems pretty as usual to me. We are of course at a high in financial insanity because we are on a near record bull run in the stock market and housing is up in every major city. This is a known recipe for people refusing to see a downside because it is too terrifying yo seriously contemplate and our financial memories are short.

      Crypto currencies are certainly a curve ball. But when I start seeing news articles about teenagers making a million bucks from “wise” bitcoin investment, you know we are getting ready to see the crypto gamble cite a bunch of people in the ass. Seems reminicent of how people got rich in the dotcom boom.

      Hopefully it wont be too rough but I think many of us are starting to suspect a crash in the tech sector is coming. Probably with a bunch of over invested start ups folding and FAANG stocks returning to some normal level.

      • chris Hauser
        Oct 26, 2017 at 8:39 pm

        is it possible that a bitcoin is an algorithm supported phenomenon?

        computerized ponzi, as opposed to concocted ponzi?

        i sez we are nowhere close to suspension of disbelief.

        i have zero interest in investing, except selling shovels and picks.

        • kraig
          Oct 28, 2017 at 6:05 am

          Don’t forget bitcoin and others have inflation-baked in, this is the idea behind asset-backed crypto, but then we are back to private money how do you trust the issuer? The inflation rate of blockchain etc decreases algorithmically , At the beginning inflation rate was not that far below the Venezuelan Bolivar. So very easy for the earliest in to a cryptocoin to make a lot more than later entrants, of course none of these ever publish their gains in real terms. So not exactly a lie but hardly the truth, the whole truth and nothing but the truth

    • Endeavor
      Oct 23, 2017 at 11:35 am

      Kind of like the movie ‘The Truman Show’ but featuring everything going to seed.

    • Si
      Oct 23, 2017 at 1:37 pm

      Nope you are not the only one.

  3. am
    Oct 23, 2017 at 1:35 am

    Right now, a cryptocurrency called IOTA has a market cap of $1 billion USD. The description says:

    “IOTA enables companies to explore new business-2-business models by making every technological resource a potential service to be traded on an open market in real time, with no fees.”

    This is dot com bubble 2.0.

    At some point, something will cause everyone to rush for the exit at the same time, and the “wealth” stored in cryptocurrencies will evaporate in a matter of hours. There will be lots of stories about people who lost their life savings, and how they couldn’t log into the exchange while it was falling in value.

    • Raging Ranter
      Oct 23, 2017 at 9:13 am

      “…with no fees.”

      In other words, we have no way to monetize our business model, thus no chance to make a profit. But don’t worry, angel investors will keep the venture capital flowing indefinitely.

  4. 2banana
    Oct 23, 2017 at 1:36 am

    All this cheap and easy money (really debt) has to go someplace to die.

    The stock market bubble, the housing bubble, the bond bubble, etc.

    The crypto currency bubble.

    When they pop…and they will…epic tears.

  5. JM Keynes
    Oct 23, 2017 at 2:28 am

    – The issuance of these cryptocurrencies is based on the “full faith and credit” of the companies that issue them. For me it’s like in the crazy days of the Dot.Com bubble in the very late 1990s.
    – If these are REAL currencies then I should be able to exchange them every day for e.g. USD in every bank. But I can’t do that. So, these “currencies” are simply another (stock) scam.
    – No, I’ll let this bowl filled with poison pass by.

  6. d
    Oct 23, 2017 at 3:47 am

    “I don’t remember ever having seen crazier times of more pandemic proportions.”

    These things are a symptom of the QE environment.

    Too much liquidity and no work for it.

    The Tulip Bulb’s of the 21 St century.

    And the Mafiso at the ECB, looks set to Extend QE infinity, at a slightly lower level.

    Something tells me he is seeking a “crisis” or “Pseudo crisis” to justify extending it past the end of his term/term’s.

  7. LouisDeLaSmart
    Oct 23, 2017 at 3:50 am

    So far, I really didn’t think there would be a crash, more like a slow controlled meltdown and eventual stability. Now I am scared.

  8. alex in san jose AKA digital Detroit
    Oct 23, 2017 at 4:26 am

    dot-com bomb all over again?

  9. Kenny Logins
    Oct 23, 2017 at 5:26 am

    I don’t think they’re scams, this is idiots buying things they don’t understand because they think they’ll make money.

    A scam is usually something hard for a sensible person to avoid.

    • bkennedy
      Oct 23, 2017 at 6:49 am

      A very good definition of scam

    • Enrique Bermudez
      Oct 23, 2017 at 9:02 am

      With no intended disrespect, no.

      For my part, a “scam” is something any sensible person would immediately avoid. (Nigerian 419, every single episode of “American Greed” where a “financial advisor” promises retirees 10% monthly returns, etc.)

      I’d have no part of any of this crypto nonsense myself. I think Belfort’s nalogy to pump/dump penny stock schemes is the best yet as far as this junk.

      • alex in san jose AKA digital Detroit
        Oct 23, 2017 at 5:52 pm

        It’s an interesting question. Obviously the “I’ll send you a big check, and you send me the difference” scam is pretty obvious, but Bernie Madoff managed to scam a lot of fairly intelligent people with an old-fashioned Ponzi scheme.

        I’ve seen fairly intelligent people fall for scams like “Viaticals” which is where you buy people’s life insurance and wait for ’em to die or some damn thing. Yep, he lost his shirt. I know people who are at least technically intelligent who fall for the “sovereign citizen” BS, and one guy is trying to get “allodial title” or absolute ownership, of his land here in California. Needless to say lawyers love this stuff. He’s just itching to hand some lawyer most of 100 grand to get this, and I predict whichever lawyer he works with will take the money and disappear, just like the one he paid for a building permit years ‘n’ years ago.

        There are a lot of scam-able people. They tend to divide their time between complaining about lawyers and handing over large amounts of money to them that they don’t have to.

  10. walter map
    Oct 23, 2017 at 5:49 am

    Heh. When the going gets weird, the weird turn pro.

    • cdr
      Oct 23, 2017 at 8:57 am

      Nice. I’ll probably steal it, maybe twist it up a little. Great phrase.

      • walter map
        Oct 23, 2017 at 10:39 am

        Hunter S. Thompson.

  11. Julian
    Oct 23, 2017 at 5:57 am

    So I was about 12 when the dot-com bubble burst so I did not really live it.

    From what I know, though, the dot-com bubble was, however, of greater pandemic proportions and crazier than this whole situation (that’s not to say it isn’t crazy, but I am wondering if pandemic is the right classification).

    So my question, please comment on why this is worse than dot-com or housing, and please do it without citing the lack of regulation; after all, a regulated bubble such as dot-com or the housing market is far worse than a non-regulated one, generally, because institutional parties (generally) have far less at stake in the non-regulated version.

    Probably my opinion seeped through in the question, which is that this whole thing is a non-event and that bitcoin will eventually go to $0, whereas cryptocurrency/blockchain is a possibly valuable technology although probably not in its (any) current iteration (much like more efficient batteries and such).

    • Julian
      Oct 23, 2017 at 6:07 am

      To clarify WHY it’s going to $0: the transaction fees of bitcoin are astronomical compared to your regular plain old bank transaction. Although it is impossible to provide an exact number, the entire bitcoin network uses roughly the same amount of power as the region of Flanders or over 300k (relatively power-hungry) US households.

