By letting it burn, it won’t get big enough to cause major contagion outside of crypto.
By Wolf Richter for WOLF STREET.
The last thing the crypto community – from the Bankman-Fried-bedazzled Silicon-Valley fiat-billionaire venture-capitalists down to the true believers – will listen to is another warning from another central bank about crypto and crypto exchanges and potentially losing “all your money.” And they’re certainly not going to appreciate the we-told-you-so commentary now emerging from central banks and regulators.
The latest we-told-you-so came today in a speech from Bank of England Deputy Governor for Financial Stability, Jon Cunliffe. He said, “since September, the FCA [UK Financial Conduct Authority] has warned publically on FTX that “you are unlikely to get your money back if things go wrong.”
And things went wrong. Central banks and other financial regulators are worried about crypto’s massive and tangled tentacles reaching into the fiat finance system – the issue of contagion beyond crypto.
But this year, those tentacles have gotten chopped off, tentacle by tentacle, as crypto-companies and hedge funds, one after the other, imploded and took their customers’ funds with them. The most recent example was the spectacular implosion of FTX and its affiliated companies, including Alameda Research, leaving unspeakable chaos and huge financial holes behind. The debris of all this is going to get picked through over the next few years in bankruptcy court.
So now the question arises: Why even regulate this thing? Why not let it self-destruct on its own before it gets large enough to pose a real contagion risk? Why not allow the unfettered and repeated huge losses of those users form a natural self-inflicted regulatory force that keeps the crypto space from ever getting large, thereby keeping the risks of contagion beyond crypto to a minimum?
That sounds like a good idea to me. And that argument, following the FTX implosion, can be heard more forcefully in different locations.
And even the Bank of England’s Cunliffe, today in his speech about crypto, gave this theory a nod, even as he outlined why crypto should be regulated. He referred to an essay in FT Alphaville, “Let crypto burn.”
Cunliffe said in his speech:
“It is, of course, possible that neither of these two reasons – investor protection and protection against financial stability risk – will be relevant because the very instability and riskiness of the world of unregulated crypto finance, most recently demonstrated by FTX, will in the end ensure that the sector cannot grow.
“Indeed, some [the authors of the FT Alphaville article] have argued for regulators grappling with the crypto world to keep it outside the regulatory framework to ensure that users’ ‘caveat emptor’ concerns prevents both growth and connection with mainstream finance.”
Instead of regulation, “It is far better to do nothing, and just let crypto burn,” said the authors of the FT Alphaville article, Stephen Cecchetti (chair, international finance at Brandeis International Business School) and Kim Schoenholtz (professor emeritus at NYU’s Stern School of Business).
They said in their essay:
“Actively intervening would convey undeserved legitimacy upon a system that does little to support real economic activity. It also would provide an official seal of approval to a system that currently poses no threat to financial stability and would lead to calls for public bailouts when crypto inevitably erupts again.
“Finance is all about trust. The loss of trust from surging failures already is bringing about crypto’s demise. The market capitalisation of the myriad “coins” is down by about 75 per cent from its November 2021 peak.”
I agree: let crypto burn; don’t regulate it.
Crypto came about during the Fed’s money-printing binge and the Financial Crisis in January 2009. In the initial Bitcoin white paper, they called it a “system for electronic transactions without relying on trust.” It has turned out to be the opposite. Compared to existing transaction methods, including peer-to-peer methods that are free, easy to use, and run by the banking system in fiat currency, it’s difficult and costly to use Bitcoin for transactions. And given how volatile it is, it’s also risky to use it for transactions.
On top of all this are the other risks, such as your bitcoin just getting swallowed by hackers or when the exchange goes to heck or when you lose the key.
So it never became what it was said to become. Instead, there are now many thousands of cryptos, everyone can make up their own and use it as collateral, such as FTX did with its own native crypto FTT, and these cryptos are nothing but gambling tokens in a lawless high-tech casino.
And everyone who enters the casino knows this – or should know this – because the warnings have been around for many years.
So just keep the gambling inside the casino, block the exits, and let the casino burn down on its own. And it’s doing just fine in that respect.
Unlike the regular financial system, this casino is not needed by the economy, it serves no purpose, but burns up large amounts of energy during the mining process. If this system disappears, the economy would keep functioning just fine.
The public that ventured into the casino and that is getting crushed by falling debris, the VC investors that funded the casino and that are losing their shirts on it, the hedge fund clients whose fiat money is vanishing into flames before their eyes, well, they have been warned for years about the risks of betting on something that someone just made up.
I mean, sure it worked great for a while because everyone involved played along in an act of what I call consensual hallucination.
There is no need to regulate this. It’s self-regulating by the fact that lots of people will just lose lots or all their money. And that will keep crypto from ever reaching the kind of scale that would cause serious contagion outside of crypto.
If some technologies emerge from the crypto space that have useful and broader applications, then well, great. They will find a use in the highly regulated fiat finance system.
And the rest can just burn, no problem.
These are the stocks of some of the crypto-related companies that haven’t yet filed for bankruptcy: Today’s closing price, the percent change today, and the percent implosion from the high. All of them are featured in my pantheon of Imploded stocks. There really isn’t a whole lot left to lose:
| Crypto-Related Stocks
Nov 21, 2022 |
Price $ | % today | % from high | |
| Coinbase | [COIN] | 41.23 | -8.9% | -90.5% |
| Robinhood | [HOOD] | 8.85 | -3.7% | -89.6% |
| MicroStrategy | [MSTR] | 157.22 | -7.6% | -88.0% |
| Core Scientific | [CORZ] | 0.17 | -6.3% | -98.9% |
| Hive Blockchain | [HIVE] | 2.00 | -10.7% | -93.0% |
| TeraWulf | [WULF] | 0.83 | -13.4% | -98.0% |
| Marathon Digital | [MARA] | 6.19 | -17.1% | -92.6% |
| Riot Blockchain | [RIOT] | 3.98 | -10.8% | -95.0% |
| Hut 8 Mining | [HUT] | 1.12 | -9.7% | -93.3% |
Coinbase, among others, set at new low today:
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Seems like a digital ponzi scheme to me. I agree with Wolf. I’d hold off on regulation for now and see how far it can tank. It’s nothing more than pure speculation and could, if I’m understanding things right, has TOO much fungibility.
Its not a Ponzi scheme because investors are not receiving regular payouts. Its just a regular scam, like penny stocks.
wrong a lot of the retail accounts are called staked. They are being paid outsized interest to allow their assets to be used as collateral.
Same as it ever was
They get paid in crypto, not actual money.
To pay out those high interest on the stakes that were 8% or higher when interest rates were at 0%, they had to leverage.
Leveraging can go bad when asset prices are dropping if one is not hedged….and this happens a lot.
Harrold says digital currencies [are] “ … a regular scam, like penny stocks.”
+1000
Excellent analysis and accurate too!
Google “crypto staking.”
Yep. There are about 3500 stocks that trade on U.S. exchanges. There are over 10k crypto coins. Add in all the financial engineering in the DeFi space means it would be just too hard to regulate the crypto space. The SEC has a hard enough time just regulating the stock and bond markets.
Plus crypto trades internationally. The SEC only monitors US stocks.
It would pretty much be impossible unless the doubled or tripled their headcount and budget.
Maybe one option would be you can only trade U.S. to U.S. crypto customers on a U.S. regulated exchange. But then again, that sort of defeats the whole idea of cryptos and then they have nothing more to offer than what the current banks provide.
The problem with leaving it alone is that cryptos are very important for many illegal activities.
Catch-22. It is somewhat hard to leave the space alone because of illegal activities need to be shut down.
“The problem with leaving it alone is that cryptos are very important for many illegal activities.”
Oh that’s a feature not a bug. It’s also a victory for freedom.
Yeah when we went to a crypto seminar a few years ago, the cryptobros were constantly using a selling point that a big part of crypto’s value was that it wasn’t traceable (although doesn’t the Blockchain allow for just that?) And while it could be used for all kinds of shady activities, they also brought up the point that for ex. dissidents in corrupt governments could protect their assets, and citizens in countries where the financial authorities were corrupt or incompetent would have some hedge against inflation. Of course it’s questionable how good crypto really is for that with these big swings in volatility, Wolf and a lot of others point out it’s just not a good store of value.
But I guess I’d argue that even with the recent meltdowns, crypto will still retain some level of value and transactions just for those reasons alone, it’s another form of exchange (even if a lousy and unstable one a lot of the time) when the main systems have failed or ridden with corruption and mismanagement. It’s just that that value should be way, way lower than the ridiculous valuations BTC got up to, and that’s another indictment of reckless Fed policy for the past 40 years, it’s made price discovery all but impossible. The same kind of thing that’s happened to real estate and the equity markets, even for legitimate companies with real value and revenues, the valuations are way out of line. Including for Apple, Microsoft and the FAANG’s in general, and don’t even get me started on Tesla or the SPAC’s..
Sure, let the fed set up a Moonstone bank for everyone (crypto)! Freedom lives! Who needs the SEC, when the Fed (cough cough) will do!
Very, very, very few of those thousands of proclaimed “coins” ever attracted much interest/money beyond that of their creators.
In terms of cryptos’ birthing problems, the number of coins is pretty far down the list and more self correcting than most.
Yep. Those are the ones that would jump 500% in one day. Those are the ones that certainly needed monitored too.
In a regulated world, every one of those thousands of cryptos need to have audits, product description, crypto flow of the company, quarterly readouts. Basically all the things a stock needs to be listed on an exchange so investors can make a sound decision.
Ru82,
Exactly right. We often take for granted the concrete value of having those financial checks, and balances, FDIC insurance and double entry accounting, but it’s that transparency that makes a financial system at least somewhat stable, at least in theory. Customers and investors need to have the trust and full faith and credit, to know their contracts are honored and their savings maintained.
That’s another reason why uncontrolled inflation is the by far the greatest threat to a financial system and has done more to bring down great empires and major powers than any war ever has–once that trust is gone, it’s very hard to get back, and social cohesion falls apart. The reckless, stupid Fed policy of the past 40 years with ZIRP and QE and the housing bubble and other asset bubbles they caused, has been one of the greatest crimes against the US and the American people. Ironically that’s also why we have the crypto mess. In addition to all the shady uses, the cryptobros were able to make plausible sounding argument that their unsecured, speculative money out of thin air was a hedge against inflation. Crypto rising like this was one of the symptoms that the Fed messed up badly, and why they need to be even more aggressive in reigning in inflation now.
One feature of using cryptos for illegal activites is that those lists, that The Authorities like to have, builds themselves and another one is that “They” don’t even have to pay for storage!
Yeah, this is the part I never understood. I dabbled a bit in crypto early on and even turned a small profit before selling off my BTC when the valuations started to get looney. But even then I could never get why Coinbase and all the exchanges kept bragging about how Bitcoin was more “private” or “secure” than fiat. Even if we assume more “legitimate” uses–dissidents of a corrupt government hiding their assets in crypto to prevent detection, or using crypto (mistakenly) as a hedge against runaway inflation in a country with mismanaged finances–how is Bitcoin more private when the Blockchain is designed to provide an easily reviewed record? Maybe that’s why the actual crooks switched to Monera or other coins with more of that “value”.
Yeah, crypto is *easier* to use for illegal activities than cash. Having said that, cash is STILL the major currency used in illegal activities. Until cash use is under control, there is no chance of managing crypto use.
Just declare it illegal and get it over with. It will go back to its original function, to launder criminal profits and tax cheat’s funds. We have an FBI and an IRS which will find and prosecute those in the laundry business–including bankers. BTW the states are being lined up to approve, in their jurisdictions, the use of crypto.
Senator Durbin and Senator Warren just sent the following to Fidelity to reconsider offering Cryptos as an investment:
In light of the recent stunning events in the digital asset market, we write today as a follow up to our previous letter sent on July 26, 2022. Once again, we strongly urge Fidelity Investments to reconsider its decision to allow 401(k) plan sponsors to expose plan participants to Bitcoin.
The recent implosion of FTX, a cryptocurrency exchange, has made it abundantly clear the digital asset industry has serious problems. The industry is full of charismatic wunderkinds, opportunistic fraudsters, and self-proclaimed investment advisors promoting financial products with little to no transparency. As a result, the ill-advised, deceptive, and potentially illegal actions of a few have a direct impact on the valuation of Bitcoin and other digital assets.
