Cryptocurrency investors should be prepared to lose all their money - Bank of England

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tontot
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Re: Cryptocurrency investors should be prepared to lose all their money - Bank of England

Post by tontot »

FrancisK wrote: Sun May 09, 2021 9:02 pm First of all, funny to see that everybody is buying crypto but nobody is actually using it for what it is. All my friends are buying Bitcoin and Etherium but I don’t know any of them using these crypto to actually buy stuff (as a currency of payment).
I buy (not much) gold, both paper and physical and never actually use it (as a currency of payment) because most people treat gold as stored of value. Same for Bitcoin.

Many not in crypto space think Bitcoin as currency of payment. No it is not. It is not fast enough and not cheap (transaction fee) enough. There are other cryptos for that purpose.

Most in crypto space think Bitcoin as stored of value that competes directly with Gold, Silver etc
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Re: Cryptocurrency investors should be prepared to lose all their money - Bank of England

Post by ohboy! »

watchnerd wrote: Fri May 07, 2021 7:00 pm
rhoms33 wrote: Fri May 07, 2021 6:44 pm
watchnerd wrote: Fri May 07, 2021 6:57 am
Full Disclosure:

I hold cryptocurrencies at market weight relative to global stocks and bonds (1.9%).
It’s fun to look back at your posts over the last month or two demonizing crypto and more specifically Bitcoin.

Regardless if you still think all the things you said, love to see that you’re now one of us. Welcome and buckle up.
I’m not pro crypto.

I’m not endorsing it.

I think at least half of the coins or more are of dubious future utility.

And there is a decent chance it all collapses and languishes for a long time.

But market weight is market weight.

I’m not pro gold, either, but I’m also holding that.

Fully committing to the global market portfolio means you end up buying the market, good or bad.
Respect.
banook
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Re: Cryptocurrency investors should be prepared to lose all their money - Bank of England

Post by banook »

FrancisK wrote: Sun May 09, 2021 9:02 pm First of all, funny to see that everybody is buying crypto but nobody is actually using it for what it is. All my friends are buying Bitcoin and Etherium but I don’t know any of them using these crypto to actually buy stuff (as a currency of payment).

That alone already surprises me.

But then, even if it was the case, at the end of the day these crypto currencies are just currencies....who would invest in buying USD or EUR (other than traders or hedgers)?
How investing in a currency (whether digital or traditional) can be considered like a good investment plan for the long term?

Who really need dogecoin in his/her daily life right now? I can safely say no one really needs it. Not only it doesn’t have any intrinsic value but it’s just useless (from a practical point of view).
Well, I have used BAT (Brave browser attention token) to swap other "tokens" or to tip others for good internet content. I assume they use BAT for the same thing or convert it to fiat wherever they are. I've also tried to buy some NFT art using ETH, but was outbid. I currently skate ETH (not all), and some ADA for variable %APR return. I haven't tried to buy anything with BTC or ADA.

In other posts, I have never claimed they are good investments, and I have only committed as much as I am fully prepared to lose. I don't count it fully in net worth. It's a new space, it's an interesting space, it's a space right now I enjoy learning about. I like trying new things, new risky things are not for everyone - nor should they be. Most everything else I do is quite boring.
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Re: Cryptocurrency investors should be prepared to lose all their money - Bank of England

Post by lazybones18 »

i have invested about $10k in crypto and I don't understand it very well to be honest

I am willing to lose the $10k if its meant to be

its straight up gambling

However, my opinion is that crypto is not going anywhere. its here for a long time.
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Re: Cryptocurrency investors should be prepared to lose all their money - Bank of England

Post by watchnerd »

FrancisK wrote: Sun May 09, 2021 9:02 pm First of all, funny to see that everybody is buying crypto but nobody is actually using it for what it is. All my friends are buying Bitcoin and Etherium but I don’t know any of them using these crypto to actually buy stuff (as a currency of payment).

That alone already surprises me.
Well, Ethereum isn't intended to be a currency for physical goods, so it's not surprising people aren't trying to use it as such.
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Re: Cryptocurrency investors should be prepared to lose all their money - Bank of England

Post by Valuethinker »

YRT70 wrote: Fri May 07, 2021 7:18 am The Economist: "The rise of e-money, The digital currencies that matter. Get ready for Fedcoin and the e-euro"

https://webcache.googleusercontent.com/ ... clnk&gl=nl
I don't think this makes the case for "investing" in existing cryptocurrencies?

Rather, what it says is that Central Banks will create their own currency, and that could have significant impacts for the future of deposit banking.
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Re: Cryptocurrency investors should be prepared to lose all their money - Bank of England

Post by Valuethinker »

3CT_Paddler wrote: Fri May 07, 2021 7:55 pm
staustin wrote: Fri May 07, 2021 8:12 am
3CT_Paddler wrote: Fri May 07, 2021 7:59 am How the conversation could have gone...

Government official: "Digital currency has no intrinsic value!"
Reporter: "Speaking of intrinsic value, can you talk to us about our currency and how it..."
Government official: "This press conference is over"

PS I agree that digital currency has no intrinsic value. I can come up with a new currency tomorrow and if I can get the crowd to join in, all of the early adopters can become fabulously rich. Of course once you start going down this road enough times, the crowds will realize the foolishness of this game and the gig is up.
you could use the same language to describe many ipo's dating back to the tech bubble (theglobe, vonage, pets.com, just to name a few).. investment bankers bring 'companies' to market with inflated valuations and projections.. earn high fees, exit, etc.

I don't own bitcoin but this isn't anything new.. that said, I do agree with Munger's comments yesterday in particular.
If I own a fractional piece of a company I have a claim to future profits in the form of a dividend. I own something tangible, even if the valuation is way off. Same thing with a bond.