      And that’s in its current state, while Bitcoin is being used only for speculation, black market transactions and a (very) few early adopters

      Right now the transaction costs are paid by speculators, more or less. Once bitcoin finds stable footing, transaction costs will be borne by the legitimate users of the system as a payment network (of which there are now not a significant amount greater than zero). These (energy) costs will then explode and they will have to be paid by someone.

      At the end of the day, nobody has managed to explain to me how bitcoin has a comparative net advantage over regular transactions absent near-free electricity (which is far away at this point).

      tl;dr yes it’s a bubble, ICOs are the dumbest thing since pets.com but you can make some money finding the greater sucker before everyone figures out how it is. If only I had infinite money, I could get rich shorting bitcoin… but then again I’d already have infinite money. :(

      • Makingsenseoftheworld
        Oct 23, 2017 at 6:59 am

        You write: “the transaction fees of bitcoin are astronomical compared to your regular plain old bank transaction”

        –> Can you back this claim? As far as I am concerned, fees are not higher at all. With the new changes being implemented into bitcoin’s code base, transactions have gotten even lower.

        You write: “Once bitcoin finds stable footing, transaction costs will be borne by the legitimate users of the system as a payment network (of which there are now not a significant amount greater than zero). These (energy) costs will then explode and they will have to be paid by someone.”

        –>Transaction costs are already borne by all the users of the network. Why will energy costs explode and because of what?

        You write: “At the end of the day, nobody has managed to explain to me how bitcoin has a comparative net advantage over regular transactions absent near-free electricity (which is far away at this point).”

        –> Because at this point, transaction costs are lower. Why do you speak of “absent near-free electricity” Obviously a system needs to be run. Exerting work in the form of using energy in order to get lower transaction fees as bitcoin currently does, is the cost that needs to be paid.

        • Oct 23, 2017 at 8:01 am

          Makingsenseoftheworld,

          Currently average transaction fees are $2-$3 which is too high for small transactions. In August they spiked as high $9. These are average fees, with fairly large variations. So if you’re trying to launder millions of dollars, no problem, but it you’re paying for a $50 item, you’re paying a hefty fee on it.

          Average confirmation times are “now” about 40 minutes, but in August they spiked as high as 25 hours and in June as high as 40 hours. They spike all the time and routinely reach 5+ hours. Oct 13 and 14 they spiked to 6+ hours. But you never know in advance. During that time, you’re in limbo. That’s a terrible delay. When you send a wire, you get confirmation on the spot. Same if you send money online.

        • ru82
          Oct 23, 2017 at 7:11 pm

          Is a “transaction fee” the cost of processing and moving the bitcoin from one entity to another?

          What is the fee to convert USD to bitcoin or ethereum. I tried to buy some Ethereum when 1 coin was $29 but the total transaction would have been $42. A 30% juice was too much of a fee that I wanted to spend to convert my USD to Ethereum. Of courses now it is $285 so my loss I guess.

    • Oct 23, 2017 at 7:39 am

      Julian,

      I agree that cryptos by themselves are not as big as the dotcom.

      But you’re referring to my subtitle, which was abbreviated. My full non-abbreviated statement was at the bottom. It makes clearer that I meant all these crazy things going on today, of which, as I wrote, “this whole craze (cryptos) is another shining manifestation.”

      I was referring to the everything-bubble we have today, of which cryptos are just one aspect.

      • Julian
        Oct 23, 2017 at 8:14 am

        Thanks for answering wrt costs of transactions (and proving they are indeed high). If I am not mistaken they are also increasing in system complexity but I am unsure.

        When speaking of systemic issues I think the only dance macabre is in bonds, especially high rated ones. RE and stock valuations are not as insane as they were in their respective bubbles. There is also the tendency for bubbles to be in something new that hasn’t recently bubbled. I suppose the entire bond universe going dipshit could be labeled pandemic indeed :)

      • Nick Kelly
        Oct 23, 2017 at 1:41 pm

        They’re not as big in terms of volume of course because the whole US stock market was involved in Dotcom. especially NASDAQ. Housing by 2008 was even bigger in volume because the entire economy was involved.
        But the run-up bitcoin is more extreme ( or bigger) as a percentage of its intrinsic value, because there isn’t any to it, or any other fiat currency.

        After the crash AOL was still worth something ( Time Warner wrote it to zero but that was largely for tax reasons)

        After the housing crash, most houses were still worth something.

        Bitcoin likes to portray itself as above national boundaries, and regulation, but in fact is completely vulnerable to a stroke of the pen from regulators. At the moment it is tolerated, because is not YET enough of a nuisance, i.e. a competitor for other fiat currencies.
        The explosive growth of competitor cryptos removes a lot of the heat from state fiat- currencies by diluting bitcoin’s role. If bitcoin was the only crypto, it might have been shut down by now.

        There is something comical about people thinking bitcoins are supra-national, while the transactions are taking place on regulated, networks open to national surveillance, which in the US, UK and China is constant and total.

        Bitcoin is a fiat currency, but without a state. This is portrayed as a virtue, which arguably it is (harder to inflate) until you need a state to enforce the fiat.
        The physical Federal Reserve note of course has no intrinsic value but it has the fiat (literally the ‘command’) of a world power saying it does.

        Gold, not a fiat currency, did become enough of a nuisance to the US Fed to make its ownership illegal ( with narrow exceptions for collector coins, antiques etc, )

        When US gold ownership was declared illegal, you could hide it, and of course illegal transactions continued.
        A professional or careful physical transaction is normally untraceable.
        An e-transaction is always traceable.

        Where will people hide their bitcoins when central banks (probably led by China) declare it illegal, and what will be its value then?

        • rj
          Oct 23, 2017 at 4:21 pm

          Great points.

          Bitcoin siphons off fiat currency that would otherwise be parked in real money, and that’s the only reason it’s tolerated or possibly exists at all.

        • alex in san jose AKA digital Detroit
          Oct 23, 2017 at 6:00 pm

          Silver or gold or a US Savings Bond can be held in your hand. Same goes for a Renoir or a Purdey shotgun or a Yapese stone coin.

          I can’t believe anyone is getting excited at all over something that’s not real and that anyone, anywhere, can flip a switch and it’s gone.

          Julian is correct about the cost of bitcoin transactions. This is all based on stupendous amounts of energy being used for bitcoins to even exist much less traded.

          As I was explaining to someone a few days a go, we’re not going to have robots doing all the work, electric self-driving cars taking people around, Rosie the Robot Maid etc. The reason why is, while we have factories here and there using some specialized robots, we don’t have the electricity to essentially be running 10X- 100X the robots. Besides the “embedded” energy; the energy it takes to make the things. For instance, an Ipad takes more energy just to make the CPU than it will ever use in its lifetime.

          We’ll see some robots out and about where they make sense and pay for their cost. We’ll see some as playthings of the rich. But overall we’re going to see more bicycles and more rail transport because steel wheels on steel rails are fantastically efficient. And mattress money is never going to go away.

    • Petunia
      Oct 23, 2017 at 7:47 am

      Julian,

      Just the other day our last brilliant fed chairman, Ben Bernanke, was on the tv talking up a cryto coin called Ripple. This crypto coin will be the token in a new clearing house block chain for financial transactions. Think about that for a moment. They are mining a digital coin that is necessary to transact business. You can already see that if transactions go on this, or any other block chain, the token is a toll to use the system. Of course the prices of the tokens will go up, but the number of transactions will also be limited by the mining and the ownership of the tokens.