If crypto is a haven for criminals, it’s not doing any better than other forms of trading. There are many headlines where the FBI (with help from NSA) confiscates or has recovered billions in Bitcoin or other crypto. They do it by matching bank records because eventually regular participants “cash out” to USD.
That it maybe, but like Wolf said, why even bother? I think not just crypto, but things like drugs should not be regulated. If an adult decides to take out a 2nd mortgage on their house to buy crypto or do 4 lines of coke that’s their business. If the crypto peddler on the other side takes all the money the said adult is now responsible for the mortgage. If the 4 lines of coke are too much, they will OD. How many safety nets are we going to build. That’s why world population has gone to 8 billion. We refuse to let nature take its course.
How else would government justify itself? You haven’t noticed that every year since 2008 the drumbeat has been who could have knowed? We’ve been or someone has been trying to convince us that responsibility plays no part in life. You don’t need it, we’ll just have more government!
Why not both?
I mean: prosecute those who have already committed (actual, demonstrable) crimes, then announce that anything goes from this point on. If the VC’s are as brilliant as they think they are, crypto will just be another used colostomy bag on the pile of trash.
This is kind of like the airline passenger who starts a ruckus. The only real solution is to turn him over to the other passengers.
That’s not regulating crypto as such, that just enforcing the current laws.
BTW, the stockbroker, bank clerk, trustee, or other financier using money stolen from customer’s accounts to speculate (like FTX did) is a staple of early 20th Century literature (especially detective stories – it’s a nice motive for murder), and was a crime even back then.
You saying untraceable money laundering has no value?
I’m more concerned about the apparent effort by the Federal Reserve and the government to digitize money; just another way to track everything and everyone by digitization.
You don’t have to be a con artist to appreciate the freedom that less digitization allows
Privacy and freedom from being monitored by algorithms that assign you a social worth by how well you conform to Govetment/oligarchial mandates
Agree. We do have a social credit system in the US too even if it isn’t officially called that, the credit report can effectively block millions of Americans out of participating in society even if they got hit by things like medical debt with our out of control healthcare costs. And if you’ve even been just arrested for a misdemeanor in the past with charges dropped, the background checks that HR now uses will still effectively keep you out of thousands of jobs. Not to mention that cameras are everywhere, and even just getting tagged in the “wrong” photo online can be dug up and used against you later. It’s not a good thing to have everything tracked and used to judge your worth as a citizen.
Perhaps it should not be regulated under Financial Services Regulations.
But it should still be regulated. Under Casino Regulations.
This is a hilarious hypocrisy, because it’s financial regulations that prevent this type of ponzi to grow to the point of contagion, where people start to lose their nest eggs and retirement funds.
There’s a reason why banks have a charter that allows them access to central bank funds and federal deposit insurance.
There’s a reason hedgefunds with large accounts have to publish their trades.
There’s a reason why publicly traded companies go through audits and due diligence.
These crypto schemes are essentially old fashioned scrip (which was an innovation at the time, like greenbacks), and it’s not that we decided paper currency and certificates of deposit were a bad idea, it’s that state’s regulated them to the point they can’t be used for get rich quick schemes.
But yeah, let’s keep believing, despite all the evidence to the contrary, markets are self-regulating and politicians only exacerbate things, as long as it’s greater-fool retail investors getting fleeced.
China outlawed this stuff by large years ago, and one’s gotta wonder why they’re doing so well, rather than sinking a half-decade’s of their best computer engineering talent into perpetuating an all-dancing all-singing ponzi scheme.
Don’t just gawk at the billion dollar evaluations on paper, but imagine all those man-hours, up in smoke.
Excellent point about the talent wasted.
China’s doing well? News to me.
Not saying we’d want to live there (many, many reasons we wouldn’t) but on our trips to China, we can’t help being impressed by the infrastructure and discipline of the people, and the data certainly are in their favor. The renminbi’s had much lower inflation than the USD or other currencies and much higher growth than the West even in the pandemic (and it’s largely due to better public health, not the lockdowns which in reality are rare there). China’s now the biggest trade partner for most countries in the world, with a strong trade surplus, a top science and innovation country (not just copying manufacturing) and with green tech that actually works. The US media constantly gets basic facts wrong about things there (it’s why we lost so much on our early investments when we bought into the China collapsing meme). When a country’s been going strong like that for basically 3,000 years and keeps coming back, it’s gotta be doing something right.
“it’s financial regulations that prevent this type of ponzi to grow to the point of contagion”
You mean like regulators who “saved” the economy in 2009? Regulators are always rushing to the rescue we’ll after the market corrects. Crypto is correcting just fine without regulation, it’s a scam and will crater without any regulatory action.
This is modern day Tulips and its amazing to see the history repeat and that people after all have not changed much. Well one can argue its much worse. Tulips did not waste so much electricity and was also somewhat physical and beautiful. Crypto as money is a complete scam. The fact that it cannot be printed freely is a bogus argument. My dog shit can also not be printed.
Do you compel your neighbors to store their wealth as piles of your dog’s shit? Do you impose taxes on them, payable only in your monopoly dog shit?
If you are comparing USD to dog shit, please send it to me. I like that dog shit; I mean the USD.
Hilarious!
Yeah that’s one of the worst things about crypto, the electricity consumption to “mine” the things is outrageous. Of all the stupid wastes of both fossil fuel and renewable sources, this has gotta be pretty high up there
Crypto’s are the modern day equivalent of the tulip bubble. Did they regulate tulips?
There was no Tulip bubble.
It was a bulb.
It was a bulb bubble.
Agreed; don’t regulate, as the results of “regulation” might result in a real nightmare for everyone, regardless of whether they’ve been involved in crypto.
But Wolf, Cathie Wood still believes in Crypto, she’s buying!!!
Cathie Wood is buying in the bitcoin space. Not crypto shit coins. The headline writers don’t know the difference.
Bitcoin is crypto. If not explain what is different. And it’s gotta be something other than bitcoin was 1st.
I wonder if Cathie Woods doesn’t know that Bitcoin is crypto either??
bit coin isn’t used for anything. other coins are used as gas to move other coins along their block chain. all these coins and stocks shouldn’t be allowed in peoples retirements. people should be allowed to put their home in their 401-k and interest bearing accounts and government bonds should be allowed. anything that can be lost like stocks and crypto should be only allowed for funzies. since that is all they are good for.to play with.
Thanks but my retirement is my business, not yours.
Why is Cathie Wood being held up as an example? Her investors went down in flames. Her ARKK fund is down 78%.
Thank you.
Wolf,
True…and many metros have seen apartment housing costs (denominated in DC Dollars) go up 30 percent in 18 months.
If wealth erosion is the issue, then even the crookedest crypto simply does overnight, what DC does slowly, relentlessly…at least I’m not threatened with jail if I don’t pay my taxes/buy my lunch in crypto…
Plenty of crypto implosions are due to outright fraud and doomed “creativity”.
But until the US “store of value” is treated more like a “store” by its self-proclaimed stewards, the impulse to alternatives will remain.
There is no difference.
Now that’s funny!
I’m starting a Cathie Wood contrarian fund. Pretty much guaranteed return….
Ouch, what a biting comment: “Actively intervening would convey undeserved legitimacy upon a system that does little to support real economic activity.”
I do like the idea of having the ability to move my money about w/o gov intervention. What happened in Canada earlier this year (frozen bank accounts).
@Frank: Make sure to fold in some Cramer in that Counter-Ark fund.
There is already a short ARKK ETF named SARK. 89% return already from the last 12 months.
You can. Hold a suitcase full of cash.
We just love reading Cathie Wood’s recs as a kind of anti-indicator, just look at whatever bubbles she’s talking up (buy this overpriced run-down shack now or be priced out of a home forever! yes, TSLA really is worth 3 times Toyota even selling 0.1 % of their vehicles and with failing FSD and cybertruck tech!) and do the opposite. Kind of like with Cramer, though being fair to Cramer, he’s actually backed off some of his wild squawking a bit with the Fed pushing harder to reign in inflation. In fact it’s probably a pretty good sign that the market and asset bubbles are about to start popping faster when even Cramer is more-and-more leaning to cautious side.
Jim Cramer is starting to sound reasonable.
Yup. Let it burn. I’m surprised that no one has created RatPoisonSquaredCoin yet.
Wait… I might do that. Just string a few GUIDs together for each coin and offer them up with no transaction fees. Maybe toss in a free toaster.
They literally had a coin named SQUID and people gave them millions
The creator just ran with the money after preventing people from selling the shitcoin
It is called a Rug Pull and it is all the rage
Thank you Wolf. You are so right.
“Finance is all about trust.”
For the four decades I ran my own small business, the trust of my clients and customers was by far the most valuable thing I had. Many people in this world also have a code of honor and integrity. That’s how business should be, I reckon.
“It’s sad that governments are chiefed by the double tongues. There is iron in your word of death for all Comanche to see and so there is iron in your words of life. No signed paper can hold the iron. It must come from men. The words of Ten Bears carries the same iron of life and death. It is good that warriors such as we meet in the struggle of life… or death. It shall be life.”
Sure, it is just a movie quote, but Sam Bankman-Fried seems to have missed the film. What blows me away, is how he was able to get to the point where he was slinging millions of dollars around to influence Congress and hang out with an ex-President (yes, the double tongues).
We should all study our forefathers, grandfathers, and movie quotes more closely.
“That’s part of your problem: you haven’t seen enough movies. All of life’s riddles are answered in the movies.”
– Steve Martin’s character in Grand Canyon (1991)
Prairie Rider,
I bet you are glad you are out of business now.
“My word is my bond” has gone.
It is all about stabbing people in the back and shafting suppliers and customers now and making a quick buck.
That was the reason I decided to stop business.
“The Outlaw Josey Wales” is one of my fave’s,,, and that quote just one reason PR.
Fact is that this crypto biz is just one of many of the ”paper” being traded around the world without any real connection to anything other than more ”paper” or the equivalent ”digital”.
Last I read, there is approaching a quadrillion dollars worth of this sort of nonsense lurking behind or below every financial biz these days, just waiting for the crash to bring down the entire financial system of the world.
And thus we have central banks and others destroying the money of the working folks who actually make things, etc., to protect ”THE system” rather than protect our savings.
And the folks touting this junk have the gall to bag on “fiat currency”. Yeah, it has its problems but at least it is somewhat connected to reality.
VVNV-well, in a world that values fame for its own sake, I reckon it’s not that surprising…
may we all find a better day.
Institutional Pension/Retirement funds invest in crypto and Fidelity allows Crypto ETFs it in 401Ks..is this a breach of fiduciary duty by managers?
Yes.
California Pension Fund Loaded Up on RIOT Shares During Bitcoin’s Q4 Rally…The largest public pension in the U.S. bought more RIOT shares for the first time since 2017.
Investing is high risk assets with a SMALL PORTION of one’s portfolio is standard practice. 90%+, not so much….
What most people call “investing” is always speculation.
Kinda a truism phrased that way AF; not up to your usual acumen and focus??
If speculation is defined as predicting future, are we not all speculating every day?
E.g., ”the sun will come up tomorrow” etc., etc.
Crypto ETFs were basically created for regulated institutions to kind of trade in cryptos.
Freedom and Responsibility go together.
Caveat emptor is Latin for “Let the buyer beware”
It is the acceptance of responsibility which allows you to learn through consequence. If we weren’t held responsible for our actions, whether they be right or wrong, we wouldn’t learn to change our actions to influence outcomes.
This is the problem with social welfare policies, bank bailouts, and other situations involving moral hazard. Benefits are internalized, and costs are externalized.
”It is the acceptance of responsibility which allows you to learn through consequence. If we weren’t held responsible for our actions, whether they be right or wrong, we wouldn’t learn to change our actions to influence outcomes.”
Good one max IMHO.
Having been allowed what is now considered incredible freedom from age 7, including being allowed to earn my own money selling newspapers on a street corner and darting into the cars stopped at the red light at that age AND the responsibility that went with it, I feel really sorry for kids today who are SO limited by law and social pressures, etc.