With digital currency what underlying value do you own? Think about it this way... if tomorrow there is a better alternative to Bitcoin and a large group of people decide to switch, what would happen to Bitcoin?
You have grasped what I think is key. This is a purely speculative asset.

So is gold, but gold has several thousand years behind it as a store of value plus well understood dynamics of storage, purchase and sale etc (I don't invest in gold, but I cannot in good faith completely rubbish the case for investing in gold).

If we lived in a controlled currency country, such as Iran or China or Venezuela, I could see bitcoin as a way around exchange controls.

It also may have value as a means of payment when conventional means don't work well. Think Western Union and the rates it charges.
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Re: Cryptocurrency investors should be prepared to lose all their money - Bank of England

Post by Valuethinker »

FrancisK wrote: Sun May 09, 2021 9:02 pm First of all, funny to see that everybody is buying crypto but nobody is actually using it for what it is. All my friends are buying Bitcoin and Etherium but I don’t know any of them using these crypto to actually buy stuff (as a currency of payment).

That alone already surprises me.

But then, even if it was the case, at the end of the day these crypto currencies are just currencies....who would invest in buying USD or EUR (other than traders or hedgers)?
How investing in a currency (whether digital or traditional) can be considered like a good investment plan for the long term?

Who really need dogecoin in his/her daily life right now? I can safely say no one really needs it. Not only it doesn’t have any intrinsic value but it’s just useless (from a practical point of view).
There is a case if you are in a currency controlled country like Iran, China, Venezuela? It might also be a better store of value than your own currency.

For practical day to day payments in the western world, it seems inferior.

Mastercard and Visa though typically charge 2.5% and for some internet businesses, much much higher (10%+). Thus, there's an inefficiency there which at some point someone may figure out how to close.
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Re: Cryptocurrency investors should be prepared to lose all their money - Bank of England

Post by Prahasaurus »

FrancisK wrote: Sun May 09, 2021 9:02 pm First of all, funny to see that everybody is buying crypto but nobody is actually using it for what it is. All my friends are buying Bitcoin and Etherium but I don’t know any of them using these crypto to actually buy stuff (as a currency of payment).

That alone already surprises me.

But then, even if it was the case, at the end of the day these crypto currencies are just currencies....who would invest in buying USD or EUR (other than traders or hedgers)?
How investing in a currency (whether digital or traditional) can be considered like a good investment plan for the long term?

Who really need dogecoin in his/her daily life right now? I can safely say no one really needs it. Not only it doesn’t have any intrinsic value but it’s just useless (from a practical point of view).
If you were only talking about Bitcoin as a transactional currency, I would agree. But most people are buying Bitcoin as a store of wealth, something that it has done very well over its history. You don't use gold to purchase a cup of coffee, why use Bitcoin?

As to Ethereum, I would advise you to actually learn about what is happening on the Ethereum network, as your comments that "nobody is using" ETH for any practical purpose is just clearly false. I don't think it's helpful to spread false information, especially when many Bogleheads are sincerely trying to better understand this asset class. We need more signal, less noise, around Ethereum. Thanks.
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Re: Cryptocurrency investors should be prepared to lose all their money - Bank of England

Post by YRT70 »

Valuethinker wrote: Mon May 10, 2021 2:12 am
YRT70 wrote: Fri May 07, 2021 7:18 am The Economist: "The rise of e-money, The digital currencies that matter. Get ready for Fedcoin and the e-euro"

https://webcache.googleusercontent.com/ ... clnk&gl=nl
I don't think this makes the case for "investing" in existing cryptocurrencies?
It doesn't. Did anyone say otherwise?
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Re: Cryptocurrency investors should be prepared to lose all their money - Bank of England

Post by FrancisK »

Prahasaurus wrote: Mon May 10, 2021 3:00 am
FrancisK wrote: Sun May 09, 2021 9:02 pm First of all, funny to see that everybody is buying crypto but nobody is actually using it for what it is. All my friends are buying Bitcoin and Ethereum but I don’t know any of them using these crypto to actually buy stuff (as a currency of payment).

That alone already surprises me.

But then, even if it was the case, at the end of the day these crypto currencies are just currencies....who would invest in buying USD or EUR (other than traders or hedgers)?
How investing in a currency (whether digital or traditional) can be considered like a good investment plan for the long term?

Who really need dogecoin in his/her daily life right now? I can safely say no one really needs it. Not only it doesn’t have any intrinsic value but it’s just useless (from a practical point of view).
If you were only talking about Bitcoin as a transactional currency, I would agree. But most people are buying Bitcoin as a store of wealth, something that it has done very well over its history. You don't use gold to purchase a cup of coffee, why use Bitcoin?

As to Ethereum, I would advise you to actually learn about what is happening on the Ethereum network, as your comments that "nobody is using" ETH for any practical purpose is just clearly false. I don't think it's helpful to spread false information, especially when many Bogleheads are sincerely trying to better understand this asset class. We need more signal, less noise, around Ethereum. Thanks.
I did not say that no one is using Ethereum. I said all the people around me (friends, family, colleagues) who frantically buy ETD (and other crypto) are not using it in their daily lives, and don't even know how it actually works.

I understand that many people use crypto as a store of wealth but what would happen if you could not exchange your crypto coins for US dollars? These crypto currencies have value only because we can exchange them against USD (aka, what people still consider real money). So, this idea of "decentralized" and "freedom" is bit of a myth to me (not to mention that big whales control good chunks of the crypto production).