      Even though I think all cryptos are clear scams, the markets are embracing the scams, to their advantage. It is going to be a wild ride. Remember, on Wall St. complexity hides fraud.

      • Julian
        Oct 23, 2017 at 8:20 am

        This (ripple) seems like it would take at least several hours to begin to determine whether it is a useful implementation of blockchain and then what its fair value would be. At least the idea makes some intuitive sense, unlike bitcoin.

      • polecat
        Oct 23, 2017 at 8:49 am

        ‘Ripple’ …. HA,HA,HA !

        That ol’ miester Bernanke must be swilling/$hilling some really bad wine … but be careful out there in the Wild Westeros of the Digicoin kingdom … What one drinks … could make one possess the sight of the blind !

        • Michael Fiorillo
          Oct 23, 2017 at 9:30 am

          Funny you should mention “drinking,” since I recall “Ripple” being the name of a cheap, rotgut, wino wine back in the day…

      • Oct 23, 2017 at 9:58 am

        BTW, Ripple has collapsed 54% since its peak on May 17.

    • Mike B
      Oct 23, 2017 at 7:53 am

      Hmmmm.

      at $170 billion capitalization the exposure of the crypto currencies really isn’t all that big in the grand scheme of things so I agree in principal that this is a nothingburger so far but if the big algo traders get involved that could quickly change and when (NOT if) this Ponzi scheme blows to kingdom come the shrapnel could be a significant trigger event.

      • chip javert
        Oct 23, 2017 at 11:55 am

        $170B a nothing burger?

        I don’t think so – it’s 1% of annual USA GDP and when it pops, it’ll probably (mostly) go away all at once.

        $170B is also the annual salary of 3.5 million (working) Americans.

        • rj
          Oct 23, 2017 at 4:31 pm

          Yeah, there’s like 3 billion ounces total of above ground silver worldwide worth like what, 50 billion dollars?

    • George McDuffee
      Oct 23, 2017 at 12:32 pm

      RE: …please comment on why this is worse than dot-com or housing,
      —–
      As a general rule, the doc.con, real estate, etc. bubbles had/have, at nominally, “real” assets at their heart or core. These assets may be hugely overvalued, but the asset bubble is based on something. The crypto-currencies are “magic beans” based on nothing. While we have had frauds such as Enron in the past, the crypto-currencies are overtly “magic” or “theological,” and based on nothing. There is no base or salvage value.

      • Julian
        Oct 23, 2017 at 2:04 pm

        Many dot-com (financial) assets also went to zero. In the 2008 crisis, the issue was that again (financial) assets like MBS and CDOs went to zero.

        You have a point in the opposite way that you imply. Bitcoin is not a financial asset (because there is no liability corresponding to the asset, it is by definition a non-financial asset). So if anything, nothing major is going to blow up if this sucker goes to zero. I mean, I am fairly confident nobody is using bitcoin as collateral for anything important.

        • Nick Kelly
          Oct 23, 2017 at 6:20 pm

          Except that the last sucker to buy in will be out all that he paid.
          People do crazy things chasing the rainbow, or gambling.
          The guy isn’t pledging bitcoin as collateral to buy it, but he may pledge (mortgage) his house to buy it.

          If what people thought was worth 170 B goes to zero, lots can blow up.

    • JZ
      Oct 23, 2017 at 2:18 pm

      Julian, following is my thinking on why today’s situation is worse than .com.
      .com was about people playing with money they can lose.
      2009 was about people playing with money they CAN not lose.
      Today, money is self is unsound and corrupted and bit coin is a simple challenge to the unsound money.
      If you think about how a civilization run, first layer is violence, 2md layer is money and order of law, above those 2 are markets and commerce.
      The system has eroded down to the money layer and soon it will NOT hold and go into violence. Watch for war, unrest. 2000 .com was corruption at at the commerce/market layer, today, the corruption is deeper and not coin is the symptom.

  12. raxadian
    Oct 23, 2017 at 6:37 am

    I know you are that, but what I am?

    Wall Street is indeed the biggest scam ever.

    Is true that fake crypto currencies existed and will exist in the future but bitcoin itseft isn’t doing bad.

    Not that I ever got into it.

    I think most Unicorns are a better scam. Any company that lives at a loss and is only supported by their investors money is a scam unless it starts to start having numbers in black.

    And the US dollar is a very old scam; since they dropped the gold standard at the very least. There is more US dollars circulating in the world that the FED could back up, and I am not talking just in gold. Even if a third of the dollars circulating worldwide went back to the US and were exchanged by I don’t know, salt? The US would go bankrupt.

    • Drango
      Oct 23, 2017 at 7:43 am

      There are more “claims” on dollars than there are dollars worldwide, but that’s not the Fed’s fault. Foreign banks conducted transactions like currency swaps with the “promise” that they could produce the dollars needed if required. But they can’t. There are about 25 trillion in dollar claims that foreign banks have racked up over the years, but that’s their problem, unless the Fed decides to bail them out of course, in which case American taxpayers will spend the next century paying off the bills of foreign banks. But never underestimate the stupidity of the Fed.

    • Mike B
      Oct 23, 2017 at 7:55 am

      You make some excellent points but cast that net wide enough and EVERYTHING starts looking like a scam.

      Probably why I’m so cynical ;)

    • Kent
      Oct 23, 2017 at 9:49 am

      “There is more US dollars circulating in the world that the FED could back up, and I am not talking just in gold. Even if a third of the dollars circulating worldwide went back to the US and were exchanged by I don’t know, salt? The US would go bankrupt.”

      The Fed does not “back up” US dollars. They are backed by the full faith and credit of the United States. Which simply means that the government assures you can purchase products in the US with them. Of course that doesn’t define what prices will be. The system makes it impossible for the US to “go bankrupt”.

    • George McDuffee
      Oct 23, 2017 at 12:50 pm

      RE: Even if a third of the dollars circulating worldwide went back to the US and were exchanged by I don’t know, salt? The US would go bankrupt.
      —–
      Depends how the dollars came back. This would most likely result is a sharp run-up in domestic real estate and equities/stocks as these are exchanged for the surplus dollars. [SAY WHAT????]

      Presentation of the surplus dollars/dollar denominated securities for some sort of redemption to either the US Treasury or the FRB would be simply result in the exchange of the [paper] dollars for more [paper] dollars, not gold or silver.

  13. Mike Earussi
    Oct 23, 2017 at 6:48 am

    The point is that everyone who buys them knows they’re buying BS. They’re operating on the greater fool principle, hoping to find someone stupid enough to buy their over inflated “money.” This kind of mindless speculation is what happens when you’re “investing” other people’s money. If they were using their own money they wouldn’t be doing it (unless they’ve got money to burn).

    So why worry about this, let them have their fun. It’s far safer for speculators to bid up hot air than real assets like real estate or oil. So when their bubble finally bursts it will only affect them and not the economy as a whole.

  14. Bobber
    Oct 23, 2017 at 7:43 am

    We have to find a way to bailout investors in crypto currency if the investments don’t pan out. It seems they are being taken advantage of through no fault of their own.

    • gary
      Oct 23, 2017 at 9:09 am

      LOL +1000

    • Drango
      Oct 23, 2017 at 10:52 am

      Caveat emptor.

    • chip javert
      Oct 23, 2017 at 12:01 pm

      Good luck with that “bailing out stupid people” thing.