How some youngsters today clearly excel and become responsible adults needs to be examined more carefully and thoroughly and the opposite, those kids who never grow up at all studied equally so that WE the PEONs can have some hope of achieving eventual actual working democracy and fair rules of capitalism before the current trend toward socialism removes all motivation to proceed to MORE freedoms rather than less as is clearly happening these days with more and more laws leading to more GUV MINT controls of our lives.
I don’t get the point. Crypto is already regulated by the existing laws. So we could go for less or stricter regulation.
Citizens have to be protected better, not only in the crypto space. So I would vote for stricter rules.
For many of us it’s easy to identify charlatans, others will be sammed and lose money.
The cost of education.
(Over my comment limit. Back my corner).
Caveat emptor. If you hand money to some offshore person who can rug-pull you, just like if you illegally gamble online, or trade on the dark Web, you are embracing another level of risk (insulation from accountability). Too bad.
Handing money to strangers with no mechanisms for accountability is old-fashioned stupid. All these despisers of government and regulation suddenly cry like babies for its rescue. Something things society needs to rediscover: wisdom, and (when justified) the sense of shame. But the pain of losing money is helpful.
Quote from Law Abiding Citizen : Lessons not learnt in blood are soon forgotten.
Xavier,
Respectfully, there is no such thing as “citizens being protected better.”
“He who would give up a little bit of liberty in the hopes of gaining a little bit of security (protection) deserves neither (liberty nor security) and will loose both.”
Benjamin Franklin
Respectfully, there is no such thing as “citizens being protected better.”
Really? So we should abolish the EPA, FDA, SEC and every agency that protects consumers?
Yeah, the SEC sure did a great job making sure SBF didn’t speculate with his customers money!
Not just the SEC.
Look at the history of prior financial crises, regulators always closing the barn door after the proverbial horses have bolted. Yes, I know, it will be different next time.
Crypto is just another mania, in this case part of the biggest asset mania ever. No amount of regulation can prevent a mania and all efforts to regulate moral hazard ultimately fail.
The SEC didn’t do much for GM bond holders either.
SBF wisely incorporated and ran his company from the Bahamas.
Anthony A,
What could the SEC do for GM bond holders? They lent money to a company that went bankrupt. Did GM lie when it issued the bonds?
Didn’t Trump axe the SEC? It’s politics of the rich and powerful to weaken regulation.
Now some say, the SEC failed. It’s no surprise. They got what they wanted.
Decades back the SEC was praised and feared because of its power.
HAHAHA the FDA? Really?
Libertarian claptrap
FDA regularly approved drugs including recent Alzheimer’s treatments that have shown very dubious benefits. They also needlessly raise costs for the development of effective drugs and delay widespread use by years.
SEC famously couldn’t tell Madoff was a Ponzi despite impossibly above average results for more than 20 years. Name anything that they’ve prevented.
EPA to its credit is responsible for enormous improvements in our air and water quality which mostly took place in the ’70s and ’80s. But more recently they’ve tried to regulate the gas that you breathe out as a pollutant and mostly incur enormous costs for regular businesses for extremely small environmental gains or even no games as is the case with reformulated gasoline.
The regulatory state is unelected and is hobbling the economy of the entire nation and creating an unelected ruling class. It must be drastically pruned.
Motoguy-please quote ol’ Ben correctly (the wording’s importantly different, (re: ‘essential liberty’), or be clear in the use of paraphrase. (Thanks from another moto guy …).
May we all find a better day.
If you’re needing some tax losses for year end to offset some gains, they’re here for you!
That can be tricky with crypto. Why? My understanding (not professional advice, just something I heard) is, the taxpayer must sell the crypto to lock in the loss. And if it is tied up in some bankrupt exchange? What you have isn’t even crypto ownership, per se, it is an unsecured creditor claim against a bankrupt (and very insolvent) entity. Funny thing, folks were heaping scorn on banks and legacy finance, so they switched to trusting some dodgy guy offshore in a t-shirt and cargo shorts who never got a haircut.
These losses might be deductible as a theft or casualty loss, though that might be the wrong term.
Uncollectible loss. BTDT (not with crapto).
Bitcoiners will say it’ll never die and it’ll come back stronger but if nobody does the mining then it’s dead right?!
Seems like mining will soon make no sense so how does it survive!
Unless the money printer goes brrrrr again might be time to put a fork in it…. It’s done lol
if bitcoin has value, what difference should further mining make?
just less dilution ………
Mining.. hashrate.. network security.. Transactions lol if there isn’t mining there isn’t Bitcoin
When all bitcoin (21 Million?) has been distributed, will there still be mining?
Miners earn transaction fees for every Bitcoin transaction.
Nice cell next to Madoff is open
Madoff’s cell has a new occupant–Madoff died last year.
Are the lights working In Epstein’s cell?
Whatever happened to Robert Maxwell’s and Epstein’s assert – donated to the local dog shelter or somewhere else?
People who worked hard, prayed to God every night, believed in the right thing.
They lost their entire life savings just for the newfound Forbes Billionaires to flex on Instagram with the monies from depositors.
I don’t even trust Forbes Magazine anymore. They were propping up the crypto scammers.
You are not rewarded (or bailed out) for good intentions, or being naive and gullible. You are rewarded for doing homework and learning how things really work.
If this world rewarded losing, it would be a different world.
“If this world rewarded losing, it would be a different world.”
It has been “rewarding losing” for almost 20 years. Where have you been?
you are rewarded for ownership — however you get and retain it.
warm and fuzzy feelings aside …………
The majority of victims were coerced into taking huge risks because interest rates were low to bail out the billionaires.
coerced? ummm … not me. if the alarm bells didn’t go off when the exchanges or lenders were offering a guaranteed 14% return simply for staking your crypto crap while rates in the real world were less than 1% then just relax and enjoy being a sheep in this world of wolves.
Not coerced.
But prodded.
Strongly prodded.
By the bayonets of ZIRP.
Towards every risk-based asset class, no matter how foolish or over overvalued.
@Phleep
“You are rewarded for doing homework and learning how things really work.”
That’s a wisdom bomb!! Learning how things really work is arguably the most important education in the world. For those who speak don’t know, and those who know don’t speak.
The more you know, the more you know you don’t know.
Keep going.
Binance has a 200M stake in Forbes, hence the crypto friendly stories
Binance actually appears to be well-run. CZ Tweeted some good advice in the immediate wake of the FTX implosion like ‘don’t use your own token as collateral’ and ‘don’t be ‘capital efficient’ have a large reserve.
Fun fact: CZ got this party started when he dumped FTT in response to Friedman 1) talking smack about him behind his back and 2) much worse…calling for government regulation. Let all who call for government regulation fall into ruination.
The kind of people you’re describing most definitely don’t have their life savings in crypto, and if they do, they completely deserve this result.
It’s disappointing to see such an intelligent group be so uneducated about a financial topic and technical innovation; let alone one that is designed to return the right of all individuals to preserve the value of their own life’s work to that individual, versus be relentlessly diluated away by greedy politicians and their fiat currencies.
If you couldn’t, on the spot, articulate the difference between a digital asset, a utility token, a stable coin, and explain blockchain independent of any financial use case….
Alex said: ” let alone one that is designed to return the right of all individuals to preserve the value of their own life’s work to that individual”
———————————————-
please explain or describe how that works
An excellent definition of Crypto and Blockchain from Nova:
I will pass on Crypto. Like Wolfs says Blockchain may be useful.
Blockchain nothing new — been around for 30+ years.
I think it would be MORE disappointing if somebody invested the time to learn all the things you cited above, because they probably just lost 95% of their investment.
Alex, I’m glad you’re having fun. So are we.
Birds by a feather, scammers by a, “coin,” type…
Is the punishment of, “…keep(ing) the gambling inside the casino, block(ing) the exits, and let(ting) the casino burn down on its own..,” enough?
Blocking the exits…ha, love the turn of phrase and the thought behind it. Answer: Depends on how much you enjoy the show!
I wish I could believe the fraud and double-dealing will be prosecuted, beyond the loss of funds, as the punishment for being stupid (or blindly greedy, as the case may be), but I have little faith that we will get much in the way of, “justice,” other than the fun of watching this crooked casino burn.
Was that Star Wars, where a Jedi character says, “I heard millions of crypto holders voices scream, then go silent…” ?
I am amused. Now let’s have some public crypto-scammer hangings…
Who is ‘we’?
“we” = the people that Alex points at with this comment: “…such an intelligent group be so uneducated about a financial topic and technical innovation…” we are them LOL
All corrupto-currencies (even bitcon) are just for fraudsters and glibertarians to waste electricity while shaking their fists at the clouds.
Why should I have to explain or understand any of this crap? I didn’t ask for any of it.
Exactly. Crypto bros try to convince me of the value of their solution. When I remain unconvinced, they just say I don’t understand it.
They need to recognize the massive gap between the promise of crypto and the reality of crypto. So the utopian vision was perfect until people came and ruined it? Shocker! Welcome to life.
Maybe your baby is ugly and you just can’t see it?
I reluctantly use crypto but I don’t believe in it. For me it’s a requirement for work.
In a utopian world, noble goals of crypto would be fantasma.
I need crypto for fringe transactions where fiat is risky. One day when I get out of this filthy business, I promise to go legit and use it for moral good.
Okay, show me the difference between something that literally has no intrinsic value, namely crypto, and stock, which is fractional ownership of a company. I know which one I’ll buy at the right price anyway.
They should let it burn down to almost nothing, then make crypto illegal. It should have never been allowed in the first place. If I minted a “coin” in my garage, then started passing it off as currency, the government would have come for me immediately. For this to have been allowed to grow as an alternate “currency” to compete with the US and foreign currencies in the first place was wrong.
You do have the right to coin your own money, in a way. It is called a paper promise. You could write promissory notes to strangers for astronomical amounts all day. That is what most crypto is. And yeah, that would be illegal typically: just plain old fraud.
But the razzle dazzle tech adds the element of opacity and distance: you could write the notes from the Bahamas, and have the suckers’ money wired to you.
Nice!
Explain precisely why it is “wrong” to provide competition to the DC monopoly store of value, continuously diluted.
Hahahaha, “competition”??? You’re joking.
It’s 0’s and 1’s and freedom of speech.
It’s not possible to make every stupid Ponzi dumb idea illegal, people will find another thing to invest in that has no worth.
I wasn’t interested in BitCON back in 2013 when it was 10 bucks. I wasn’t interested at $65,000. I am not interested at $15,000. And I won’t be interested at 10 bucks again.
I admit that I should have purchased 100 coins at $10 back in 2013.
I could have afforded that $1K gamble back then. My son was telling me about it and I was intrigued but never acted.
I have to admit also that I would have sold all of it when it reached $20.
Just like in Vegas, If I double my money, I quit while I’m ahead.
If I had fallen and hit my head and woke up from a coma in November 2021 and found out that my 100 coins were worth $6.5M,
I would have wondered if the world had gone utterly mad.
ha – very similar sentiments
It says a lot about you that you freely admit that you could have made tons of money, didn’t, and are proud of your bad decision making. I am ashamed that I didn’t become BitRich. I should’ve followed my convictions and bought some early on.
There is no need to be ashamed you didn’t take advantage of a greater fool. There are better ways to get rich.
It says a lot about you that you have no moral compass and are blinded by greed.
The Trustees of the Ontario Teachers’ Pension Plan had no business “investing” in an unregulated security or platform such as FTX. They and the advisors who guided them into that snake pit should be sued, and prevented from any further investment activities.
“should be sued”
Correct. But will they be? Probably not.
In Illinois it would be no worries, the property taxes are easily increased. Good thing the Governor has family estates In Florida and Wisconsin, at minimum. Good hideouts when ‘something is in the air.”
The monetary tide is receding gradually. Crypto and profitless tech provide evidence. They are not ringfenced. Vapor dollars have found their way into all asset classes everywhere. They have not changed their character through time. Consequently, collateral is grossly mispriced. What went in as vapor dollars will come out as vapor dollars. This transcends regulation. To potential claimants, whether supported by regulation or otherwise; you can’t trace into vaporized dollars.
Hi AB:
Agree completely. See my comments regarding Long Term Capital Management (LTCM) fiasco which almost brought down the entire financial system.