The moment you can't exchange your coins for USD, the coin dies immediately. That is not the same for gold. You can take it anywhere on earth, to the most remote village, humans will still recognize it as value and you may exchange it for goods or services.
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Re: Cryptocurrency investors should be prepared to lose all their money - Bank of England

Post by Prahasaurus »

FrancisK wrote: Mon May 10, 2021 8:25 am
Prahasaurus wrote: Mon May 10, 2021 3:00 am
FrancisK wrote: Sun May 09, 2021 9:02 pm First of all, funny to see that everybody is buying crypto but nobody is actually using it for what it is. All my friends are buying Bitcoin and Ethereum but I don’t know any of them using these crypto to actually buy stuff (as a currency of payment).

That alone already surprises me.

But then, even if it was the case, at the end of the day these crypto currencies are just currencies....who would invest in buying USD or EUR (other than traders or hedgers)?
How investing in a currency (whether digital or traditional) can be considered like a good investment plan for the long term?

Who really need dogecoin in his/her daily life right now? I can safely say no one really needs it. Not only it doesn’t have any intrinsic value but it’s just useless (from a practical point of view).
If you were only talking about Bitcoin as a transactional currency, I would agree. But most people are buying Bitcoin as a store of wealth, something that it has done very well over its history. You don't use gold to purchase a cup of coffee, why use Bitcoin?

As to Ethereum, I would advise you to actually learn about what is happening on the Ethereum network, as your comments that "nobody is using" ETH for any practical purpose is just clearly false. I don't think it's helpful to spread false information, especially when many Bogleheads are sincerely trying to better understand this asset class. We need more signal, less noise, around Ethereum. Thanks.
I did not say that no one is using Ethereum. I said all the people around me (friends, family, colleagues) who frantically buy ETD (and other crypto) are not using it in their daily lives, and don't even know how it actually works.

I understand that many people use crypto as a store of wealth but what would happen if you could not exchange your crypto coins for US dollars? These crypto currencies have value only because we can exchange them against USD (aka, what people still consider real money). So, this idea of "decentralized" and "freedom" is bit of a myth to me (not to mention that big whales control good chunks of the crypto production).

The moment you can't exchange your coins for USD, the coin dies immediately. That is not the same for gold. You can take it anywhere on earth, to the most remote village, humans will still recognize it as value and you may exchange it for goods or services.
Well, a couple of points:

1 - ETH already has utility as a currency. The entire NFT marketplace is priced in ETH. ETH is required for all transactions on the network. Unlike Bitcoin, Ethereum is already carving out a space as a transactional currency. Since without it, you cannot transact within crypto, unless you avoid Ethereum (not easy).

2 - Agree with you that most transactions will be in national currencies, at least for another generation. But stablecoins and eventually digital currencies will work just perfectly over crypto networks like Ethereum. DeFi is about options. Do you want to earn .1% interest on your dollars or 10% interest on a digital dollar at Aave (running on Ethereum) that can be converted 1:1 to a dollar at any time? I have six figures earning interest now on Aave. Most Bogleheads are praying for 3% bond returns. I have 8-10% on cash.

More people will move to DeFi once they understand it. It's already growing exponentially. Aave has around 18 billion USD locked in their smart contracts, they are barely over a year old. Amazon.com did 15 million USD business its entire first year of operation.
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Re: Cryptocurrency investors should be prepared to lose all their money - Bank of England

Post by watchnerd »

Prahasaurus wrote: Mon May 10, 2021 10:20 am 2 - Agree with you that most transactions will be in national currencies, at least for another generation. But stablecoins and eventually digital currencies will work just perfectly over crypto networks like Ethereum. DeFi is about options. Do you want to earn .1% interest on your dollars or 10% interest on a digital dollar at Aave (running on Ethereum) that can be converted 1:1 to a dollar at any time? I have six figures earning interest now on Aave. Most Bogleheads are praying for 3% bond returns. I have 8-10% on cash.
As far as I know, a few of the CBDCs (central bank digital currencies) plan to use Ethereum on the back end.
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Re: Cryptocurrency investors should be prepared to lose all their money - Bank of England

Post by Prahasaurus »

watchnerd wrote: Mon May 10, 2021 10:27 am
Prahasaurus wrote: Mon May 10, 2021 10:20 am 2 - Agree with you that most transactions will be in national currencies, at least for another generation. But stablecoins and eventually digital currencies will work just perfectly over crypto networks like Ethereum. DeFi is about options. Do you want to earn .1% interest on your dollars or 10% interest on a digital dollar at Aave (running on Ethereum) that can be converted 1:1 to a dollar at any time? I have six figures earning interest now on Aave. Most Bogleheads are praying for 3% bond returns. I have 8-10% on cash.
As far as I know, a few of the CBDCs (central bank digital currencies) plan to use Ethereum on the back end.
Maybe. They are testing on Ethereum. I think it will be the ultimate winner, because it's by far the most decentralized. A central bank or company like Visa or PayPal is not going to use Binance or XRP, that is a joke. They must have a properly decentralized platform with real utility. I'm having a hard time seeing who else can do it. It's not just the technology, it's the usage, the developer community, the years or proven reliability, etc. It's Ethereum's market to lose. But you never know.
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Re: Cryptocurrency investors should be prepared to lose all their money - Bank of England

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Prahasaurus wrote: Mon May 10, 2021 10:49 am

Maybe. They are testing on Ethereum. I think it will be the ultimate winner, because it's by far the most decentralized. A central bank or company like Visa or PayPal is not going to use Binance or XRP, that is a joke. They must have a properly decentralized platform with real utility. I'm having a hard time seeing who else can do it. It's not just the technology, it's the usage, the developer community, the years or proven reliability, etc. It's Ethereum's market to lose. But you never know.
The Tier 1 fiat currencies may not want to have that kind of dependency and have the resources to do whatever they want.