      They’re being taken advantage of because they are greedy; their stupidity is simply a collateral issue.

      • Garypaul
        Oct 23, 2017 at 5:40 pm

        I think some people are missing the sarcasm.

    • Drango
      Oct 23, 2017 at 1:38 pm

      If cryptocurrency investors lose money through no fault of their own, should they also be required to turn over any profits they make through no fault of their own?

  15. RagnarD
    Oct 23, 2017 at 7:58 am

    I can’t figure out why folks believe in BitCoin. Yes, it may have critical mass, but the fact that its model is being replicated daily proves that it can’t be a store of value. Could this not be any plainer?

    Yes, crypto tech may be a great transaction tool, but that in no way means it has the properties of precious metals or oil.

    • Nero
      Oct 23, 2017 at 8:10 am

      I work in tech, and the only people I know who have bought any cryptos bought them when the prices started going astronomical this year. None of them were even slightly interested in them before, and are only buying because they want to get rich.

      Blockchain has a future no doubt, but cryptocurrencies are not money, simply because they can’t be a store of value when they’re based on volatile technology that is changing every 3 months. It’s bad enough when you’re trying to manage production enterprise systems running in a cloud platform when updates are rolled out every month. It’s the volatility that is so hard to manage.

    • Mel
      Oct 23, 2017 at 9:49 am

      Back in 2008 the whole international payment clearing system collapsed when all the banks had gone broke and nobody could find reliable parties to intermediate. Back then a clearing system that didn’t depend on the condition of the banks seemed like a very good thing.
      Bitcoin has turned out not to be The One. The volatility that everybody loves is poison for a medium of exchange. It’s like a currency with very little foreign trade, but with a boiling foreign-exchange market. So yeah, just what the traders think they’re trading is an open question.

  16. Nero
    Oct 23, 2017 at 8:05 am

    Do you remember when the gold price dropped during 2008, apparently due to the “demand for liquidity”, and gold has inherent value!

    So can you imagine the slaughterhouse that will befall the cryptos (bitcoin especially) when the next financial crises hits, when traders are desperate to meet margin calls and are offloading them for any price they can get – who will buy them when the price is dropping hundreds of dollars a day?! Can you say “no bid”…

    • Kent
      Oct 23, 2017 at 9:57 am

      My step-father has decided to dive in head first into the economic fringes of the Internet. This is a retired guy without a lot of money. And, of course, his is a true believer in the imminent crash of the dollar. He firmly believes that he wants to put $10,000 into gold (along with canned foods and ammo).

      There are 3 gold dealers in my little town. I told him to look up the spot price of an oz of gold any morning. Then pick one of those guys to talk to about how much they would be willing to pay him for gold. If any would be willing to pay the spot price, buy the gold from him.

      He hasn’t purchased any gold.

      • RagnarD
        Oct 23, 2017 at 10:45 am

        The local dealer is not investing. He makes money buying on the bid ie $1200, selling on the offer ie $1250.

        Go to a currency exchange and find someone to pay the spot (mid market) price for YEN or Euros. You’ll find no takers. Same deal as the gold dealer.

      • Drango
        Oct 23, 2017 at 12:05 pm

        If things get so bad that people need guns and ammo to fend off the starving hordes, does your step-father believe that people will want gold to barter? In that situation, a can of tuna will be worth its weight in gold, but gold itself will be dead weight.

  17. Gene
    Oct 23, 2017 at 8:06 am

    I would have invested in bitcoin by now but I don’t have any faith in the buying process. It seems from anecdotal reading of the reviews of Coinbase that people have lost money in the initial stage of buying. Admittedly, it does seem that it’s an embodiment of the Greater Fool Theory – the idea of getting nothing for something. You’re giving up real money with the hope that someone else will buy it from you for a greater price.

  18. Mike R.
    Oct 23, 2017 at 8:16 am

    As I recall, early belief in Bitcoin and other cryptos was based primarily on loss of value of the dollar. In otherwords, Bitocin would hold value or appreciate as the dollar was trashed due to excessive money printing. In otherwords, similar to gold.

    The latest buying surge is all about speculating that the price is going higher, I believe. Much like dot com era.

    I never believed the governement(s) would allow bitcoin or others to be allowed at some point. Afterall, they could become a refuge from the dollar. Like gold.
    We all know that gold is artificially manipulated through futures to stay within a range. This can occur as long as demand for gold stays moderate. My theory is that the Central Banks are allowing cryptos to take off only to crash them down and disillusion those who viewed them as safer than the dollar. China has initmated as such. Jamie Dimon has said as such. If Bernanke has spoke in favor, it’s a ruse in my opinion. A setup.

    Consider this. There is only ONE alternative to the dollar that has the capability to supplant the dollar during loss of faith. That is gold. No other commodity or item of value is as transportable, storable, verifiable, etc. It has all the needed traits, including a long history (“tradition” as Bernanke called it) of value.

    Gold scares the bejesus out of the CB’s. Cryptos are essentially a high tech version of gold in many respects. That is why they will not be allowed. I’m very certain of this. But why not have some fun in the interim. Let them run up and then crash them down hard for good. Would be a great object lesson to not get to in love with gold.

    • RagnarD
      Oct 23, 2017 at 8:38 am

      Good point. Maybe at this relatively early point, its in the best interest of govts to let people speculate / distract themselves with cryptos, in so far as it keeps them off of the real game: Gold.

      And yes, “they” may work to have us conflate the cryptos and gold as being one and the same, to confuse us, to keep us from choosing gold over the dollar.

      • Kent
        Oct 23, 2017 at 10:04 am

        The government could care less if you choose gold over the dollar. You have to pay your taxes in dollars. If you don’t pay your taxes in dollars, they will confiscate your gold and sell it on the open market for dollars. And throw you in jail if they think it is worth the effort. Governments, defense contractors, bankers all only care about dollars.

        • RagnarD
          Oct 23, 2017 at 10:51 am

          Do you think the govt could care less if Saudi Arabia, or any other oil producer wants gold instead of dollars?

          If the script of the US Govt (USD) is seen as toilet paper, they might start to care. They can care “only about dollars” in so far as the game remains the same. At some point the game will change.

        • Mel
          Oct 23, 2017 at 2:13 pm

          RagnarD:
          I think they would care a whole lot. That’s why Nixon broke the link between gold and dollars back in 1971. The foreign spending the US was doing was tying down too much gold.

        • thelocalpragmatist
          Oct 25, 2017 at 12:43 pm

          RagnarD
          Toilet paper? Our currency is backed by the full faith and Credit of the United States Marine Corps….

    • economicminor
      Oct 23, 2017 at 12:47 pm

      Gold and silver. Silver is more practical for every day transactions than gold in that it can be more easily traded for things needed for living.. Even at today’s low gold value, an ounce is still to valuable for everyday use (with to few places to exchange it into the local currency – which is my complaint about cryptos.. to hard to use and/or exchange).

      IF the $ crashed and burned, which seems incomprehensible, how would you even value and once of gold? And what would you do with a 10 oz bar? I would rather have bags of old silver quarters myself..

      All this about gold and cryptos is nuts thinking. It is all about hoping to score on the Big One! Me I just want things to be stable so I can have a comfortable life and travel. Instead the world seems hell bent on becoming more and more crazy and unstable..

  19. Gershon
    Oct 23, 2017 at 8:43 am

    Yellen sees no bubbles.