US dollars still pay taxes and are legal tender for all debts, public and private. That might be devalued sometimes, but it is not vapor. It is not equivalent to some privateer selling his own “currency” that is nothing but numbers floating in a void, plus gullibility.
Plus math. Transparent hard math. BitCoin has failed as money, but it’s supply is very stable in that it is mathematically limited.
But there is ZERO actual demand because no one needs BTC for anything. There is only cooked-up artificial demand. So, when the artificial demand goes away, any supply is oversupply.
Incorrect. It’s used on DarkMarkets, or at least used to be, and is held as an asset. That’s demand, handwaving over ‘artificiality’ and other semantics notwithstanding.
Oh, and you absolutely need BTC in 2010 to make the most money in the 2010s. No other asset came close. Will it do that again? In an era where easy money is probably gone for good? I doubt it. There is only one answer: build or otherwise obtain a time machine, take cash.
This is not the demand for a “money” to accomplish an economic activity, but artificial demand for a gambling token in the very act of “consensual hallucination” that I described in the article. That demand has now vanished.
Time to cool your heels a little here.
There is need for something to serve as money, that a corrupt and demented government cannot control. Gold could serve the purpose, but crypto is more convenient. Fiat is poison. The beauty of crypto is that it provides the truth without the need for trust. That makes it incorruptible. This is just a bubble playing on the gullible and the fiat printers and it too shall pass.
In my humble opinion it still has value to criminals and terrorists transferring money internationally without traceability. It has monetary value and demand. At least in the short term.
That need will keep it stable to a certain value.
It also has some value based on:
1) Limited supply (like fine art)
2) Faith in its believers.
phleep
Not all dollars are vapor. True.
Just the ones that were excessively printed over 12 or so years, including during the pandemic. They run into trillions of units and are harmful to the financial system, as described.
Feel free to characterize the extent of QE as the production of legal tender causing routine and occasional devaluation issues. You are not alone.
My only hope is that those who enriched themselves with vapor dollars will take personal responsibility for their repayment obligations in real ones.
Hi Wolf:
Your approach to the problem to NOT regulate Crypto and let it burn out makes sense; however, history teaches us that unregulated markets can, and do, eventually spill over to regulated markets.
Remember LTCM which used highly leveraged T BILL transactions (not regulated) to build up a massive debt which had to be bailed out by 10 of the major banks to save the entire U.S. financial system. Also, the Hunt Brothers and their attempt at a Silver corner which left a $600 Million debit with Bache & Company.
Bailing out LTCM didn’t save anything.
“The 1990 failure of Drexel Burnham Lambert had no systemic consequences, and there is no evidence, also according to Kaufman (2000, p. 236), that the failure of Long Term Capital Management 8 years later ‘‘would have brought down any large bank if the Fed had provided liquidity during the unwinding period through open market operations’’ while also backing the counterparties’ unwinding plan.”
https://www.fte.org/wp-content/uploads/WhiteSelginLastrapesFed1.pdf
Burn, baby, burn!
When Crypto and Bitcoin go to zero, I’m going out to celebrate. I’m going to need a ride home with Uber
I’d really be sorry to see crypto go. One of my all-time favorite pastimes has been to ask a crypto “investor” to please describe how crypto derives its value.
“Contorted” doesn’t begin to describe many of the responses I’ve received. One of my favorites is, “It’s just like gold!” After the crypto crash of late 2021 and the recent demise of FTX and Alameda…I’m really regretting not having recorded some of these responses for future generations to enjoy.
And CNBC’s Jim Cramer is on record calling Sam Bankman-Fried “the JP Morgan of this generation?” Just WOW. Might be time to for Jim to retire his riding spurs.
> Might be time to for Jim to retire his riding spurs.
Might have been said hundreds of times. But the world keeps minting suckers.
Cramer… How many times has he destroyed his credibility, only to keep yelling and claiming to be an expert? Truly a notable figure of our post-shame society.
CNBC is a media company that supports its advertisers. The crypto industry pays them a lot. So of course they’re talking heads like Cramer will be shills …
Nature balances things out. The sheep will be eaten.
The same with YouTube. They allow crypto spam comments because crypto pays the most.
Let it burn. The same with Tesla fanboys. They and crypto bros are an annoying bunch. They owe Gordon Johnson an apology.
Totally with you on that, peas in the same pod of corruption and bubble speculation.
Crypto goes to zero because there is no limit on the number of wallet systems, which makes the the supposedly unique work derived hash blockchain meaningless.
It has been a very useful lesson for me because i did run the mining algorithm in 2010 but I didn’t fully understand the quantity of idiots who would buy into it. I also thought facebook would fail. So there you are don’t take my advice.
Small group of people bidding up the price of their pet rocks waiting for some fool to take notice. A lot of people have noticed by now so those rocks just aren’t as shiny as they used to be.
“I also thought facebook would fail.”
I think you may still be right, about both crypto and FB. Maybe your timing is just a little off.
“consensual hallucination”. Wolf you need to put that on your next beer mug!
It’s called Cognitive Dissonance.
I’m fine with everything in this article as a POV, except lumping BTC in with the other cryptos.
and this statement:
“If this [crypto] system disappears, the economy would keep functioning just fine.” -WR
Is the economy functioning just fine?
Not sure most would agree with that statement.
How about, If the FED and the banking system went away, the economy would adjust to use ‘sound’ decentralized money (BTC) that went up in value instead of down in value.”
Cathie bought bitcoin years ago because Art Laffer looked into it and told her what the market cap could be if BTC became adopted as a store of value for a decent part of the world’s wealth. Since the bitcoin network remains uncompromised, that thesis is still in play. Macro is having a hard time and so it bitcoin. BTC went down along with the everything bubble bursting. But it’s not out.
Don’t eat too much turkey old dudes… Heart attacks go up 5% between Thanksgiving and NYE.
Agreed Bitcoin isn’t crypto or it wasn’t meant to be.
If Bitcoin survives it’ll be because of it’s ethos and it’ll be in spite of the insane amount of greed crypto has fostered.
Ultimately like everything else monetary and fiscal policies will decide the assets future.
Bitcoin does have hypothetical value IMHO. Sending large amounts of money around the world for pennies and having the money settled and verified in minutes sounds like value to me.
Anybody sent an international wire before?? don’t forget your swift code! Or worse sit down with some idiot banker who doesn’t know what there doing.
This value goes out the door though if hash rate crashes because miners shut down so we’ll see
I’ve used the Swift system to send money between countries, it’s very easy and secure.
Yes of course swift works but you have to have the right code, if you have to use intermediary banks it’s slower and costlier, and you have to rely upon your bank not to mess it up.
Akin to the complaints about wallet addresses and losing keys
If you send the wrong wire that money is gone more times then not just like it you send Bitcoin to the wrong address
“Anybody sent an international wire before?? don’t forget your swift code! Or worse sit down with some idiot banker who doesn’t know what there doing.”
Yup. Just did my first one a few weeks ago, you are spot on. It took 10 days for the wire to complete. Silly me, I thought it would take 10 minutes.
Wire transfers are a ripoff. There are plenty of modern low-cost and fast alternatives available. I’m using one of them. Never ever wire again.
Bitcoin has forked a few times creating bitcoin offshoots. There could be unlimited quantities of Bitcoin copies created if there’s enough people to support the infrastructure required.
Ethereum based tokens are obviously worse in some senses but don’t use as much power and are “programmable”.
If the FRB and modern banking went away, BTC would definitely not be the preferred alternative. It’s not a real currency and never will be due to volatility alone. It’s just another option for speculation to transfer wealth from one person to another.
But keep on believing otherwise.
In a situation where our government doesn’t learn and continues to spend too much money why couldn’t Bitcoin be used, or something similar? What do you define as a real currency? I’m pretty sure it’s whatever you can trade for things you need.
I find it so funny the hypocrisy from the older skeptical crowd hating Bitcoin so much cuz it’s not “real”
YET you all hate government spending and think we should go back to gold standard BUT also hate Bitcoin which was designed as a fair medium of exchange that governments couldn’t corrupt
You hate QE and the endless money printing from the Fed BUT also can’t acknowledge a currency with a hard cap, making lobbying for bailouts and grants impossible, as an idea that has value.
But wait it’s not backed by anything…. Again You hate the irresponsible uncle Sam but are more scared of the idea that he isn’t guaranteeing your existence
Also the volatility argument😂 look at the volatility of the dollar the last couple weeks and all these other crap currencies aren’t much better then Bitcoin.
Crypto may finally be the Bitcoin killer but the idea of Bitcoin is to have money that’s free from government corruption which is what we don’t have right now and everybody is paying the price for it and I’d say there is value in that idea.
“I find it so funny the hypocrisy from the older skeptical crowd…”
And I find if so funny that you immediately assume everyone’s older. Typical naive thinking by someone who is both young and doesn’t yet “get it”.
I think the word you’re looking for is “gold “
Wrong, Bitcoin has been hacked at least twice. Maximalists try to white wash history or are ignorant of bitcoins history
Citation?
In any event, BitCoin simply isn’t stable enough to work as money. There are quite a few gold-backed stablecoins…
I haven’t had success posting links here, but you can Google incidents like the following
On August 15th 2010, Jeff Garzik discovered in block 74,638 that an unknown entity exploited a value overflow bug in Bitcoin’s code. This allowed the attacker to create over 184 billion bitcoin amongst 3 addresses, well beyond the 21 million supply cap. This was possible because the code for checking Bitcoin transactions didn’t work correctly when summing very large outputs.
And I agree Bitcoin as a currency is a failure
But a bank has never been robbed or closed and people lost money in deposits right?!😂
Wow, you’re even younger than I thought!
I’d say in the modern era, no, life changing money is rarely ever stolen. Anyone lose any money at WFC or JPM in the last few decades? Nope.
Aaron Fairchild,
1. If a US bank gets robbed, bank shareholders lose the money, NOT the depositors.
2. No depositor that stayed within the FDIC limits has lost money in a bank ever.
3. The entities that get bailed in first and automatically when a bank fails are the stockholders, then the preferred stock holders, and then the contingent convertible bond holders, and then it goes up the capital structure. So even if your deposit is over the FDIC limit, you generally get paid most or all of your deposit because ALL the equity holders get bailed in first and they take a total loss. That’s how bank resolutions work in the US.
250k per depositer so yeah most people are covered now.
Point was back in the earlier baking days when black Friday feds would come and shut down the banks that were insolvent those people didn’t always get there money back.
General point was without more regulation banks weren’t all that secure and there is a ton of parallels between wild West banking and what’s been going on in crypto.
Also it’s not naive to assume older people don’t understand and or are resistant to change and especially technology. Not all encompassing but generally it’s the older generation that can’t understand or see any value in Bitcoin in particular…BTW totally agree 99.9% of altcoins are worthless scams and need to die!
Cash sitting in bank accounts is ‘robbed’ by inflation causing it to lose purchasing power.
Was the USD ‘stable’ between 2005 and 2015?
Between 2020-2022?
Is it true that the $100 USD in 1970 now has the purchasing power of $10 USD due to FED monetary policy?
Why is my house worth 3-4x what I bought it for 10 years ago? Valued in USD.
The FED is a failure at keeping the economy stable.
What happens if USA can’t keep printing and the world runs from the USD?
Duke,
You fell off the deep end with your comparison:
1. Inflation is eating up the purchasing power of cryptos, like everything else, but cryptos don’t pay interest. You get 4%+ with bank deposits to help defray the costs of inflation.
2. the value of cryptos plunges overnight, many of them are down over 90% in days and weeks, no need to wait 50-100 years LOL; the value of bank deposits within FDIC limits NEVER CHANGES and is guaranteed by the government. And you get paid interest.
3. By comparing the riskiest trash that has collapsed in a matter of months to government guaranteed bank deposits, you’re showing that crypto has turned your thinking to mush.
4. You should have compared cryptos to SPAC and IPO stocks — that’s the comparison, not bank deposits. That’s just ridiculous BS
Heart attacks go up from all the family hanging around.