But I could see the smaller currencies being in a different position.
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Re: Cryptocurrency investors should be prepared to lose all their money - Bank of England

Post by ensign_lee »

I'm very invested in the crypto space.

What the bank of England says here, on its face "Cryptocurrency investors should be prepared to lose all their money" - isn't wrong. This is a highly volatile investment. Yeah, you might lose 80-90% of whatever you put in. I've had that happen. You can't be in an investment that can be up so much without also taking the risk that you can be down so much.
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Re: Cryptocurrency investors should be prepared to lose all their money - Bank of England

Post by Prahasaurus »

watchnerd wrote: Mon May 10, 2021 11:12 am
Prahasaurus wrote: Mon May 10, 2021 10:49 am

Maybe. They are testing on Ethereum. I think it will be the ultimate winner, because it's by far the most decentralized. A central bank or company like Visa or PayPal is not going to use Binance or XRP, that is a joke. They must have a properly decentralized platform with real utility. I'm having a hard time seeing who else can do it. It's not just the technology, it's the usage, the developer community, the years or proven reliability, etc. It's Ethereum's market to lose. But you never know.
The Tier 1 fiat currencies may not want to have that kind of dependency and have the resources to do whatever they want.

But I could see the smaller currencies being in a different position.
Well, I disagree on dependency. You want the largest, most liquid, most decentralized network (Ethereum). If a large country develops its own solution, fine. But you're not going to get the world to run their currencies on USANetwork or ChinaChain... Other countries are already sick of America's oversized influence on global capital markets. They won't accept any solution that is controlled by any one country, no matter its size.

The internet works because it's global and not really owned by anyone. Something similar will happen with decentralized finance and Ethereum.
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Re: Cryptocurrency investors should be prepared to lose all their money - Bank of England

Post by banook »

Prahasaurus wrote: Mon May 10, 2021 11:30 am
watchnerd wrote: Mon May 10, 2021 11:12 am
Prahasaurus wrote: Mon May 10, 2021 10:49 am

Maybe. They are testing on Ethereum. I think it will be the ultimate winner, because it's by far the most decentralized. A central bank or company like Visa or PayPal is not going to use Binance or XRP, that is a joke. They must have a properly decentralized platform with real utility. I'm having a hard time seeing who else can do it. It's not just the technology, it's the usage, the developer community, the years or proven reliability, etc. It's Ethereum's market to lose. But you never know.
The Tier 1 fiat currencies may not want to have that kind of dependency and have the resources to do whatever they want.

But I could see the smaller currencies being in a different position.
Well, I disagree on dependency. You want the largest, most liquid, most decentralized network (Ethereum). If a large country develops its own solution, fine. But you're not going to get the world to run their currencies on USANetwork or ChinaChain... Other countries are already sick of America's oversized influence on global capital markets. They won't accept any solution that is controlled by any one country, no matter its size.

The internet works because it's global and not really owned by anyone. Something similar will happen with decentralized finance and Ethereum.
There's still a risk with a 51% attack on DeFi - seemingly unique IDs may not be unique. Or unique actors may choose to act in conjunction. One hopes that never becomes the case, but I think it is still a possibility.
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Re: Cryptocurrency investors should be prepared to lose all their money - Bank of England

Post by watchnerd »

banook wrote: Mon May 10, 2021 11:39 am

There's still a risk with a 51% attack on DeFi - seemingly unique IDs may not be unique. Or unique actors may choose to act in conjunction. One hopes that never becomes the case, but I think it is still a possibility.
Ohhh....so a hostile takeover where some infinitely deep pocketed entity just buys control over the entire network by paying outrageous prices per share?
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Re: Cryptocurrency investors should be prepared to lose all their money - Bank of England

Post by banook »

watchnerd wrote: Mon May 10, 2021 11:41 am
banook wrote: Mon May 10, 2021 11:39 am

There's still a risk with a 51% attack on DeFi - seemingly unique IDs may not be unique. Or unique actors may choose to act in conjunction. One hopes that never becomes the case, but I think it is still a possibility.
Ohhh....so a hostile takeover where some infinitely deep pocketed entity just buys control over the entire network by paying outrageous prices per share?
Well, no - maybe all the whales are the same whale. Or the whales are part of a pod - to use an analogy. I don't think this will happen, my point is that it could still happen and did happen on ETH classic - at least 3x if memory serves.
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Re: Cryptocurrency investors should be prepared to lose all their money - Bank of England

Post by watchnerd »

banook wrote: Mon May 10, 2021 11:45 am
Well, no - maybe all the whales are the same whale. Or the whales are part of a pod - to use an analogy. I don't think this will happen, my point is that it could still happen and did happen on ETH classic - at least 3x if memory serves.
I can imagine even the possibility of that happening freaking out big CBDCs like US and China.
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Re: Cryptocurrency investors should be prepared to lose all their money - Bank of England

Post by banook »

watchnerd wrote: Mon May 10, 2021 11:56 am
banook wrote: Mon May 10, 2021 11:45 am
Well, no - maybe all the whales are the same whale. Or the whales are part of a pod - to use an analogy. I don't think this will happen, my point is that it could still happen and did happen on ETH classic - at least 3x if memory serves.
I can imagine even the possibility of that happening freaking out big CBDCs like US and China.
Yes. Who knows? It is possible CBDC is a whale or a whale pod. I don't think so, but it is a possibility. Certainly at some points mining has been concentrated in certain places - decentralized doesn't necessarily mean evenly "distributed". I don't actually think this is the case, but it is worth pointing out.