  20. GSH
    Oct 23, 2017 at 9:29 am

    There is a fundamental flaw in the blockchain algorithms and that is a lack of scalability. Even with the minimal usage today, the Bitcoin implementation had to split as the blocks were becoming too large and too expensive to process. Read up on Bitcoin lack of scalability. Technically, it is a house of cards.

    • intosh
      Oct 23, 2017 at 1:57 pm

      The split (fork) was due to dissension on the way the scaling operation was decided (there is a powerful struggle between the Core developers, the miners and the businesses), not due to technical reasons.

      The scalability issue with bitcoin is a political and ideological one, not a technical one. Therefore, it is not inherent to the blockchain itself.

  21. Gee
    Oct 23, 2017 at 9:30 am

    Here is an interesting article. I suggest that if you can’t understand it, you should not be investing in any of the so called cryptocurrencies. My bet is about 0.1% of the population can understand it :

    https://blog.chain.com/a-letter-to-jamie-dimon-de89d417cb80

    • chip javert
      Oct 23, 2017 at 12:23 pm

      Well, I’m a retired financial institution CFO who (once upon a time) was a systems engineer, and I couldn’t understand the article.

      Some may blame this on my low IQ or being retired: I chose to blame it on a bull-shit buzz-word loaded description (inter-laced with tiny elements of irrelevant truth) of an almost intrinsically valueless so-called-asset-class.

      This activity attracts the “wanna-be-rich but don’t-wanna-work-for-it” crowd like maggots to a rotting corpse. This is the perfect definition of the fool in “a fool and his money…”.

      No matter how sincerely you believe in Tinker Bell, it’s still a fairytale.

      • MASTER OF UNIVERSE
        Oct 23, 2017 at 10:05 pm

        Bitcoin is a money laundering mechanism like a casino. Bitcoin is for gamblers & risk takers with spare cash to invest & play with. Institutional investors will dominate the field, and their interest will ensure growth for a time. Pump n’ Dump just like a lottery. Greater fools love lottery tickets, Chip. Why not admit it?

        MOU

        • chip javert
          Oct 26, 2017 at 12:57 am

          MOU

          Oh, I freely and energetically admit what you said.

          My comment was for Gee, who feels his linked-document (only understandable by 0.1% of population) is the minimum requirement for being able to play “bitcoin”.

          I was gently sharing my considerable professional opinion that if that document impressed him, he has a severely deficient bovine-excrement-detector.

          Fools go into Vegas casinos every day, and about 0.1% come out big winners (Gee got the %age correct).

      • Gee
        Oct 25, 2017 at 1:25 pm

        Right, this is my point. A lot of jibberish. In other words, nobody with any sense should be “investing” in this. But please, by all means, while the music is playing (and it is playing) do feel free to speculate. Just dont’t be the bagholder! Oh, the bagholders this go round are going to feel some pain. (looks in mirror, sees t-shirt with joe 6 pack taxpayer on it, weeps silently)

        • chip javert
          Oct 26, 2017 at 1:00 am

          Gee

          It appears I missed your sarcasm and owe you an apology.

    • Julian
      Oct 23, 2017 at 2:10 pm

      This is a great article. While a little one-sided (it’s clear what camp the guy is in) it makes a lot of important distinctions and clears up a lot of the mess surrounding the definition of crypto. It also explains why bitcoin is worthless, although not literally.

      After reading this article I think that cryptos are a fascinating new technology, but there is no reason to “invest” in it, unless you want to actually use the decentralized application and the market value (in currency!) that application represents.

      Ethereum does seem like an interesting concept, and the article explains it well. The question is whether Ethereum can produce efficiency (i.e. a hosting service that is more efficient than Amazon S3). It seems plausible that it can’t. because other than S3 it adds a load of extra computation that Amazon S3 doesn’t need.

      I didn’t read to the end yet, but I’m gonna take a guess that it doesn’t explain how a decentralized app on Ethereum could beat S3 (or Dropbox, or any other centralized app that is efficient).

      • intosh
        Oct 23, 2017 at 2:21 pm

        “cryptos are a fascinating new technology, but there is no reason to “invest” in it, unless you want to actually use the decentralized application and the market value (in currency!) that application represents.”

        Right. As an analogy, right now, it’s like people investing in disk space while the drives hold no meaningful data. They are hoping that one day, the drives will hold data valuable enough that other people will pay them more than they initial paid for the disk space.

    • intosh
      Oct 23, 2017 at 2:16 pm

      It’s not too difficult to understand the technical aspect of blockchain but anyone claiming they understand the business (e.g. decentralized applications) and game theory dynamics and their implications is a liar.

      In my opinion, the very fact that cryptocurrencies like bitcoin are based on the ideology of the pure free market “capitalism” and the “invisible hand” mean they are sure to fail.

      • Nick Kelly
        Oct 23, 2017 at 10:39 pm

        Traditional capitalism ( the one that financed the computer you are commenting on) would have no interest in bitcoin.

        The reverse in fact, but in ideological wars, fact is a casualty.

        Next you will visit the kitchen, nuke some food, flush a poop, turn up the heat (or the AC) watch some telly, and then to bed, perchance to read about the failures of capitalism ( with aid of the Swann-Edison light)

        Capitalism: where would you be without it?

  22. KurtZ
    Oct 23, 2017 at 9:39 am

    Run on the banks… A crypto-run.

  23. JB
    Oct 23, 2017 at 9:48 am

    Well as Wolf pointed out, the weak link in the crypto process is lack of liquidity . Don’t these systems/exchanges need to be “plugged in ” to conventional payment systems ? If i sold my bitcoin (converted it into fiat money) where could i deposit my money?

    • ru82
      Oct 23, 2017 at 10:47 am

      In my other post I had a link of the riches address. You can click on the address to see the wealth and if the number bitcoins in the account. Most of those addresses in the top 20 bitcoin holders are not selling or buying. Bitcoin is like a stock with a low float which adds to the volatility.

  24. Harambe
    Oct 23, 2017 at 10:09 am

    Wolf, how does the Fed track cryptocurrencies? Is it part of M1, M2, M3? Do they consider them currency, or like Eurodollars, or something else? I can’t seem to find any info on the web about this.

    • Bobber
      Oct 23, 2017 at 7:08 pm

      Don’t know about the Fed, but the IRS considers bit coin property, like buying and selling a stock. If you use bit coin as a currency it would be a huge headache on your tax return.

  25. Hg
    Oct 23, 2017 at 10:16 am

    The future of Blockchain technology, otherwise known as “the Future” IS the future and you’d all do well to read up on it. The combined global energies being dedicated to bitcoin mining/nodes is at this hour equivilant to the total power needs of Germany! If Bitcoin hits 8K, 10K and 15K is it because ALL fiat currencies are collapsing at the same time, disguising the dollar inflation?Bitcoin=100K? Seems outlandish unless, by some crazy coincidence, 10 years of Fed money printing $4,000,000,000,000 turns out to be inflationary. Bitcoin would then be a means to transfer LARGE sums, and a .01 BTC fee for doing so wont be much of an afterthought.

    • chip javert
      Oct 23, 2017 at 12:38 pm

      Hg

      Option #2: Bitcoin is doing an excellent marketing job of attracting every get-rich-quick-(and easy) addict in sight, thus driving up price of an “asset” you hope to sell (aka dump) before the next price crash.