I agree with Wolf–Crypto mania will destroy itself because it was a sand castle based on the shaky foundation of:
1. The Fed will never raise rates.
2. The Fed can create unlimited amounts of 1s and 0s (hence cryptos always rise in value).
3. Cryptos cannot be tracked by the government so you won’t pay tax on your earnings.
4. They will always be safer than fiat.
Cryptos got so much of their funding from the stimulus payments just like everything else. Now that piper has to be paid, just like inflation.
Where we go from here is anyone’s guess, but I agree with Rickards that this is the time to be in cash (as Warren is).
It is a test for a completely unregulated financial system. A Libertarian dream.
We can go back to the Pre-SEC version of the Wild Stock Market Days of the 1920’s. That didn’t end well.
Seen it all before, Bob,
We went back to the pre-SEC days in 1999 with the repeal of the Glass-Steagall act.
The 1920s didn’t end well because unlike any other stock market crash before, there was a Fed, which moronically tightened rates during a downturn.
Per Cecchetti and Schoenholtz, via Alphaville:
“Actively intervening would convey undeserved legitimacy …. would provide an official seal of approval …. and would lead to calls for public bailouts ….”
————————————————————-
nothing else need be said.
Calls for regulation or intervention is from sorry “investors” and their paid off lobbyists and politicians to bail them out.
This doesn’t mean that fraud shouldn’t be pursued against fraudsters. Fraudsters, thieves and corrupt politicians should always be vigorously pursued.
Crypto exists only if there is electricity. We could have an EMP attack but I think that someone will sabotage 14 substations and bring down the grid. The transformers are made in China and there is an 18 month backorder. It is estimated that in one year without electricity, 90% of the population will die. Crypto will be the least of your worries. Spend instead on storable food, guns, ammo and pre-1965 silver coins. Bullet holes in transformers are what took down a substation in NorCal a few years ago. All the toxic cooling oil leaked out. It can happen again. And remember that The Great Reset is hoping for an economic collapse.
I’ll gladly die with the 90% if the remaining 10% are nut balls like you😂
Kinda hard to imagine folks able to destroy enough of the supporting components to bring down the entire grid SS, but, clearly, NATURAL phenoms exist with that capacity.
Starting with hurricanes and other weather events, climate change or no; then earthquakes, fires, etc., all of which have occurred recently in various places and destroyed at least local parts of the grid.
But IMHO, the one that will do the job on the grid is some sort of projection from our sun, as has been done, as per Carrington Event.
As to the 90% biz, that’s just fear mongering by folks wanting to sell you something, as it is really not that hard to live without electricity as is clearly demonstrated by thousands of years of folks doing so.
There will certainly be some serious changes to our lives, but we will adapt; that’s what our species does.
Sometimes I think I’d be happy with a collapse of the internet. I’d miss this website, but Wolf could create a magazine or newsletter.
It was bound to happen, Wolf. I agree with your take on crypto 100%. Let’s get on with most splendid housing bubbles in America so I can disagree again.
The Guardian has some revealing interviews with people who lost big money on Crypto – it’s worth a read. ‘The money is gone’: people who lost out in FTX’s collapse
The amazing thing is that many of these people are still believers. It makes me think that even if it does all burn down into nothing but ashes, Crypto 2.0 is going to happen
Those people didn’t “lose money on crypto,” they lost money on an exchange.
Sure. A crypto exchange. In fact, it was an exchange developed exclusively for crypto. An exchange that couldn’t exist anywhere except the crypto world. And now – suddenly – doesn’t.
Excuse me, but with all of the new information breaking, calling FTX an ‘exchange’ is even more disingenuous than calling Enron an ‘energy company.’
The fact that you want to make up fantasy definitions doesn’t change the facts. FTX was an exchange no different than Coinbase or Binance. It’s where people buy and sell crypto, yes, but it’s not crypto itself. Nobody who owned crypto in private wallets were affected at all.
The fact that you think calling FTX an exchange is “disingenous” leads me to conclude that perhaps you got burned by the collapse and are purple-faced angry, lashing out at anybody. Maybe sit back and have a little bit of a Thorazine cocktail to take the edge off, because you’re not making a lot of sense right now. And I hate crypto as much as anybody.
“Nobody who owned crypto in private wallets were affected at all.”
If somebody held FTT and/or Solana in a private wallet, they were still affected by the collapse. At least their net worth was directly affected.
was FTT not crypto?
It’s a religion for many. I fear it could get ugly as crypto goes to it’s intrinsic value. They’re going to snap. Hell, they’re still gambling in lunaC
Stockholm syndrome
““I can calculate the motion of heavenly bodies, but not the madness of people.” The above quote, attributed to Issac Newton, came in the wake of the great scientist losing a large sum of money speculating in shares of the South Sea Company in the early 1700s, the financial bubble of his day.”
We’ve seen it all before in the news.
A cult built around a gambling token…that’s gotta be a first. Is it like a cargo cult? Build the crypto first, then decentralization naturally follows?
Crypto needs one regulation.
“Caveat emptor”
Debbie Downer:
What if Crypto is just a symptom that the entire global economy is a sham?
Pouring trillions into the economy only inflated crypto…which has what value? Penny stock or OTC.
The trillions of freebie cash was financial helium gas.
Guns, germs and steel. Get some – avoid some. BTC does not solve anything.
Michael Engle…the Dow 30 is ready to blow.
Thanks as alway Wolf…great article and great discussions.
I wonder what the situation inside El Salvador and Central African Republic is, which made themselves global Crypto trailblazers by adopting it as legal tender by decree.
More examples of lessons-to-learn for the rest of the world..
Read an article about El Salvador recently. I believe CNBC.com but might have been elsewhere.
According to the article, it’s hardly used as a currency at all. Most of those who signed up for the wallet did so for the free partial token that came with it.
Bitcoin transactions are so slow it would be impossible to use it as a currency in a country bigger that say Podunk.
The very idea that Bitcoin could ever be a currency is completely daft.
I think it’s time to bring back my IPO:
SouthSeas Tulip Data, inc.
That’s right. S.T.D. is back.
You can get in NOW while it’s HOT.
We are the On Line Cloud Data provider of the Future, and we will take any token. Our Soft Ware is so Future oriented, it isn’t even developed yet.
But, it will be beautiful applications.
We will purchase what’s left of FDX, and any other cyber corps. We plan for the future, and so should you.
So, get STD today and spread the word.
Marcus Aurelius wrote: ” I think it’s time to bring back my IPO:
SouthSeas Tulip Data, inc.
That’s right. S.T.D. is back……
So, get STD today and spread the word.”
Now that was funny.
Ha Ha!
STD lives on!
Agreed. I think all the talk of regulations are just a way for the big banks to kick down their challengers though.
They watched the dumpster burn with FTX but now SoFi is being threatened by the senate…
Regarding BTC, or indeed, any crypto :
I LIKE THE CONCEPT!!!
Currency not controlled by the rich and powerful who are trying to push me around? Sounds great!
However, I keep asking this same simple question, and I keep NOT getting an answer:
HOW DO I USE BTC AS AN ACTUAL CURRENCY TO BUY STUFF I NEED?
By my reckoning, I have asked this question at least 200 times, on many other forums. I have never received a satisfactory answer. But until I can use BTC — or any crypto, I’m not biased — to buy gasoline or tools or eggs or whatever, none of these cryptos are an actual “currency”. More like a tech stock with no product that doesn’t even pay a dividend.
Straight up, I would be happy to be proved wrong
There are various BitCoin Debit cards-can’t guarantee they are all good. Not sure about debit cards linked to other crypto. If I understand correctly (and it’s brutally clear that I am the only here who has any interest in doing so) then you can link the card to your crypto wallet and swipe for your groceries and stuff all you want.
If you swipe a card at a grocery store, you’re paying USD fiat for the amount denominated in USD fiat. Period. The charge is processed by Visa, MC, etc. Then the card company may link it to your crypto account convert the USD amount to crypto and deduct the crypto amount and fees from your account. But you’re paying in USD fiat. And then you’re paying to have it converted into crypto. Let’s try to keep the BS to a minimum here.
It’s like a French traveler paying with a credit card in the US. The amount he is paying is in USD, and then his bank in France converts the USD to euros, adds fees, and deducts the euros from the bank account. But the guy paid the store in the US in USD, not in euros.
Thank you!!!
That’s exactly it tho it’s always been about adoption. And it’s never gotten close
You can buy lots of things with Bitcoin but it’s not easy or mainstream and it’s in the vendors side to accept it and most of the time the vendor that accepts it is turning right around and converting it to fiat so it’s like what’s the point right?
BUT if we got to a point where we ruin the dollar and it was as easy as using an app or debit card linked to a digital wallet or a tap to pay with wallet I phone app then people would use it and it could work in theory.
In reality sleazy people got control of the narrative and it became mainstream for speculation versus innovation. 🤷 Stuck with USD for now
“If we get to a point where we ruin the dollar…”
Slippery slope fallacy
Sammy..
BTC is just like any other foreign currency. When you want to spend it in the local currency, you have to exchange it for USD and purchase things with USD.
The difference between BTC and a countries FIAT currency is BTC can’t be printed by anyone. So over time, as FIAT is inflated away, bitcion will be adopted by people who want a store of value that goes up over time instead of down over time.
Cash App lets you hold both and exchange at will. Yes you will pay a fee, just like any other currency.
That is slowly changing. TESLA said it will again take BTC for cars at some point. El Salvador and other far away places have experiments going with local retailers taking BTC. But its early.
More BS from crypto-promo troll Duke:
“BTC can’t be printed by anyone.”
Sheesh. BTC has been printed by crypto miners since 2009 every day, 24/7, 365 days a year, constantly. This is just braindead BS.
What are these ‘solving a math problems’ like?
I used to like the Martin Gardner math problem and games books from the ‘60s.
I recently read on NAHB that Single Family Homes for Rent (SFHFR) is now 6% of all single family homes. Up from 3% prior to 2010. Slowing increasing YOY but really jumped the past 3 years.
Will the trend continue? Probably.
————————-
According to NAHB’s analysis of data from the Census Bureau’s Quarterly Starts and Completions by Purpose and Design, there were approximately 16,000 single-family built-for-rent (SFBFR) starts during the third quarter of 2022. This is 6% lower compared to the third quarter 2021 total. Over the last four quarters, 68,000 such homes began construction, which is a 42% increase compared to the 48,000 estimated SFBFR starts in the prior four quarters.
————————————–
Surprisingly enough…..home ownership rate increases to 66%. Some of this data below from NAHB seems odd. Home ownership increaseed while people complain about affordability. Renter households decreased yet SFHFR is gaining market share.
———————
The Census Bureau’s Housing Vacancy Survey (CPS/HVS) reported the U.S. homeownership rate at 66% in the third quarter of 2022, which is statistically unchanged from the last quarter reading (65.8%). It is 0.6 percentage points higher than the rate in the third quarter of 2021. The national rental vacancy rate rose to 6%, while the homeowner vacancy rate inched up to 0.9%. The homeowner vacancy rate is still hovering near the lowest rate in the survey’s 66-year history (0.9%). The homeownership rates of adults in all age groups increased over the last year, except those householders aged 65 years and over experienced decrease. The housing stock-based HVS revealed that the count of total households increased to 128.3 million in the third quarter of 2022 from 127.1 million a year ago. The gains are largely due to strong owner household formation (1.7 million increase), while renter households decreased by 454,000.
6% of all new homes built. Not all homes.
Just curious, but isn’t this thread about Crypto and not real estate? Maybe you posted in the wrong article?
As written by Thomas Tusser in 1573: “A fool and his money are soon parted”. Still true. I agree: Let it burn!
Caveat Emptor keeps all things in check. Art, old cars, pokemon cards, and now bitcoin and the NFT clip art. Snake oil still sells. The Vitamins and supplements are not far behind. Anything celebrity endorsed is not much better than the average stuff. But we the people like to believe in lots of things that make no sense. We are literally brainwashed by advertising yet sit in front of the TV anyway. Many accept all of this as reality. This human element is why economists have such a hard time forecasting. So on the whole – we deserve what we get. Does anyone want to make an offer on my pokemon cards ? Offers are accepted 1 day only so don’t miss this once-in-a-lifetime opportunity (all sarcasm). But seriously, I am glad that crypto is not on the TBTF list.
