UST/Luna - Worthless now!

Discussion in 'Off-Topic Discussions' started by AsianStew, May 14, 2022.

  1. AsianStew

    AsianStew Moderator Staff Member

    JBjunior and Maniac Craniac like this.
  2. SteveFoerster

    SteveFoerster Resident Gadfly Staff Member

    I get it that the volatility that accompanies cryptocurrencies is not for everyone. But extrapolating from UST/Luna to cryptocurrencies as a whole (especially with scare quotes) is tarring with too broad a brush. If you said it's a good reason to avoid algorithmic stablecoins that might be more reasonable. As it is, though, it's like saying to avoid stocks because companies occasionally go out of business.
    Dustin and Maniac Craniac like this.
  3. Rich Douglas

    Rich Douglas Well-Known Member

    Hey! The music stopped. Why aren't there enough chairs for everyone to sit?
  4. Rich Douglas

    Rich Douglas Well-Known Member

    The problem with crypto is that the only value in it is the hope that you can sell it to someone else for more than you paid for it, but you have absolutely no way of analyzing that. Houses, stocks, things like that you have data to go by. You can't predict the future with certainty, of course, but you're not just blindly guessing and hoping.

    And if there IS information to be had in crypto, only some people are privy to it, which means the rest are being played for suckers.

    Crypto is just gambling, nothing more. At least with the Tulip craze you got a flower.
    JBjunior, Dustin and chris richardson like this.
  5. SteveFoerster

    SteveFoerster Resident Gadfly Staff Member

    The point of any investment is the hope that you can sell it to someone else for more than you paid for it. Yes, information about crypto markets exists, and yes, it's accessible to lay people, same as stocks, bonds, etc., and nowadays often on the same sites in the same formats.

    Do you not think the people on Wall Street have better access to financial information than you or I? I remember reading about a trading company that set up a microwave connection between Chicago and New York because it was a tiny bit faster than a fiber optic connection for taking advantage of arbitrage opportunities. And that was for commodities, not crypto.

    It's really not, at least any more than any other asset class. On the contrary, in addition to its (admittedly volatile) use as a store of value, it's also useful as a medium of exchange in a way that most asset classes are not. Try that with the Vanguard mutual fund in your 401(k).

    I get it that crypto bros are annoying and often oversell their revolution. But be careful with that tub; it doesn't just have bathwater in it.
  6. Rich Douglas

    Rich Douglas Well-Known Member

    Sorry, but crypto is just a pyramid scheme, nothing more. Oh, and a way to try to evade law enforcement. Gee, that’s nice.

    As for information, certainly insiders have more info on stocks and bonds. And you can hire such people to work for you. With crypto, there is NONE. The average investor is taking a knife to a gunfight. Better yet, to a game of Russian Roulette.
  7. SteveFoerster

    SteveFoerster Resident Gadfly Staff Member

    Considering that a blockchain is a publicly viewable ledger, it's a really terrible way to try to evade law enforcement. If you don't believe it, ask Ross Ulbricht.

    A simple Google search finds plenty of financial planners that can advise on cryptocurrencies. There are IRAs for it, credit cards that let you earn Bitcoin instead of miles, the works. This isn't 2015.
  8. Dustin

    Dustin Well-Known Member

    Slightly OT: On Netflix, The Hummingbird Project is about this exact thing, loosely based on the real story of high frequency traders who shaved a few milliseconds off their orders by building a fiber optic cable from Kansas to New York thus assuring them riches.
  9. SteveFoerster

    SteveFoerster Resident Gadfly Staff Member

    It's fascinating stuff! I did some corporate training for an all-fiber optic ISP and learned a great deal.
  10. Rich Douglas

    Rich Douglas Well-Known Member

    Well, it wouldn't be the first time I didn't understand something. If secrecy features are not relevant, then what? On what basis does one make "investment" decisions regarding cryptocurrency? Bonds have interest and (sometimes) tax advantages. Stocks have all kinds of underlying business indicators. Even cash accounts have rates of return. But what does one use as decision factors when it comes to crypto? (And no, it's not just the recent dive in that stuff; the same questions applied when it was rising.) How is this any different from other crazes, except that it is more so?

    This seems like a bad (block)chain letter.
  11. nosborne48

    nosborne48 Well-Known Member

    Tulips. And as with tulips, when people recognize that the Emperor really has no clothes, the jig is up!