      Oh yea, and (as you say) this whole “free” process sucks up the total electrical consumption of Germany (3% of global total) , and requires belief in programmers somewhere controlling the difficult “mining” software. Gee, what happens when someone hacks the software (don’t even think of telling me this can’t happen)?

      • Hg
        Oct 23, 2017 at 1:28 pm

        Sure it can happen, thats why I suggest we look into what blockchain is all about. To “hack” bitcoin all that is needed is to overwhelm the network, i.e. control half+1 of the networks total hashing power. As stated previously, you will need to devote resources equal to Germany’s total energy needs for the hour plus +1 to do so. Alternatively: divine a pattern in the field of prime numbers making modern encryption algorythms (and the internet) obsolete. Chinese Quantum computers may do just that.

        • Hg
          Oct 23, 2017 at 2:25 pm

          *fact checking myself: bitcoin hashing resources conservatively estimated at 1 TWh annually, about 1/10,000th global wattage. Not close to equiv of Germany mea culpa. Still considerable, LA is about 7TWh

        • Hg
          Oct 23, 2017 at 2:29 pm

          ** CORRECTION: LA about 70 TWh

    • economicminor
      Oct 23, 2017 at 2:23 pm

      And if the dollar was collapsing at the rate bitcoin is raising then why hasn’t the cost of food or fuel gone up as in inflated away? I know I’m old and passed my cognitive prime but doesn’t something real have to change? At least for me it does to see how it affects me or what I call the real world.

      There is no REAL there (cryptocurrency) as far as I determine in my real life. Or are you suggesting the life I live is really a dream and the Matrix has taken over?

      • Hg
        Oct 23, 2017 at 8:02 pm

        Mark my words, you will be well and truly sick of the word Blockchain by the middle of next year as it comes to touch nearly every aspect of our lives. As for the “there” there, the Bitcoin blockchain REAL becomes the staggering computational resources devoted to making it unhackable. It turns out such a thing is indispensable, we just didn’t know it until now:)

  26. ru82
    Oct 23, 2017 at 10:25 am

    I used the following site to add up some numbers a few weeks ago so it has changed a little.

    https://bitinfocharts.com/top-100-richest-bitcoin-addresses.html

    58% of all bit coin addresses hold and average of $4 in their account. I am guessing that most of these address are in China because why would you open an account for $4.

    Meanwhile. the top 1% (140k address or of 19 million) own 89% of all the bitcoins and wealth. Actually 17k people own 60% of all Bitcoins. So 17k out of 19 million have any real wealth at all.

    Bitcoin is not a store of wealth except for a very few number of people.

    It looks like one of those multi-level marketing schemes.

    That being said…block chain appears to be a disruptive technology.

    • Nero
      Oct 23, 2017 at 11:26 am

      It somewhat irks me when cryptos are referred to as a “store of wealth” (not targeting your post specifically). For how can anyone know that a crypto currency can “store wealth” when they haven’t even been around a decade and in that time the volatility has been off the charts! Let alone survive financial crises, social breakdown, technological disruption, etc.

      A medium of exchange? *Perhaps*. A store of value? No way! One has to give gold it’s due in this regard, yet many of the crypto evangelists arrogantly dismiss gold and proclaim bitcoin/cryptos as a better replacement as a store of wealth.

      Fools.

    • intosh
      Oct 23, 2017 at 2:35 pm

      It is the worst kept secret that bitcoin holdings are heavily centralized.

      Also, I read somewhere that about 25% of bitcoins are lost (key to the wallets missing).

      Blockchain is TCP/IP; bitcoin is napster.

  27. Matt Keck
    Oct 23, 2017 at 10:46 am

    I’m a believer in bitcoin’s value as a store of value. Yes, better blockchain technologies will emerge for transactional efficiency, but they will probably be readily exchangeable with bitcoin.

    Just like the usd has enormous resilience because people have confidence everyone accepts it, bitcoin is becoming similar.. more and more people every week are starting to realize that people believe in it. Sorry, naysayers, but that is a VALUABLE trait in something anyone can access over the internet, particularly in an inflationary environment.

    Bitcoin is intrinsically deflationary as well – not good for a transactional currency, just fine for a store of value.

    The few times I’ve been out of bitcoin, I’ve wanted back in right away because I hate my other investing options right now.

    • Julian
      Oct 23, 2017 at 2:30 pm

      Hey believer, glad I found you. Can you explain why anyone would want (to buy your) bitcoin who doesn’t see it as a store of wealth? Real assets have value because they matter/are useful to people in some way.

      Can you name one example of a store of value that is not useful (or valuable) other than to the people using it to store value (or sell drugs)?

      Btw you can’t compare it to the USD because the USD does not require confidence to store value. The USD only requires that the US government can haul your ass to prison if you do not pay your taxes. Additional benefits are that transactions are instantaneous and free (when paying cash and most bank transfers). Hence the USD is useful also to people who don’t want it as a store of value (to pay their taxes).

      • Matt Keck
        Oct 23, 2017 at 3:22 pm

        I’m saying bitcoin is mainly desireable as a store of value and that’s why it’s so dear. There are other uses, yes, but they’re not why it’s $5700 (oops $5950).

        Yes, gold. If I were to buy (more) gold (so I could watch it flat-line for another 10 years), the main reason I would do it is because I believe people will value it. It ain’t for exchange transactions (5% transaction margins), it ain’t for building circuits, nor for more jewelry. Gold is a rock mined from the earth like limestone. People like to look at it, yes, but they don’t pay $1300/oz for things to look at very frequently. More likely, they would only spend that much because they believed people would value it as a store of value.

        What if.. people are starting to use bitcoin to store value the way they used to use gold. What if more and more folks are noticing that’s what people are doing, and so they do likewise?

        • Julian
          Oct 23, 2017 at 3:36 pm

          Actually, gold (a shiny pet rock people like to keep in vaults for no easily quantifiable reason) probably is the most apt comparison to bitcoin at this point.

          To answer your question: then bitcoin goes to $1.000.000. But what if they don’t? That seems infinitely more likely, and I’d rather own something that generates a return (like any financial asset other than some stuff from Draghi land) or something that is useful to me (like a house).

          To each their own.

        • chip javert
          Oct 23, 2017 at 4:26 pm

          “I’m saying bitcoin is mainly desireable as a store of value and that’s why it’s so dear….What if.. people are starting to use bitcoin to store value the way they used to use gold?”

          I’m an old guy (didn’t fall off the turnip truck yesterday), and retired CFO – I’ve seen this “store of value” movie many times over the last 40 years:

          1. Pet rocks
          2. Drexel-Lambert junk bonds
          3. Japanese yen to replace US dollar as world reserve currency
          4. Dot-coms
          5. Beanie Baby
          6. CMO (or whatever the hell Citi, BofA and others called them)
          7. Bernie Madoff investment fund
          8. Condos in Miami Beach
          9. Beanie Baby
          10. Euro to replace US Dollar as world reserve currency
          11. Bitcoin to replace money

          That’s about 1 eminently wacko idea every 4 years or so. When a relatively small number of true believers pile into this stuff, greater-fool speculators jump in and shear the sheep.

          (Mea culpa if I have missed your favorite con-job).

        • ru82
          Oct 23, 2017 at 6:57 pm

          I was sort of being sarcastic as a store of wealth. The wealth is being generated for the people who bought over 3 or 4 years ago.