Western governments’ growing urge to regulate (control) everything is too strong. They won’t be able to resist. It will only take a few carefully-planted newspaper articles, featuring sad faces who have lost the lot to crypto and need to heat a can of baked beans over a candle, for the tide of public opinion to swing in favour of more crypto regulation. It’s only a matter of time.
Eloquently articulated wisdom.
Agree … let it burn.
“let it burn”
Isn’t that effectively anti-inflationary? Excess fiat dollars being ‘invested’ in a non-tangible ‘asset’ which then causes these dollars to disappear?
Now that is removing excess liquidity from the marketplace.
:)
How does it cause dollars to disappear? Dollars are simply transferred from the individual “investing” in crypto to the people creating the tokens. The fiat dollars are just changing hands.
Let em ALL crash and burn, – what needs to be regulated is to never let them exist at ALL, – like it should have happened in the first place!
Geeeez – We already have electronic banking systems in place and that has served us just fine for decades, and it’s better off without this crypto-trash that is based on a “handful of nothing”, unlike the established system backed by Gov backed currency.
People think this Bitcoin stuff is secret currency that the Gov can’t trace, well guess what every crypto-trash trans can be traced back to names of the people – both to and from, and Bitcoin is very traceable.
Of all 9285 crypto coins there are only 7 that aren’t traceable, – (yet) – and Monero is one of the most infamous that is used by crooks – all those will eventually be traceable too.
I also agree that contagion will small to the overall markets.
Maybe this will teach people a lesson about valuation, and to listen to the greats like Warren Buffett, – he said this crypto stuff is “rat poison” – instead of celebrity Carnival Barkers!
The only reason crypto went big, is because of how badly the government treated investors in Fiat currency. A decade with negative real interest rates? Free helicopter money falling from the sky for anyone to collect, what’s a person to do?
Well, it turns out invent a crypto coin, and build a paper fortune. As long as you remember what you were doing was just trying to collect as much helicopter money as possible, you’d make out like a bandit. If you believe your own sales pitch, and bought your own BS, well we can now see where Bankman-Freid ended up.
Is it any surprise that crypto promptly comes back to earth only a matter of months after the Fed turned off the money machine? Never should have turned the damn thing on in the first place.
Certainly a valid explanation for many.
Has anyone thought about all the money the mafia underworld has lost?
Bankman is likely a dead man…………
Even Bartman was (quite unjust LT) hounded and threatened for years after that 2003 Cubs playoff game. The similarities will be in how the media corpse spin it.
You didn’t exactly need preternatural olfaction to be able to discern the reeking waves of BS coming off Crypto — kinda glad to see it consigned to the dustbin of popular delusions alongside cold fusion and nanotainers.
At the same time, yeah — keep the pilot light on enough so that all these inbred nerds & self-styled Phony Starks have something to play grabass with, esp if it keeps them out of things like housing.
Keep telling yourself that and it won’t come true. Crypto isn’t going away. A trustless verification network unlike anything we’ve ever had can’t not fundamentally change the world.
Good lordie. Do you have any idea, Cytotoxic, how ridiculous this sounds to anyone who isn’t a true believer?
Over a decade ago I contributed a small chapter for a book, and the US publisher sent me $50, of which about $20 arrived after the US-UK bank fees. Boy do I remember the value destruction, I never did work like that again.
If your ambitions are limited to buying groceries at the local shop, Bitcoin isn’t and will never be for you. But try remotely paying an artist in Russia (I’m assuming you’re not on the sanctions list), and you will comprehend how useful it is to some people today. Another good use case is short term escrow, if one doesn’t want to shell out for a lawyer/banker. Fundamentally, the long term value should be a function of international transaction fees (miner + exchange), vs alternative Credit Cards, PayPal or WU.
Then there’s a whole lot of places in Africa where national currencies are non-practical, and all sorts of places around the world where you have to rob a bank to get your own money out. Absolute game changer since 2009.
None of this justifies the current high valuations, which are a matter of leverage games. But then, anything can bubble, even *gasp* houses. Bitcoin will work just as well at $1k as it does at $15k today.
I’m using a modern service for international transfers (involving USD to EUR) that is quick and free at both ends, and you get a good exchange rate. The service is available for lots of other countries/currencies. It takes about two minutes to initiate the payment online. It goes from bank account to bank account, and there are no additional hoops to jump through.
But wire transfers — which is what you were using — are a huge ripoff esp. for small amounts due to their fixed fees on both ends. In addition, they’re a ripoff because the exchange rates they use are a ripoff. But there are plenty of easy-to-use low-cost modern alternatives available.
Just stay in your lane wolf. This stuff ain’t going away and from your writing it’s clear you have very little understanding of the benefits some of the technology is bringing to computer science and beyond. Obviously, there was a bit of a mania and lots of scams but that doesn’t preclude the actual progress being made. I’m not a true believer in bitcoin or any other coin for that matter but your stance is just as close minded as the most rabid maximalist of whatever flavor.
Let’s do a little thought experiment. Suspend your disbelief for a moment and imagine a world in which the Fed goes away and is replaced by DAO. Every US citizen is a voting member of this DAO. The cost of maintaining the USD network could be financed by a very small tx free on transactions over a certain size. The entire network would be on an open ledger readable by all. Would be very difficult to perpetrate fraud of any kind and extremely cheap to transact. I’m sure there are all kinds of flaws with this 2 minute brainstorm but democratic control of monetary policy sounds good to me. Unless you think the fed has been doing a great job? Maybe I’ve been reading you all wrong…
OTH,
dream on, have fun. Go live in Meta’s Metaverse. Maybe all your dreams are good in the Metaverse.
Consensus algorithms likely will be used in the future but crypto is just a proof of concept that spun wildly out of control
I stopped trying to deepen my understanding of crypto and blockchain after reading Bruce Schneier’s assessment. Can you explain why he is wrong?
FTX is no more an indictment of crypto than Madoff was of fiat. FTX’s failures indeed have nothing to do with crypto, it was just mismanagement, fraud, and ‘effective altruism’. Nothing exceptional here.
“The market capitalisation of the myriad “coins” is down by about 75 per cent from its November 2021 peak”
LOL. We’ve been here before, and crypto came back stronger than ever and it will again. The world needs good money and crypto is going to provide it, one way or another, eventually. But go ahead, tell yourself crypto is over. It will comfort you until one day you can’t recognize the world.
“The world needs good money and crypto is going to provide it,…”
hahahahaha, as we can tell already.
The stuff people STILL post about crypto is just astounding. That’s precisely why regulators need to let it burn.
Yeah, so we can be vindicated faster.
Tell you what Wolf, pretty sure you can bet against Binance and Tether and such. Go ahead. Do it. Make all the money and tell us all about it. Don’t forget to subtract inflation.
Cytotoxic, what I don’t understand in the whole crypto argument (and I understand the technology under the hood) is that in the desire to remove oneself from unbacked fiat currency, the replacement/ alternative is still fiat backed by even less. Add to that the risk of losing keys and the whole model seems to collapse to hopes. At least gold and silver are tangible accepted stores of value of one doesn’t like fiat.
I think many are conflating crypto and scams now.
All my cold wallet BTC is still safely stored.
I’ve taken profits of 2500% since 2015.
My remaining BTC is worth 4500% more than my initial stake when I bought it in 2015.
No special investment strategy. Just buy and hold.
Indeed I took most profits in late 2019 just before prices surged.
Up down up down. Maybe it’ll go to zero.
Greed begets greed whatever the medium of exchange or investment, regulated or not.
It definitely needs to burn, and fail, and people to learn not to be greedy… and what is finally left probably has merit!
In my view it’ll be bitcoin.
Pat yourself on the back there Satoshi Nakamoto! Charles Ponzi also did great on his early stamp investment!
Yes, lots of money can be made by getting into the early phases of a scam. That’s precisely why scams exist – because lots of money is being made early on. Lots of money is being lost when the scam unwinds. Just because you got in early doesn’t mean it’s not a scam. Ask the people that got in a year ago.
Tulips are not a scam. They are really nice pretty flowers to grow in your garden. They have a real sensible price for centuries.
But allow a tulip bulb market with unlimited promises of currency, you get credit expansion and ridiculously high prices. Did tulips somehow turn into scams? Do the flowers become toxic to touch? No! They are the same flowers.
So why did so many people go bankrupt? One can become poor from buying overpriced tulips, but one cannot go bankrupt from that alone. To go bankrupt you’d need to either already have negative cashflow (i.e. going bankrupt regardless of tulips, just faster with tulips) or, more commonly, to borrow money to buy the bulbs, which cannot be repaid without selling them at a higher price. It is these borrows backed solely by expectations of price appreciation that are the actual scam.
People incorrectly focus on the numerator asset but generally that has little to do with the bubble. Just like leveraged coins, Beanie Babies, South Seas, Railroads and dotcom and almost all bubbles in history, hopium-backed emissions of promissory notes in the denominator currency of the asset is the bubble. Price is just a symptom.
I’ve read that someone actually killed a co-worker over a Beanie Baby debt.
“Borrower nor Lender be, for a loan oft loses both itself and friend” – Shakespeare
Saynor? Is that you there? Better HODL..in fact HODFL the way things are going
Craig, Bitcoin isn’t fiat because it’s not government issued and it’s backed by the network so backed by something wait for it……. Real lol
AF, “backed by something wait for it……. Real”. Backed by the network is “real”? That’s supposed to be meaningful? That history of computes doesn’t equate to being backed by anything, but only proves who had it. “Backed” means what it can be converted into, and you can’t convert something into “the network” in any way that has monetary meaning. (Ok, unless you are converting dollars into routers to improve a company’s network.). Also, I believe that saying “fiat” has to be from a country falsely obscures the notion of not being backed by anything.
You commenters really ripped into crypto in this article. Overwhelming boomer presence here & a few millennials I see. Remember, nothing or nobody is worse than the bankers. BTC is worth $15k as I write this,, which is still a nice piece of change. I can be on an island in Tonga with a dial-up internet connection and my expat buddy could be in India likewise with dial-up. And within 1-hour I can send him BTC that he could then use to buy food from somebody. No banker can stop it. No gov’t could seize accounts by labeling him or me a terrorist. That’s the power of crypto. It defeats the powers-that-be and the control mechanisms built into their banking system. Its highly-volatile sometimes so it should have never exceeded 10% of anyone’s portfolio if they were smart. But it’s here to stay, those coins in people’s wallets aren’t gonna disappear. A whole generation believes in it so it won’t disappear. Taxpayers were on the hook for bailing out the bankers. To want crypto to be killed off while the banking system and its private owners continue to thrive is just a sad idea to put into the atmosphere
You could – but the money for going there was invested in crypto :)
Anyways, El Salvador is The Place To Be for bit-coiners. As long as they bring USD.
“A whole generation believes in it so it won’t disappear.”
And Wall Street gets it. This is the vehicle through which “your generation” will be fleeced out of what they actually “earn” from what they produced.
@AC
I’m Gen X. And I’m confused – I need help with your scenario. I electronically send a payment in bitcoin from Tonga to India. What am I actually paying my person in India with? Bitcoin is scrip. It’s not actual tender. How do they alchemize that bitcoin into usable real currency? Do they take the bitcoin receipt to the bank, like a casino payout ticket? Is there a machine that transfers those Xs and Os into usable currency? Since “the government” is anxiously seeking to foil my transfer of funds, only a bitcoin transfer will do, I guess. How does my person in India CONVERT the Xs and Os into something actually usable with “the government” around? Where does the actual money come from? And how does the transfer of actual currency – the point of the transaction – not alert “the government” upon completion? It seems that one party pays actual currency, and gets Xs and Os in return. What am I missing?
That’s the thing these “true believers” always leave out. They are dependent upon fiat. They are all either reckless gamblers hoping to get rich, or money launderers hiding their illegal activities. Period.
If your government is unfairly seeking to foil your transactions then you will have to use an unofficial exchange (street corner dude) with a black market rate to convert your Xs and Os into paper rupees that local market stalls will accept.
Exactly the same as if you need rupees but received a padded envelope stuffed with paper Tongan Pa’anga, or a parcel with a gold bar. But the postal service costs postage and can take weeks (if it gets there at all, given in your scenario they may inspect your post). Bitcoin takes an hour and can be done in multiple tranches to mitigate market and exchange risk.