I again re-note that we have 2% of our net worth in crypto, do not count it in our net worth, and are prepared to fully lose it.
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Re: Cryptocurrency investors should be prepared to lose all their money - Bank of England

Post by hilink73 »

dt123 wrote: Fri May 07, 2021 10:46 am I've met a number of people in their 20s whose only investments are in crypto. They know nothing of stocks/bonds or even money market funds, and they don't want to know. The idea that their investment in crypto could go to zero is laughable to them. "It always goes up," they've all said. It's scary.
What must happen that "crypto" goes down forever?
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Post by firebirdparts »

hilink73 wrote: Mon May 10, 2021 1:53 pm
dt123 wrote: Fri May 07, 2021 10:46 am I've met a number of people in their 20s whose only investments are in crypto. They know nothing of stocks/bonds or even money market funds, and they don't want to know. The idea that their investment in crypto could go to zero is laughable to them. "It always goes up," they've all said. It's scary.
What must happen that "crypto" goes down forever?
"Greater Fool" operations are always limited by fool size. You know that. Everybody knows it.
A fool and your money are soon partners
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Re: Cryptocurrency investors should be prepared to lose all their money - Bank of England

Post by hilink73 »

banook wrote: Mon May 10, 2021 12:05 pm
I again re-note that we have 2% of our net worth in crypto, do not count it in our net worth, and are prepared to fully lose it.
According to Stoic principles, one should be prepared to lose everything.
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Re: Cryptocurrency investors should be prepared to lose all their money - Bank of England

Post by DB2 »

The government banned gold during The Great Depression. It would not surprise me to see all of these cryptos banned at some point as some countries are already doing it. I am still holding onto my 2,500 shares of Doge bought at .12 cents and have already sold off most of my share to cash in a little. All that is left are some profits. If it drops to .20, I will probably just dump it unless it happens before I wake up one morning. lol
Last edited by DB2 on Mon May 10, 2021 2:03 pm, edited 1 time in total.
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Re: Cryptocurrency investors should be prepared to lose all their money - Bank of England

Post by hilink73 »

firebirdparts wrote: Mon May 10, 2021 1:58 pm
hilink73 wrote: Mon May 10, 2021 1:53 pm
dt123 wrote: Fri May 07, 2021 10:46 am I've met a number of people in their 20s whose only investments are in crypto. They know nothing of stocks/bonds or even money market funds, and they don't want to know. The idea that their investment in crypto could go to zero is laughable to them. "It always goes up," they've all said. It's scary.
What must happen that "crypto" goes down forever?
"Greater Fool" operations are always limited by fool size. You know that. Everybody knows it.
And to which "crypto" is this applicable?
Last edited by hilink73 on Mon May 10, 2021 2:12 pm, edited 1 time in total.
banook
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Re: Cryptocurrency investors should be prepared to lose all their money - Bank of England

Post by banook »

hilink73 wrote: Mon May 10, 2021 2:01 pm
banook wrote: Mon May 10, 2021 12:05 pm
I again re-note that we have 2% of our net worth in crypto, do not count it in our net worth, and are prepared to fully lose it.
According to Stoic principles, one should be prepared to lose everything.
:D Absolutely. Point taken. I am grateful for what I have, and what I have been given too. Thank you for the reminder.
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Re: Cryptocurrency investors should be prepared to lose all their money - Bank of England

Post by decapod10 »

watchnerd wrote: Mon May 10, 2021 10:27 am
Prahasaurus wrote: Mon May 10, 2021 10:20 am 2 - Agree with you that most transactions will be in national currencies, at least for another generation. But stablecoins and eventually digital currencies will work just perfectly over crypto networks like Ethereum. DeFi is about options. Do you want to earn .1% interest on your dollars or 10% interest on a digital dollar at Aave (running on Ethereum) that can be converted 1:1 to a dollar at any time? I have six figures earning interest now on Aave. Most Bogleheads are praying for 3% bond returns. I have 8-10% on cash.
As far as I know, a few of the CBDCs (central bank digital currencies) plan to use Ethereum on the back end.
I'm guessing they would mostly use forks of Ethereum like Consensys Quorum or a customized fork. It will be interesting to know what would happen if countries start creating CBDCs on private Ethereum forks and how that would affect public Ethereum. I would expect it would be good for Ethereum since Ethereum Main net would still probably be the settlement layer between different CBDCs if they are running on Ethereum forks, but I guess it wouldn't necessarily have to be the case.
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Re: Cryptocurrency investors should be prepared to lose all their money - Bank of England

Post by txhill »

Prahasaurus wrote: Mon May 10, 2021 11:30 am
watchnerd wrote: Mon May 10, 2021 11:12 am
Prahasaurus wrote: Mon May 10, 2021 10:49 am

Maybe. They are testing on Ethereum. I think it will be the ultimate winner, because it's by far the most decentralized. A central bank or company like Visa or PayPal is not going to use Binance or XRP, that is a joke. They must have a properly decentralized platform with real utility. I'm having a hard time seeing who else can do it. It's not just the technology, it's the usage, the developer community, the years or proven reliability, etc. It's Ethereum's market to lose. But you never know.
The Tier 1 fiat currencies may not want to have that kind of dependency and have the resources to do whatever they want.

But I could see the smaller currencies being in a different position.
Well, I disagree on dependency. You want the largest, most liquid, most decentralized network (Ethereum). If a large country develops its own solution, fine. But you're not going to get the world to run their currencies on USANetwork or ChinaChain... Other countries are already sick of America's oversized influence on global capital markets. They won't accept any solution that is controlled by any one country, no matter its size.

The internet works because it's global and not really owned by anyone. Something similar will happen with decentralized finance and Ethereum.
Interesting. I think we'll see divergence among countries on how they'll do the settlement layer. I imagine China will retain complete state control over the settlement layer. The US currently does that with bank transactions (all money needs to pass thru the Fed, I think) but I think I remember reading that the US is looking at options that will preserve more privacy (like cash does). But I imagine they'd want to implement some controls to retain their sanctions power.