    Feeling cliche this morning. Sorry.
  12. Flelmo

    Flelmo New Member

    This bag I'm holding seems to be empty...
  13. SteveFoerster

    SteveFoerster Resident Gadfly Staff Member

    Originally the idea was that it would be a common medium of exchange. The network turned out to be too slow for that, although it's still used a lot for international transactions, especially foreign remittances. Now, however, there's more interest in it being a base layer that facilitates smart contracts. That was what differentiated Ether from Bitcoin, for example. (Although, the UST/Luna debacle shows that it's also very possible to get that wrong.)

    That points to what I think is really going on here: smart people with high tolerance for risk have been given a new set of technological and financial Legos and we're still seeing what they can build with them. The amount of entrepreneurial energy in this space is tremendous. I'm sure a lot of that will end up being bad ideas that go nowhere. Some of it won't.

    There's also a geopolitical angle, in which smaller lower income countries are starting to see whether they can parlay interest in cryptocurrencies into another avenue for economic development. I don't entirely know what to make of that, but it isn't nothing. I mean, the argument is that fiat currencies that form the base layer of the existing financial system are ultimately useful because you can pay taxes with them, well, to a small degree that's true for Bitcoin now too.

    And, of course, some of it is also speculation and hype. I get that. I just don't see that as unique to crypto, nor as the only thing that makes crypto interesting.

    That's okay, people said that the other seven times it dipped significantly. You get used to it.

  14. nosborne48

    nosborne48 Well-Known Member

    It seemed to me at the start of the crypto craze that the very thing Bitcoin promoters claim as the "currency's" greatest advantage is in fact in the long run its greatest defect. I'm referring to the fact that it isn't backed by any government. What that means is, there is no authority that must accept it in payment of debts and taxes and, worse, there is no national authority that will defend it from inevitable "bank runs". There is nothing at all to keep such a "run" from driving the price of Bitcoin, or any other similar "currency" to zero.

    Bitcoin prices are quoted in USD or other convertable national (fiat, if you like) currencies. What gives the Bitcoin holder a nice warm glow (or shudders of terror) is that price because the ability to sell Bitcoin to someone else for some national currency is nearly the sole source of Bitcon's value. Well, in a panic over quickly falling prices, all it would take is a massive move by Bitcoin owners to exchange their holding for cash. Whump. Zero. If you tried that with, say, GBP, the UK government would defend its pound. But there is no one to buy Bitcoin to support its price. There is no one who must accept Bitcoin in return for value. There is no lender of last resort to stem such a "run".

    The government of El Salvador is finding that out right now.
  15. nosborne48

    nosborne48 Well-Known Member

    Here's another thing to think about. Bitcoin price hit about $60,000 last November. Now it's under $30,000. On an annualized basis, that means Bitcoin holders are enduring 100% inflation. Not a good "store of value".
  16. nosborne48

    nosborne48 Well-Known Member

    It seems to me that crypto promoters and enthusiasts know more about technology than they do about money and banking.
  17. nosborne48

    nosborne48 Well-Known Member

    Bitcoin lost another $1,400 today in a pretty steep decline at the end of the trading day. No one can ever say for sure, this is it. This is the end. If I were the type to gamble, I'd sell short right now. I'm not, though. But still. It doesn't look good.
  18. nosborne48

    nosborne48 Well-Known Member

    Anyone who bought Bitcoin figuring to sell to the next greater fool might think about finding that fool pretty quickly now. It's not pleasant to find the biggest fool in the mirror! Are you listening, Mr. Musk?
  19. Vonnegut

    Vonnegut Well-Known Member

  20. Rich Douglas

    Rich Douglas Well-Known Member

    A big problem with crypto is that the activity around it is not:
    • Investing, or
    • Using it as a currency.
    Instead, it is merely a speculative device, and buyers are just gambling that someone, sometime, will buy it from them for more.

    Unlike stocks and bonds, crypto doesn't make anything, doesn't do anything, and has no extrinsic value. Worse, its value isn't even actively managed. (Yes, some are designed to be pegged against currency, but even they're failing at it.)

    I do a lot of training. As an icebreaker, I once auctioned off a dollar bill. By the time the bidding was done, it sold for more than $5. It was hilarious to watch the final two bidders locked into a death match, determined not to let the other guy win.

    Crypto is for suckers.

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