          From what I can tell….it is a store of wealth for about 1% of the bitcoin owners and most of those owned Bitcoin for over 3 to 4 years. 99% of bitcoin owner address own less than $1000. The average USD value of the 99% is $434.

          If Bitcoin doubles to $12,000 then store of wealth for the bottom 99% will go to $868. Now the top 1% average holding is $600k. So they will see their wealth double to $1.2 million. Sure, some people may own more than 1 address so maybe they have $868 dollars and it doubles to $1700ish.

          This sure smells like a colossal pyramid scheme where only the top 1% get rich.

        • Nero
          Oct 24, 2017 at 7:20 am

          Gold has a 3000 year history of being money good, being a store of value with a stable price. This is indisputable fact, regardless of one’s personal ideology.

          It’s laughable that after bitcoin’s awful 10 year history for price stability, it has one year of a nearly 800% rise and the crypto evangelists declare history irrelevant and that bitcoin is the new “store of value”, without presenting even a shred of non-ideologically driven evidence. Simply another cult of sophists.

          As for gold, when something has 3000 years of history behind it you don’t need to “believe” anything, you can simply assume it “is”. Unless of course your really think that something so significant has just occurred to change the course of history. Yes yes, I know “it’s different this time!”, but I’ve worked in tech since 2000 and have seen plenty of over-hyped technology from desperate marketeers and slick salesmen, and don’t see anything in bitcoin that fundamentally changes anything.

          Adam Ludwin’s letter to Jamie Dimon (linked above) is a brilliant and balanced article that dispells much of the myths and downright deceit being spread around about cryptos, I suggest you read it.

          And your “what if people are starting to use bitcoin to store value the way they used to use gold”… do you have any evidence to back this claim up? Nope. It’s just a spurious statement attempting to give credibility to the crypto bubble. Whilst not definitive and absolutely anecdotal, the only people I know buying cryptos are the fools buying into this years hype wanting to get rich quick, and they absolutely don’t know anything about the tech (or gold for that matter), nor do they care about “stores of value”.

        • thelocalpragmatist
          Oct 25, 2017 at 12:55 pm

          Chip,
          You failed to list baseball cards and Star wars toys and memorabilia…and you call yourself a CFO….

  28. Oct 23, 2017 at 11:16 am

    How do you bastardize a Tulip Bulb?

    Any logical cryptocurrency should be a transaction only device to move your assets from one class or commodity to another. The problem with money is that you hold onto it, that’s Economics 101. Don’t let the plebs hold cash.

    Cryptocurrency is the logical next step to credit cards. Buy something with a CC nobody ever sees the cash.
    If you put $50 in Paypal and it was $100 tomorrow, you would know something is not right.

  29. Old Codger
    Oct 23, 2017 at 11:27 am

    I am going to rip up my back yard and grow LOTS of Tulips!

    I will sell the bulbs for $1 each in week one, $10 each in week two, $1000 each in week three, and $10,000 each in week four.

    I will make a FORTUNE!

  30. Citizen AllenM
    Oct 23, 2017 at 11:34 am

    LoL- nothing new under the sun. read https://en.wikipedia.org/wiki/Cryptonomicon

    What you need is a good secure portal, and servers secured out of reach of the interested governments, and good WORM drives. Everything after that is reached will be a giant race to the bottom to in the e-currencies, with the winner probably backed by Amazon (giant secure server farms), L3, or another big NSA contractor.

    The irony is the seamless transactions. Bitcons are simply tokens. I can just issue them, and the register has to match the current wallet. That is emoney that destroys capital controls. But halal systems, and Triad banking already did this in the past, but without scale now possible.

    The encryption stuff is boring, as is the whole mining fiasco.

    Bitcoin itself is simply solving a giant math problem, with a massively distributed solution slice algo that people actually are paying to solve.

    The genius of that is undeniable.

    • TJ Martin
      Oct 23, 2017 at 2:03 pm

      A good secure portal …. hmmm … lets see now .. whats that lesson I’ve posted in the past ? Oh yeah …

      Online/Digital / Internet Security 101

      1) Any code written by a human being or by a machine created by a human being can be easily broken by another human being or another machine created by a human being assuming enough motivation and reward … period !

      2) Therefore the only thing you can be secure about when it comes to online/digital/internet security is the simple realty that ultimately there is no such thing as online/digital/internet security

      So much for a good secure portal . And so much for the myth of the ephemeral bitcoin economy .. that isn’t . The reality being absolutely irrefutable and undeniable .

  31. Tom
    Oct 23, 2017 at 12:49 pm

    I have my long date calender marked for in 5000 years from today I will trade one of my silver dollars for bitcoin.

    • Oct 23, 2017 at 2:49 pm

      Now that’s what I call a long-term trade :-)

  32. pag
    Oct 23, 2017 at 1:05 pm

    Blockchain based financial instruments including currencies are the inevitable future. Most posters here have very superficial perspective – one that is perhaps mostly derived from news headlines. Granted the excess money supply is causing ICO bubbles much like bubbles in legacy markets but the underlying disruptive technologies are an order of magnitude better than existing systems and will wash over them much like the internet washed over teletext and the like. This is simply a process of natural selection.

  33. George McDuffee
    Oct 23, 2017 at 1:22 pm

    (Ran out of reply levels)
    RE: RagnarD
    Oct 23, 2017 at 10:51 am
    Do you think the govt could care less if Saudi Arabia, or any other oil producer wants gold instead of dollars?…
    —–
    IIU/RC it was precisely Saddam Hussein’s refusal to accept payment for Iraqi oil in $US and instead to price Iraqi oil and demand payment in Euro’s, Yen, Yuan, etc. that led to his hanging. Such a policy struck terror into the hearts of both the New York banksters for their profits, and the Treasury Department functionaries tasked with maintaining ‘mercan hegemony of the global financial markets.

    • Nick Kelly
      Oct 23, 2017 at 11:07 pm

      Iran under US sanctions could not transact in US$.
      Did a bunch of bartering and work- arounds with India etc. (oil for rupees) but eventually was forced back to the table.
      No alternative to US$ right now, (euro, yen and pound won’t defy US)

      Most challenged by US credit sanctions, Russia, which with Vlad turning 65, is much less stable than commonly believed.

      NB: Russia with the same size economy as Canada, supports 4 times as many people. So it should have one fourth the billionaires.

      But it has four times the number of billionaires.

      This is not the one percent controlling Russia.

      This is the one percent of the one percent.