So we'll just see how things shape up in the CBDC world in a few years' time. Will be interesting to see how Facebook's Diem fits into the picture too.

I think regardless, the potency of US sanctions will diminish with more digital currency options becoming available worldwide.
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Re: Cryptocurrency investors should be prepared to lose all their money - Bank of England

Post by SlowMovingInvestor »

decapod10 wrote: Mon May 10, 2021 2:12 pm
watchnerd wrote: Mon May 10, 2021 10:27 am
Prahasaurus wrote: Mon May 10, 2021 10:20 am 2 - Agree with you that most transactions will be in national currencies, at least for another generation. But stablecoins and eventually digital currencies will work just perfectly over crypto networks like Ethereum. DeFi is about options. Do you want to earn .1% interest on your dollars or 10% interest on a digital dollar at Aave (running on Ethereum) that can be converted 1:1 to a dollar at any time? I have six figures earning interest now on Aave. Most Bogleheads are praying for 3% bond returns. I have 8-10% on cash.
As far as I know, a few of the CBDCs (central bank digital currencies) plan to use Ethereum on the back end.
I'm guessing they would mostly use forks of Ethereum like Consensys Quorum or a customized fork. It will be interesting to know what would happen if countries start creating CBDCs on private Ethereum forks and how that would affect public Ethereum. I would expect it would be good for Ethereum since Ethereum Main net would still probably be the settlement layer between different CBDCs if they are running on Ethereum forks, but I guess it wouldn't necessarily have to be the case.
Here is one example of a pilot project using Consenys Quorum (which is a permissioned version of Ethereum). It's entirely possible the source and even the protocol could diverge from that of Ethereum at some point (the way open source projects often do -- MySql/MariaDB, dozens of BSD, hundreds of Linux distros) since private forks don't necessarily have the same requirements that public Ethereum does. And it doesn't have scaling issues the way public Ethereum does since it has only a small group of participants.

https://consensys.net/blog/press-releas ... c-project/

If Central banks are only settling with each other, then I suspect they might just have another permissioned blockchain between central banks and the BIS for settlement. But you could easily put in links to public blockchains via authorized gateways.
Last edited by SlowMovingInvestor on Mon May 10, 2021 6:16 pm, edited 2 times in total.
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Re: Cryptocurrency investors should be prepared to lose all their money - Bank of England

Post by watchnerd »

txhill wrote: Mon May 10, 2021 2:17 pm Will be interesting to see how Facebook's Diem fits into the picture too.
Ewww.
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Re: Cryptocurrency investors should be prepared to lose all their money - Bank of England

Post by banook »

watchnerd wrote: Mon May 10, 2021 6:11 pm
txhill wrote: Mon May 10, 2021 2:17 pm Will be interesting to see how Facebook's Diem fits into the picture too.
Ewww.
Same same.
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Re: Cryptocurrency investors should be prepared to lose all their money - Bank of England

Post by SlowMovingInvestor »

Wall Street Uses Old Tricks in $2.4 Trillion Crypto Jungle

https://www.bloomberg.com/news/articles ... pto-jungle


"The creatures outside looked from pig to man, and from man to pig, and from pig to man again; but already it was impossible to say which was which.”

:moneybag :happy
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Re: Cryptocurrency investors should be prepared to lose all their money - Bank of England

Post by txhill »

banook wrote: Mon May 10, 2021 6:17 pm
watchnerd wrote: Mon May 10, 2021 6:11 pm
txhill wrote: Mon May 10, 2021 2:17 pm Will be interesting to see how Facebook's Diem fits into the picture too.
Ewww.
Same same.
Oh yeah I don’t love the idea of Facebook having any more role in shaping society than it already has. But it’s coming…
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Re: Cryptocurrency investors should be prepared to lose all their money - Bank of England

Post by YRT70 »

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Re: Cryptocurrency investors should be prepared to lose all their money - Bank of England

Post by 3CT_Paddler »

Always passive wrote: Sat May 08, 2021 9:48 am
3CT_Paddler wrote: Fri May 07, 2021 7:55 pm
staustin wrote: Fri May 07, 2021 8:12 am
3CT_Paddler wrote: Fri May 07, 2021 7:59 am How the conversation could have gone...

Government official: "Digital currency has no intrinsic value!"
Reporter: "Speaking of intrinsic value, can you talk to us about our currency and how it..."
Government official: "This press conference is over"

PS I agree that digital currency has no intrinsic value. I can come up with a new currency tomorrow and if I can get the crowd to join in, all of the early adopters can become fabulously rich. Of course once you start going down this road enough times, the crowds will realize the foolishness of this game and the gig is up.
you could use the same language to describe many ipo's dating back to the tech bubble (theglobe, vonage, pets.com, just to name a few).. investment bankers bring 'companies' to market with inflated valuations and projections.. earn high fees, exit, etc.

I don't own bitcoin but this isn't anything new.. that said, I do agree with Munger's comments yesterday in particular.
If I own a fractional piece of a company I have a claim to future profits in the form of a dividend. I own something tangible, even if the valuation is way off. Same thing with a bond.

With digital currency what underlying value do you own? Think about it this way... if tomorrow there is a better alternative to Bitcoin and a large group of people decide to switch, what would happen to Bitcoin?
So Gold is not for you either?
Gold has real world applications, and is a rare material. It is no different than other precious metals like silver or platinum. It is just the one that gets the most attention. And gold's value is a speculative play. The only reason I would subscribe value to it would be to the extent that it gives you an alternative to a paper backed currency that is being purposefully inflated (see Zimbabwe).