There’s no magic. For the unofficial exchange premium you effectively delegate the hard work of arbitraging value across capital controls to the unofficial exchanger. They are a specialist in solving this kind of problem for the sum of their customers and competes with other such specialists in the inventiveness of their schemes to keep local prices inline with international prices. They could just be netting out counter trades, or could even be bribing local bankers and politicians.
My point is there is someone in India who will accept the bitcoin in exchange for food, clothing, a gallon of gas, rent, etc. And these ‘tech’ type millennials exist worldwide. Gold & silver hoarders must realize the weakness of their thing, metals are tangible – your safe can be dug up or the locks can be picked. But of course you still should have some precious metals. If you can remember a simple John Lennon song like Imagine, you can remember the words of your private key. Don’t store your bitcoin in anyone’s wallet but yours. It Always gets stolen. Everyone isn’t a gambler or money launderer who is interested in crypto. Some ppl just feel good about having an option that doesn’t include the Federal reserve. It’s a form of rebellion against the system for some. I’m Gen-X by the way
I’m sure this was said about Tulip bulbs. And the South Sea Company. And Pets.com. Do you know anything about financial history? You don’t have to be a Boomer, I’m not, you just have to be able to read.
They already have regulations in place for toxic paints and electrical hazards. Can’t they just use those regulations for crypto?
Bitcoin/Crypto while madness to some, is being exonerated by the entire legislature of Texas. Top Down Support. The party is just getting started. Austin, TX will be the Citadel. Rise or Demise will be direct reflection of the Leadership of Congress regulators.
Republican U.S. Sen. Ted Cruz, who is a Bitcoin investor and a leading advocate for crypto, also reaffirmed his unwavering enthusiasm for the industry during his event at the summit on Friday. “I want Texas to be an oasis for Bitcoin and crypto,” he said.
“This Generations Oil Boom”
Well of course – Cruz would’ve been the first slob on the boat right behind Captain Bligh. Is there a more complete living study in how not to be? Avaricious, cowardly and squeamishly adaptable. If the man endorsed air, I’d figure out how to grow some gills.
Then there’s this:
“After years of studying it, I believe that cryptocurrency is an inherently right-wing, hyper-capitalistic technology built primarily to amplify the wealth of its proponents through a combination of tax avoidance, diminished regulatory oversight, and artificially enforced scarcity.” Jackson Palmer, Dogecoin Creator :
Bulfinch,
Good post and my 1st good laugh of the day from it:
“Well of course – Cruz would’ve been the first slob on the boat right behind Captain Bligh.”
And ex House Speaker John Boehner (R) said “Ted Cruz” was Lucifer in the flesh” – LOL
He reminds me of Grandpa Munster with a Mister Haney voice.
What is really ironic is that twice now, the ad that Google has served up to me while reading this page is for a coin mining rig. 😂
The collapse of crypto market capitalization is almost exactly in lockstep with the pace of the Fed’s Quantitative Tightening (QT) program. A mirror opposite of crypto’s nascence and growth with QE from the past. Worth keeping in mind crypto started sinking from its highs when the Fed started discussing tapering QE last year.
I’d imagine the crypto silliness would continue full force if the Fed maintained QE and let inflation run even wilder. Even though QE & QT may not be a direct causation of crypto’s swings, the correlations are remarkable.
A startling example of this QE/QT correlation with crypto valuations also took place in 2018. Powell tried a round of QT that year (with Trump flogging him for it), and sure enough Bitcoin was in the process of collapsing from $20K in 2017 to a nadir of $4K in 2019 around the time the earlier QT ended.
The price of crypto is set by the Fed.
Crypto is a great tool for the Fed to identify excess liquidity. If they set BTC to an upper limit of $10-$100, inflation would decline, unfortunately, not landing softly, but that prospect passed many years ago.
They ignored the BTC alarm bells well before RRP balances started blowing out.
It allowed some crypto eco system people to live like billionaires at the expense of their investors.
Good for them as long as they did not do anything nefarious.
Maybe the worst investment for the retail investor is anything that is a new technology. They tend to be over hyped and rarely live up to the promise. Probably better off with 20 – 30 boring dividend payers that have a long dividend history.
Crypto isn’t a new technology. Blockchain is not crypto.
Crypto doesn’t actually do anything. It’s not a real product or service.
It’s nothing.
“It’s nothing.”
Rather, it’s a means to separate fools from their money. At least, that is what it has been demonstrated thus far.
In other words, it’s a hustle.
There are going to be a lot of doctoral dissertations on the Rise and Fall (death) of Crypto.
Good article. Many people who talk about the fiat system and the current economic climate become fools when talking about crypto. They consider it as some kind of godsend, just because it’s outside Government control. It was a Ponzi scheme from the word go and now it is proving that fact.
When any crypto coin is worth less than the electricity to mine it, people will stop. Large mining companies will stop if their electrical rates go up too high as well.
Sure, some giant miners will buy their own hydro power dam. But most people can’t do that. And some countries, like N Korea will mine because – I have no clue.
Let it all burn.
Strange times. QE gave birth to crypto (BTC) – great idea in principle, but fraud / deceit flooded the market and destroyed the dream.
Hopefully central banks will eventually find a use for blockchain at some point – making transactions less laborious – a silver lining.
I find it odd that bitcon fanbois rant about “fiat” currencies, yet they are all-in on an asset that some random person (whose identity has never been verified) just made up. The only reason that bitcon has “digital scarcity” is just because everyone has agreed to abide by an anonymous white paper. There is really nothing objective about any of this.
It’s called game theory and aligned incentives. It’s a trustless model, it doesn’t work just because the dude abides.
Don’t expect these reckless gamblers to apply any logic. Ask them about BitCON and they have catchy little replies like “Bitcoin solves this.” When you say, “wait, what, I didn’t ask you about solving anything?” they blurt out “have fun staying poor” and then they’re done. That’s just about all they’ve got.
A diversion and liquidity burn for Surplus Males. You can see it in population pyramids, males up to age 40 love Crypto. The same phenomena drives housing bull, lead by Surplus Feminine over age 50.
Thank goodness I was in my teens in the ‘70s and twenties in the ‘80s. We had better ways to get our jollies.
The irony of the crypto space is they are re-creating all the same infrastructure surrounding and supporting crypto that the fiat space they are purporting to get away from, already has. They have exchanges, derivatives, money laundering, lenders, scammers, hackers, brokers, advisors, and are now saying they need more regulations that again is what they were seeking to avoid. It’s all digitally contrived out of thin air too ! So instead of nation of pope government issued fiat, or ‘currency’, and a limited number of them at that, there are thousands of crypto ‘coins’ that are issued by whoever wants to issue them. Yep that just sounds so much better than regular boring government issued fiat.
It’s gonna burn or implode alright. And a boat load of people will get burned being seduced into it.
This 100%.
The ideology that drove crypto. Initially and still drives it for many is the sepparation for traditional finance and FIAT currency. Except the result for most is exactly the same, except no regulation so it is the wild west.
Also bitcoin or any of the other ‘currencies’ have so far not met any of the traditional requirements of a currency most importantly being a stable form of value and readily tradable with any counter party.
The two thing it has had resounding success in is facilitating black market transactions electronically and as an glorified gambling tool. Neither seem to benefit the economy.
The general assumption is that the money that went into “crypto” went there just because of stupidity and greed. That certainly is true to some extent. But:
“Crypto” has been and is used for one very “real world” purpose, and that is money laundering. If you want money -‘a lot of it – to disappear in one place and then magically re-appear in another, “crypto” is your thang. Nothing like having a few million whatevers on your unsuspicious phone. I mean hey, everybody’s got one. Works everywhere with just an internet connection, which nowadays is – everywhere.
If you read on Zerohedge that the “the US attorney’s office in Manhattan” had a probe into FTX months ago and found – nothing or that an”nigerian crypto startup” now is bankrupt because of FTX you know what’s shaking.
That article had me at ‘SDNY’, who is a protector of these hoodlums.
Crypto currency will remain a dark-net currency for drug dealers, pedophiles and terrorist because it’s main feature was always anonymity.
1) N. Korea programmers built a a cyber bridge to Sam Bank Madoff
billions to transfer money in a huge sucking sound, for fun and
entertainment only.
2) In the seventies, after Nixon built a bridge to China, it was all about high tech and globalization. Programmers flourished, but the midwest rot.
The flyover people died in midlife from alcohol, obesity and drugs.
3) It cost $80k/y to grad in physics or math in Stanford or Princeton, but
almost zero in Russia, China, Ukraine and NK.
4) We built a wall around NK, but they built a cyber bridge to steal our
money to benefit NK gov from globalization and high tech.
5) Gen Z and millennial got heart the most from creepto unexpected
collapse ans student loans jubilee cancellation.
6) How could that happen so fast : our programmers are below par. NK
cyber attacks happen almost every day, every year, for many years.
7) NK 5:0 Bank Madoff II
8) SF might be on it’s way to become like Johnstown PA, Braddock and Youngstown.
Detroit, the Silicon Valley of its day, a radiant attractor for talent, skill and work ethics. Actually, in the American Century, more than SiliCON Valley is, when it veers into hucksterism and dystopian propeller-head-ism.
Michael, who will play you in The Big Short II movie?
Why not let it self-destruct on its own? Because crypto goes against the Fed, US Gov’t and WEF. With the efforts to institute a CBDC, crypto is viewed as a unregulated competitor and avenue for criminals. All cryptos EXCEPT for Bitcoin will be turned into securities by the SEC essentially ending the crypto space. Bitcoin will be the sole survivor as it’s more like a commodity, (although I don’t believe in that classification).
This is Marijuana penny stock shams bubble of 2014. Except crypto one went insanely higher and for much longer.
Regulate it? When bitcoin was at $800, I was being told how great it will be and that government will have no control over it. “It will kill fiat currency and government grip once and for all”. I would never think it would go up to $65k but I can bet that at its high “bitcoin millionaires” would oppose any government regulations, especially if those coin shams would have to demonstrate their financials. Now, when all those Wish coins tanked, same “millionaires”, who are now underwater are crying wolf (no pun intended) are screaming for government to help regulate it.
So yes – please continue to let it burn.
But… but… the large investment brokerage firms want it to survive so they can continue to extract fees from suckers. It’s amusing to me that some people think those firms getting involved proved the legitimacy of “investments” in cryptos.
yup … wolves will be wolves …
and the sheep think the IB’s and VC’s are in it for the great and noble cause …
i’m loving this …
“IF something goes wrong….” Is that intended to be a joke? The crypto world, unregulated as it is, is the premier space for every fraudster on earth. Who needs to bother making scam calls to the elderly, or impersonating a Nigerian Prince. More money than brains types flock to crypto and believe any story that is told.
I think I’ll open a new exchange and call it Bit Space. Yes folks, you too can log on and send all your coins to BS and be able to look at them daily and trade them among yourselves. We’ll even create a new coin pegged to the USD, called BS Coin. These will be carefully crafted by a program to generate new BS Coins at the same rate as we take in other crypto coins. We’ll even send you an email weekly showing how strong the BS Exchange is. BELIEVE and you will RECIEVE!! Be sure to tell all your friends!!
Oh, by the way Wolf, you do a fantastic job of tracking this stuff. Just curious if there is an estimate of the running total of how many billions of losses have occurred….so far. I imagine that can’t be easy though, with Sam Bank-Fraud as an example of the fraud structure, having 134 entities to use in the shell game to hide and absorb any incoming value from their crypto holders.
Reminds me of the software scammers who post a false image of the victim’s bank account balance while they drain it behind the scenes. What makes anyone think that what is posted in their wallet isn’t just a feel goo image?
> how many billions of losses have occurred
Overall, the popular number bandied about is that 3 trillion dollars has become .8 trillion. As far as even FTX, the current CEO scratches his head and points to total lack of valid controls and accounting. A popularly claimed number there (with an eye to translating the laughable “balance sheet” produced by SBF, which got him laughed out of the office of rescuers he was pitching) is $8 billion customer money “disappeared.”
The next round features runs on the bank at more exchanges. With crypto, lack of faith can mean “value” evaporates instantly, turning a “liquidity” problem into a “solvency” chasm.