    • RagnarD
      Oct 24, 2017 at 8:00 am

      George: Yeah, actually, I was thinking of the more recent Aug, 2015 comment by then, (I think) Sec. of State, John Kerry also relating to Iran:

      “If we turn around and nix the deal and then tell them, ‘You’re going to have to obey our rules and sanctions anyway,’ that is a recipe, very quickly … for the American dollar to cease to be the reserve currency of the world,” U.S. Secretary of State John Kerry said at a Reuters Newsmaker event.”

      http://www.reuters.com/article/us-iran-nuclear-kerry/dollar-could-suffer-if-u-s-walks-away-from-iran-deal-john-kerry-idUSKCN0QG1V020150812

  34. MASTER OF UNIVERSE
    Oct 23, 2017 at 2:00 pm

    The normal trading wave of finance has reasonable volatility and reasonable volume. The low interest rate environment has been taken to extreme and the resulting lack of volatility logically propels trading industry professionals towards high volatility dealing. Bitcoin is the only area under the sun that has high volatility and the advertising to push the volume down the road. Trading desks & traders know roughly when to get out, but this blockchain technology is just too promising for traders and institutional investors for anyone to ignore all this ‘irrational exuberance’ given that this is what traders feed off of. It does not matter if everyone knows Bitcoin is just another Ponzi scheme because the whole Bitcoin craze has somewhat of a future in terms of expectations. This is where all traders should consolidate their theoretical stance and perspective on Bitcoin investments. The only question one need ask is how long will Bitcoin will be operational before it is crashed intentionally, or it crashes randomly? That is the prime motivator for investment in Bitcoin. Balfor likens it to a Pump & Dump with an expiry date baked into the cake. USD is a Pump & Dump with an expiry date baked into the cake in so far as the lifecycle of currency [ Bitcoin or USD ] is roughly one century if we analyse the historiography of currencies. USD is slated to become defunct in the near future. Prospectors are looking for alternatives given the historiography, and the alternative here is Bitcoin and not necessarily any of the other cryptologic. Balfor is correct that it is a Pump & Dump, but that is common knowledge. What people need to determine is how long Bitcoin will probably be in existence given that all institutional investors are now jumping in with both feet. The threat is real to USD and we all know it intuitively.

    MOU

  35. Maximus Minimus
    Oct 23, 2017 at 2:24 pm

    Wall Street, Cryptocurrencies, Biggest Scam Ever. Which is the cuckoo egg?!

  36. Rates
    Oct 23, 2017 at 2:32 pm

    Not sure if people are aware of this, but in order to participate in ICOs, you need to pay using …. Bitcoins or Ethereums. If that does not explain the blow up in demand on those 2 coins, nothing will.

  37. Kenny Logins
    Oct 23, 2017 at 3:13 pm

    Houses are in a bubble, they’re not a ‘scam’, and they are still useful.

    Crypto are the same. Useful, sensible, completely reasonable as things.

    If idiots speculate on them and break them, it’s not the cryptos fault.

    I think people need to acknowledge the difference.

    I love Bitcoin. When it was £100 a coin, I could buy them easily, and have low transaction fees and 1min confirm times.

    It was cheaper than CC and more anonymous.

    Now it’s easier and cheaper to just use credit card, and source anonymity via other means.

    But I still like btc because at some point I’ll cash out up 1000’s of percent.
    If I don’t, btc goes back to being useful and I lose nothing.

    Win win for everyone who isn’t an idiot.

  38. Gershon
    Oct 23, 2017 at 5:20 pm

    Remember, in a time of universal fraud, possession is 9/10s of the law.

  39. mean chicken
    Oct 23, 2017 at 5:25 pm

    One trillion seconds is over 32,000 years. US national debt is said to be about $20T

    Blimp on fire.

  40. Bitcoin prices and volatility are set through scamming
    Oct 23, 2017 at 7:14 pm

    The price of bitcoins is artificially determined by large holders who trade among thousands of bitcoin addresses of their own, pretending to be ams-length parties that set a price at each particular moment. This transacting is done using scripts, it is all digital after all. So, the price of Bitcoin will keep going up, with lots of artificially created volatility to lure in greedy naive speculators who have no clue the price movements they see are not the result of arms-length trades.

  41. Bobber
    Oct 23, 2017 at 7:18 pm

    What will bit coins be worth when governments outlaw them? It seems obvious that will happen at some point.
    Bit coin will then need a well armed militia to maintain its value.

  42. Bo Jenry
    Oct 23, 2017 at 9:59 pm

    Simple question- how does one go about shorting any of these ICOs? Or Bitcoin, Ethereum, or any other “cryptocurrency”, for that matter? The ability to short these assets would take a lot of the wind out of their sails. Put options would be preferable.

    • Jon
      Oct 24, 2017 at 9:20 am

      You can’t short

      • david
        Oct 24, 2017 at 10:46 am

        Maybe talk Wolf into being our front man…. getting JPM to write some CDS for us :-)

  43. Jon
    Oct 24, 2017 at 9:22 am

    What happens when all 21 million are mined and now there is no incentive for miners to process transactions? Who’s gonna burn all that electricity for essentially free?

  44. Jim Graham
    Oct 25, 2017 at 6:03 pm

    Query…….I do not understand anyting concerning bitcoins – except that it is either a game or a con.

    *___According to WikiPedia – With Bitcoin, miners use special software to solve math problems and are issued a certain number of bitcoins in exchange. This provides a smart way to issue the currency and also creates an incentive for more people to mine.___*

    My main question – – where / how do I get the bitcoin “money” to pay the person or persons that find the answer to my math question? Generate the coins myself or buy some on the bitcoin market?

    What is to keep a bunch of folks doing some “mining”, then some of us “paying” some of the folks so they can sell the bitcoins they have “earned” for real currency?

    What limits the number of “coins” to 21 million?? The number of people that they expect to fall for the con?

  45. Chris R
    Oct 26, 2017 at 7:54 pm

    95% of the comments on this article are extraordinarily ill-informed on the subject at hand. The programmers and engineers who’ve been working on BTC have been working on it in a brilliant, open and honest manner & it’s astounding the assumptions here that people on the inside are somehow unaware of problems inherent in the system & have done nothing to resolve them.

    My take on BTC is that the supposed wild fluctuation in price will retroactively be understood as the growing pains of an asset as it attains a more stable price as a major store of wealth & currency. I can’t explain to everyone how & why in one comment, but there are an endless number of resources online for anyone with an open mind to self-educate. Should anyone poo-poo that & become a late or non-adopter I guess all the better for me.

    There are IIRC 8 count ’em 8 places after the decimal point in one BTC, the smallest unit being the satoshi. A satoshi is slated as the basic transactional unit. The limit is 21 mn BTC which a commenter correctly notes is inherently deflationary. It’s not at all unreasonable to expect a single BTC to end up being a store of $100K or $1mn or more; this is in fact baked into the cake and we’ve been moving toward that at what I find to be a reasonable rate with that perspective.

    Why anyone prefers central bank fiat to this is beyond me.

    • d
      Oct 27, 2017 at 2:53 am

      The technologies behind the block-chain are worth a lot the chain is already being used in other medium’s.

      The Cryptos themselves are modern tulip bulbs selling 4, what ever, until they are selling for nothing again.

      Your post continually tries to join two separate things, chain and cryptos, together as one and assign value to it.

      Thats like saying a house surrounded in purple smoke is worth more than the same house without said smoke.

      • Chris R
        Oct 29, 2017 at 3:16 pm

        Somebody sounds very bitter about… which is it, A) 0% interest on cash and/or B) the tubs of copper pennies that can’t legally be sold for scrap or C) the gold investment that never pays off because the central banks keep bangin’ it down?

        The blockchain has enabled people to create their own currencies. Some of them are flash in the pan but the established ones like BTC are here to stay & should continue to gain in value.

        • d
          Oct 30, 2017 at 3:10 am

          I want them to bang gold down, to where it belongs, under 300.00 OZ, then I will buy some more.

          The legality or not, of scrapping copper coinag,e has never stopped me, and never will stop me, melting it down.

          The chian itself is here to stay, and being taken over buy the mainstream.

          You just borrow everything you can against all your assets and keep buying those privately issued cryptos, please do.

Comments are closed.