A cryptocurrency like Bitcoin is a made up set of rules that could be duplicated a million times over. And it has been duplicated a ton already with LiteCoin and Dogecoin and host of others. Their value will rise and fall based on the whims of the crowd or the ability of its creator to convince others it has value. It is only group belief as well as the currency design/protocol that causes it to rise in value.

Yes there can be value in having a currency that functions like Bitcoin, but what draws people in is not the functionality of the currency, but the arbitrary rules that can make you rich.
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Re: Cryptocurrency investors should be prepared to lose all their money - Bank of England

Post by YRT70 »

watchnerd wrote: Fri May 07, 2021 7:23 am
YRT70 wrote: Fri May 07, 2021 7:18 am The Economist: "The rise of e-money, The digital currencies that matter. Get ready for Fedcoin and the e-euro"

https://webcache.googleusercontent.com/ ... clnk&gl=nl
Gosh, I hope they come up with names better than Fedcoin (not great) and e-euro (ugh).
Get ready for the Britcoin.

https://www.coindesk.com/bank-of-englan ... l-currency
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Re: Cryptocurrency investors should be prepared to lose all their money - Bank of England

Post by Valuethinker »

ensign_lee wrote: Mon May 10, 2021 11:15 am I'm very invested in the crypto space.

What the bank of England says here, on its face "Cryptocurrency investors should be prepared to lose all their money" - isn't wrong. This is a highly volatile investment. Yeah, you might lose 80-90% of whatever you put in. I've had that happen. You can't be in an investment that can be up so much without also taking the risk that you can be down so much.
Speaking as a dot com survivor ...

It's always easy to talk about these things in the abstract, than to experience them.

Just as a general warning to others reading this, who have not had the privilege of seeing their stock drop 90% -- or to 0%.
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Re: Cryptocurrency investors should be prepared to lose all their money - Bank of England

Post by Always passive »

3CT_Paddler wrote: Tue May 11, 2021 8:39 am
Always passive wrote: Sat May 08, 2021 9:48 am
3CT_Paddler wrote: Fri May 07, 2021 7:55 pm
staustin wrote: Fri May 07, 2021 8:12 am
3CT_Paddler wrote: Fri May 07, 2021 7:59 am How the conversation could have gone...

Government official: "Digital currency has no intrinsic value!"
Reporter: "Speaking of intrinsic value, can you talk to us about our currency and how it..."
Government official: "This press conference is over"

PS I agree that digital currency has no intrinsic value. I can come up with a new currency tomorrow and if I can get the crowd to join in, all of the early adopters can become fabulously rich. Of course once you start going down this road enough times, the crowds will realize the foolishness of this game and the gig is up.
you could use the same language to describe many ipo's dating back to the tech bubble (theglobe, vonage, pets.com, just to name a few).. investment bankers bring 'companies' to market with inflated valuations and projections.. earn high fees, exit, etc.

I don't own bitcoin but this isn't anything new.. that said, I do agree with Munger's comments yesterday in particular.
If I own a fractional piece of a company I have a claim to future profits in the form of a dividend. I own something tangible, even if the valuation is way off. Same thing with a bond.

With digital currency what underlying value do you own? Think about it this way... if tomorrow there is a better alternative to Bitcoin and a large group of people decide to switch, what would happen to Bitcoin?
So Gold is not for you either?
Gold has real world applications, and is a rare material. It is no different than other precious metals like silver or platinum. It is just the one that gets the most attention. And gold's value is a speculative play. The only reason I would subscribe value to it would be to the extent that it gives you an alternative to a paper backed currency that is being purposefully inflated (see Zimbabwe).

A cryptocurrency like Bitcoin is a made up set of rules that could be duplicated a million times over. And it has been duplicated a ton already with LiteCoin and Dogecoin and host of others. Their value will rise and fall based on the whims of the crowd or the ability of its creator to convince others it has value. It is only group belief as well as the currency design/protocol that causes it to rise in value.

Yes there can be value in having a currency that functions like Bitcoin, but what draws people in is not the functionality of the currency, but the arbitrary rules that can make you rich.
I own gold (5% of my portfolio), but not Bitcoin. I think that once governments get into that space, it will lose its attractiveness. And that is about to happen,
I suggest you read the wonderful book of the great Peter Bernstein, “The Power of Gold.”
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Re: Cryptocurrency investors should be prepared to lose all their money - Bank of England

Post by csmath »

I was going to post this in the "Crypto Mania" thread that got locked because it fit in with my question about leverage. I ran into this advertisement a few minutes ago and thought some would find it interesting.
1:100 leverage trade with PrimeXBT

Here you’d only have to pay 1% of your $100,000 position, or $1,000 to open such trade. If the Bitcoin price rises by 5%, you would still make the same profit of $5,000, but at a considerably reduced cost.

That means that profits can be hugely multiplied.
source: https://primexbt.com/trade-bitcoin-with-leverage

Earlier today I posted this:
Good question. If the collateral is crypto, and a market correction drops the value of the collateral triggering a liquidation, doesn't that further depress the markets, which trigger the next rung of collateral to be liquidated, depressing the market further, triggering the next rung, etc. In the traditional financial world, most collateral is required to be of stable value and cannot be used over and over again for different loans right? That sounds like a Robinhood world.

Can I deposit $100k into crypto and invest it, then use it as collateral for a cryto loan and invest that borrowed crypto, then get another loan off that investment... to invest... etc? This sounds like a really dumb question but while I feel I have a decent grasp of the tech side of blockchain/crypto, I haven't kept up with the "ecosystem".
So with 100x leverage... can I deposit $100k into crypto and invest with 100x leverage to get 10,000k crypto that can be used as collateral for an enormous loan and invest that loaned crypto with 100x leverage... etc? This can't be possible can it? It sounds like something that would get posted on Wallstreetbets for instant celebrity status.