Yes, there is. There exists a blog called Web3 Is Going Just Fine which not only blogs the scams and hacks and everything but has an interactive, running tally in USD lol
Google it. I really enjoy her long form writing on crypto in general
She not only believes cryptos (especially NFTs) are a scam and ponzi scheme by design, but that the entire concept of “web3” is hand-wavey BS. She’s pretty convincing.
Who could possibly have thought that a collection of hyped-up digital nothings — a few electric charges in a computer memory that confer zero claim to any tangible asset — would turn out to have zero value?
No need for regulation. Just give a loaded pistol to everybody that had their account stolen or gambled away. The situation will resolve itself and serve as a deterrent to future SBFs.
The boomer cope in the comments section is embarrassing. Crypto is here to stay and is loved by 100’s of millions of fed up, libertarian minded mostly young people around the world.
Y’all’s prejudiced views about crypto will be amusing memories, like 60’s baseball cards and roller skates with metal wheels. Is the service economy around crypto full of scammers? Yes, of course. But so has been every other major, nascent tech/business revolution in human history. Crypto itself, the technology that allows me to hold and send value whenever I want to whomever I want, free from interference by government dooshb@gs, has performed brilliantly in this FTX meltdown.
I’ll bring virtual s’mores.
An NFT isn’t even that. The “s’more” pointed to by it, could be changed without notice, into everything or nothing. The “seller” might not even have rights to the image of it. The “owner” walks away with bragging rights, if that.
It sounds like something straight out of the most sickly laughable nihilistic science fiction joke ever dreamt of. It is the emperor’s new clothes.
The widespread graphic representation of these digital crypto duds as golden metal discs with an embossed “B$” (for boolsheet?) appeared to be a lynchpin of the con game to draw in more suckers.
Fraud by craptocurrency exchanges: no way of verifying the true price of a transaction and all the “coins” can be stolen. And to register on an exchange you have to provide at least as much ID documentation as when opening a bank account. So much for anonymity.
The true enthusiasts will propose “offline cold” storage, for example on a thumb drive, to avoid exchanges altogether. They forget to mention that the thumb drive or a paper “wallet” does not hold any krapptocurrency at all, only the private keys to them. And when attempting to transact independently of an exchange you still have the counterparties internet provider, blockchain developers and miners.
What about this scenario: you plug your thumb drive on which you have stored a few $100000 of bitcon purchases into the internet and get an error message? Fill in a complaint form to Satoshi Nakamoto?
You don’t know what you’re talking about. Bitcoin is not and never was anonymous. It’s a public ledger! It’s pseudonymous, meaning that it only associates with you if you choose to do so.
Exchanges want you to identify yourself to comply with money laundering laws in their country of operation. To use that exchange, you have to associate your pseudonym with your real name. Dealing with an exchange is like dealing with a bank. You have to trust them or they can take everything. The problem is that with no regulation or backing insurance, those exchanges can fail or commit outright fraud or simply make mistakes which leads to theft from the exchange.
“Cold storage” is not a way to avoid exchanges. It’s a way to disconnect your holdings from your computer so that if your computer is compromised, your holdings are not.
You don’t need an exchange to move bitcoins! It is it’s own network. An exchange is used to convert between currencies (e.g. bitcoin USD).
All tokens are nothing but numbers (special numbers known as “keys”). Cold wallets, hot wallets, exchanges, etc. all hold nothing but those numbers. And like any true asset, they cannot be reproduced or recreated. Even I can do a painting but it’ll never be a Picasso.
Deal with an internet provider? You do that a dozen times for every website you visit; they do nothing but forward data. Deal with developers? You don’t write all your own software. Deal with miners? They’re just independently recording what you asked to be done with no ability to change it.
Your purchases are stored on the public ledger. It’s there for the world to see. Your wallet merely provides unassailable proof that you are who you say you are because nobody else should have those numbers indicated in the transactions.
Of course, the point you’re _trying_ to make at the end is that if you lose that proof, you lose the ability to trade that which you have received. That is a problem but a surmountable one: Make a backup! In fact, most wallets these days, whether software or hardware, force you to make a backup and instruct how to secure it. Bitcoin, etc. may be the most valuable data on your computer but it’s not the only valuable data. Make a backup.
The misunderstandings around “crypto” are rampant, even here.
Major tokens such as bitcoin and ethereum are solid and reliable. They’re not exactly what was envisioned when they were created but then what ever is? They grow, change, evolve, and improve.
Just recognize them for what they are! They’re a digital token that cannot be forged traded over a public network using a public ledger. They have only the value that someone else attributes to it — just like every other asset… including USD though the government is assigning a value to that so it’s remarkably safe.
Most of the other tokens are pure speculative toys. They offer nothing new but people buy them because they’re hoping to get rich like those who bought the “big boys” early on. That causes huge price fluxuations and any leverage there (like FTX using their own coin as collateral) is a gasoline fire waiting to happen.
Do I think bitcoin is worth $65K each? No. But somebody did. Just like somebody thought a comic book was worth $5.3M.
People making new crypto with no intrinsic value and selling it to get-rich-quick speculators is probably fraud. But that’s not the token’s fault.
And yes, bitcoin and ethereum _do_ have some intrinsic value in that they’re actually used globally and power some services. What is that value? Small compared to its price, I’d say. But then the intrinsic value of gold (it’s use in electronics and as a heat conductor) isn’t anywhere close to it’s price either.
You’re not comparing a Superman comic book to crypto, are you?
Nope. Just comparing the overpayment for something with little intrinsic value.
The intrinsic value of most every painting is about the same whether it’s rendered on black velvet with dogs cheating at poker, or an old master worth $200 million.
Exactly.
And you’re not comparing a thingy-ma-jig with an asset of real value, say, equity or debt in a company that puts diapers on your kid, fuel on your car, shoes on your feet, are you? Yea, poopcoins naturally hold the same value as 3M debt/equity. Are you high?
You must be high. You wrote “Bitcoin and Ether are solid and reliable”. Sold and reliable in what purpose? like, to use as money or just some thing-ma-jig used to brag? imagine running a 50% loss on your bet only to show up at Wal Mart to find you can’t buy 50% of what you would have 6 months ago when da hype boiz were sellin tam brody coinz off da chain.
Christ. Poor Cytotoxic and people like yourself need to come to grips with your bad bets, understanding its you and you only that bet your way into a hole.
Ownership in a company that provides goods or services has a high intrinsic value because of the companies ongoing ability to provide (and sell) those goods and services.
Non-usable assets, which besides crypto includes art, comic books, gold, and even USD, have no _intrinsic_ value but may fetch a good price from someone else who values it for their own reasons. Cash is so ingrained that everyone values it but it has no _intrinsic_ value.
Price stability is a real problem but that’s due to people speculating on it, not the token itself. The networks that run bitcoin and ethereum are solid and reliable.
As for me personally, I didn’t make any bad bets on crypto; saying random things because you don’t actually know the facts does not help your case.
Yea and i agree with you– something is only worth what someone is willing to pay you for it. Now, with all debate about fiat and currencies and blockchain set aside — like you said (and i agree with you again) that bitcoin probably shouldn’t have been valued at 65k… and i agree with you that its speculatory in nature, like a copy of the first PlayBoy or XMen… but thats EXACTLY WHY these pensions and mutual funds and stuff should NOT be offering this crap to people ACTUALLY trying to save for retirement. Thats a very very awful idea. Just throwing that out there.
The crypto space does serve one important function. It attracts the majority of fraudsters, con artists and other types of crooks, so they don’t prey on the rest of us.
Fraudsters prey on everyone and if you’re not into crypto then they’ll happily use something else.
Yeah but crypto comes with its own lube to extract value so seamlessly, instantly and unaccountably!
I heard the lube is underwater-based.
It’s not the crypto that comes with that. It’s the people chasing rainbows that bring it with them.
Supposedly 3 billion cyrpto hacked or scammed this year.
FTC has a running total of 81,000 complaints. Up 295% from last year.
Who has time to enforce this?
I vote we set up a fiat fund for Brian and Cytotoxic. When they’re poor and destitute after cryptos collapse, and begging for fiat coins at intersections, we can Venmo them some fiat dollars to pad their empty crypto wallets.
While I agree with Wolf 100% here, we all know it will never happen. Way too much money to be had(stolen) under the rubric of “it’s the future”. I suspect we will see years of booms/busts with this garbage. Folks that make money and folks that lose money will BOTH say “I told ya so loser!”
I have been consumed by this FTX debacle like watching a train wreck in slow motion. From all the articles I have read it’s a bit like Enron from 20 years ago and a lot like Bernie Madoff and his ponzi scheme from 13 years ago. However, one thing is becoming very clear, which is crypto is based on believing in something out of nothing – blind faith. It really doesn’t exist as a true monetary instrument, but rather like an ephemeral transaction in cyberspace. I agree that regulation would only give this phantasm in the financial markets legitimacy it doesn’t deserve. Let it crash and burn and let’s all be rid of this shell game in crypto space. Amen.
Nothing is going to get rid of it. Like AI, big data, and advertising on websites, it’s here to stay. The only question is what it will become.
Yes, there is rampant speculation that borders on fraud (and probably is that outright in some cases). Crypto is not a ponzi scheme since that means paying early investors with the investments of later investors which doesn’t apply to an inanimate asset; it’s something people do. Don’t confuse the asset with companies that manipulate it.
There are a great many assets in the world that have no “use” that people still pay for because it has value to _them_. (e.g. $5.3M for Superman#1) That’s not blind faith. Blind faith is assuming without research that you can buy an asset that has no value to you and later sell it for a profit to someone who does value it.
Plenty of crypto “investors” fall in this latter category.
A few crypto tokens _do_ have a use and thus will always have value to someone even if most tokens do not. Ether, for example, is the way to pay for services that run on the ethereum network. That means that if those services have value to others, someone will need to pay for it with Ether.
Don’t believe the hype but don’t believe the FUD, either. To me, it’s like having just invented the wheel with people laughing at it as it bounces down a hill. We don’t fully understand what we have. Perhaps it will amount to nothing. Perhaps it will.
Brian, how much does it cost, in energy usage, to do a Etherum transaction? From a Conservationist/Environmentalist perspective?
How much does it cost to drive armored vehicles between banks and businesses every day all over the world? And to heat and cool those huge cushy bank branches? And to process visa/mc transactions? Just for starters.
“There really isn’t a whole lot left to lose.” This is only true if you invested at the high. But those who rush in now to “buy the dip” in these stocks still have the opportunity to lose 100% of their investment. LOL!
A shake-out of the “altcoin” mess was bound to happen and most of those will go to zero because they serve no purpose other than speculation.
Bitcoin and Ethereum, and maybe a few others, will stay around because they do actually have a use. Ethereum because it actually powers real services and Bitcoin because it was the first with a large user base and hence the “gold standard”.
What price they’ll achieve remains to be seen. It may be years before they regain their respective highs or they may never do so but that would be a good thing as it would mean an improvement in price stability.
Sure is a lot of generalized anti-government feeling expressed in these comments. Many seem to think that if crypto could weaken the power of governments that would be a good thing. Maybe it’s an American thing.
We Canadians aren’t as concerned with Life, Liberty, and the Pursuit of Happiness, as we are with Peace, Order and Good Government. At least, that’s the cliche about our difference in national political basics. I fear the weakening of governments. I fear the possibility that “mere anarchy is loosed upon the world”. Without government and the rule of law an individual can’t own anything any longer than it takes a stronger person to steal it. So please stand up for your government and appreciate it and make it work better.
no it’s not an american thing. as Wolf pointed out this is global. Singapore, Dubai, Bahamas, etc. all trying to be the world’s crypto center.
(hmmm … seems to imply that CEFI isn’t going away. you need CEFI to make the crypto numbers go up. can’t do that in DEFI alone.)
The only regulation Congress should pass is the following which shall be posted with every crypto transaction:
“THE US GOVERNMENT BY LAW SHALL NOT ISSUED ANY GUARANTEE NOR INSURE ANY CRYPTOCURRENCY OR INVESTMENT FROM LOSS OF PRINCIPLE OR INTEREST FOR ANY REASON. YOU CAN LOSE 100% OF YOUR FUNDS.”