I think this fits in the "Prepare to lose all your money" thread.
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Re: Cryptocurrency investors should be prepared to lose all their money - Bank of England

Post by Fat-Tailed Contagion »

Sounds like more of a threat than guidance.

The central banks grip on control is why Cryto was created.
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Re: Cryptocurrency investors should be prepared to lose all their money - Bank of England

Post by OohLaLa »

csmath wrote: Fri May 14, 2021 9:41 pm I was going to post this in the "Crypto Mania" thread that got locked because it fit in with my question about leverage. I ran into this advertisement a few minutes ago and thought some would find it interesting.
1:100 leverage trade with PrimeXBT

Here you’d only have to pay 1% of your $100,000 position, or $1,000 to open such trade. If the Bitcoin price rises by 5%, you would still make the same profit of $5,000, but at a considerably reduced cost.

That means that profits can be hugely multiplied.
source: https://primexbt.com/trade-bitcoin-with-leverage

[...]

I think this fits in the "Prepare to lose all your money" thread.
Awww shucks... it's not available in my country :mrgreen: :
https://help.primexbt.com/policies/rest ... isdictions

I wonder what the margin call level is... Couldn't find that info. There has to be a catch somewhere because that whole brokerage's presentation of info reads like a honeypot, especially the "Negative Balance Protection" lol:
https://help.primexbt.com/leverage-trad ... d-leverage
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Re: Cryptocurrency investors should be prepared to lose all their money - Bank of England

Post by SemiRetire »

Medium of exchange
Store of value
Unit of account

Ability to perform these functions are what gives any money value.
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Re: Cryptocurrency investors should be prepared to lose all their money - Bank of England

Post by dsasdg »

watchnerd wrote: Fri May 07, 2021 7:23 am
YRT70 wrote: Fri May 07, 2021 7:18 am The Economist: "The rise of e-money, The digital currencies that matter. Get ready for Fedcoin and the e-euro"

https://webcache.googleusercontent.com/ ... clnk&gl=nl
Gosh, I hope they come up with names better than Fedcoin (not great) and e-euro (ugh).
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Re: Cryptocurrency investors should be prepared to lose all their money - Bank of England

Post by Paradise »

Not even just for no actual value. There is a serious risk that these currencies become banned completely under the rationale that it is facilitating ransomware and other illegal activities. Already banned in other countries.
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Re: Cryptocurrency investors should be prepared to lose all their money - Bank of England

Post by SemiRetire »

Paradise wrote: Sat May 15, 2021 7:51 am Not even just for no actual value. There is a serious risk that these currencies become banned completely under the rationale that it is facilitating ransomware and other illegal activities. Already banned in other countries.
Which countries have banned cryptocurrency?
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Re: Cryptocurrency investors should be prepared to lose all their money - Bank of England

Post by watchnerd »

SemiRetire wrote: Sat May 15, 2021 8:05 am
Paradise wrote: Sat May 15, 2021 7:51 am Not even just for no actual value. There is a serious risk that these currencies become banned completely under the rationale that it is facilitating ransomware and other illegal activities. Already banned in other countries.
Which countries have banned cryptocurrency?
Not many, but there are a few:

Algeria, Egypt, Morocco, Bolivia, Pakistan, etc

https://en.wikipedia.org/wiki/Legality_ ... _territory
Last edited by watchnerd on Sat May 15, 2021 8:17 am, edited 1 time in total.
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Re: Cryptocurrency investors should be prepared to lose all their money - Bank of England

Post by GregG3 »

tontot wrote: Sun May 09, 2021 11:02 pm ....
Most in crypto space think Bitcoin as stored of value that competes directly with Gold, Silver etc
The difference is that gold and silver are both physical commodities with numerous industrial/commercial uses unlike cryptos. Around 1000 tons of gold is consumed annually for industrial use alone. Crypto is not a commodity, apart from traders, and perhaps international malware distributors, nobody needs it.
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Re: Cryptocurrency investors should be prepared to lose all their money - Bank of England

Post by Gadget »

OohLaLa wrote: Fri May 14, 2021 10:46 pm
csmath wrote: Fri May 14, 2021 9:41 pm I was going to post this in the "Crypto Mania" thread that got locked because it fit in with my question about leverage. I ran into this advertisement a few minutes ago and thought some would find it interesting.
1:100 leverage trade with PrimeXBT

Here you’d only have to pay 1% of your $100,000 position, or $1,000 to open such trade. If the Bitcoin price rises by 5%, you would still make the same profit of $5,000, but at a considerably reduced cost.

That means that profits can be hugely multiplied.
source: https://primexbt.com/trade-bitcoin-with-leverage

[...]

I think this fits in the "Prepare to lose all your money" thread.
Awww shucks... it's not available in my country :mrgreen: :
https://help.primexbt.com/policies/rest ... isdictions

I wonder what the margin call level is... Couldn't find that info. There has to be a catch somewhere because that whole brokerage's presentation of info reads like a honeypot, especially the "Negative Balance Protection" lol:
https://help.primexbt.com/leverage-trad ... d-leverage
I don't subscribe to the crypto price shilling subreddits, but they do have people that use this crazy leverage. I don't think I've ever seen anyone post gains from it when I look. It's almost always someone posting "I didn't understand how leverage worked, I lost everything on a minor market dip". The last one I remember seeing lost everything he put in to it in something like 10 minutes.

I'm guessing the scam is that it is nearly impossible to get more funds there in time during a margin call. The site you posted isn't even the only one.

It'd be better if /r/wsb allowed crypto though. Their memes are the best.
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