Your argument is all crypto is a scam. So far so good on that call, but my feeling is it will be around forever but only used for covert transactions, buying drugs on the dark web and such. Beyond that it’ll remain as an investment vehicle, an extremely risky gamble with a potentially sky-high reward.
"It is difficult to get a man to understand something when his salary depends upon his not understanding it!”. I think this quote applies to pretty much every celebrity who endorses crypto
I spent many hours, trying to understand crypto over the last 5 years or so. It took me a good couple of years to conclude that it was a Ponzi scheme. I still find myself learning a lot just by reading the threads on Qt3, and especially watching the videos. Lots of very knowledgeable people have gotten on the crypto bandwagon. Since how computer work is basically magic to 90% of the population, I understand them getting taken. I think anyone who has a degree in computer science or has spent more than a year coding for a living, should have known better.
Marc Andreessen’s endorsement in particular almost led me down the crypto path. He definitely should have known better.
I agree with your views on crypto in general, but I think this particular statement is both incorrect and a good representation of how this got this big this fast. Crypto was an ideal scam vehicle because it combined obscure technology topics with obscure financial topics. You correctly noted that most of the population doesn’t have any ability to judge the technicals, but that’s also true of the financial side of things. When you combine the deep financial knowledge required to understand what was going on with the deep technical knowledge required to grasp how it all worked, there was only a tiny slice of people who could really grasp the picture at first.
This made it very easy for the snake-oil salesmen to find both expert technical opinions (who didn’t understand the finance bits) and expert financial opinions (who didn’t understand the technical bits) and get approving statements from both sides.
A lot of people got taken in, and not individual rubes but big investors as well. Hedge funds, pension funds, etc are all exposed to crypto to some degree at the moment. I’m actually curious if crypto has gotten too big to fail and will be bailed out by government if things go really pear shaped. I don’t think so, but it’s hard to say what the exposure is among pensions and retirement accounts and other funds that the government can’t afford politically to let collapse.
The desire to make a quick profit and the fact there are endless ways to put a new wrapper around a ponzi makes investment fraud ever green.
Funny thing about information though is it’s usually ignored anyway.
I’ll give you a real life example I saw countless times. The prospectus for the scams that even bothered to put one together to pitch a deal (i.e. oil and gas scams in TX never die) almost always contained a section that stated something along the lines of 95%+ of the funds raised can be used at the sole discretion of the corp raising the money.
It made absolutely no difference.
You are 100% right, I completely forgot about the financial aspect. When I lived in Silicon Valley, most of my friends and acquaintances understood technology, and a fair number also understand finances. The Venn diagram who understand both was small but not tiny. In Hawaii, most RL and online friends understand financial issues, not many understand technical, and very few get both.
Of course, my friends are completely unrepresentative of the country as a whole, as is QT3.
To the average American, Bitcoin’s value went from $100, to $1,000, to 10,000 and BEYOND, and gave the little guy a chance to get rich, and weren’t controlled by Wall St. Non-fungible tokens and sector ETFs are equally incomprehensible so why not invest in the one going up the most?
It doesn’t take much knowledge to understand that a wildly floating thing that no one can explain why it’s guaranteed to profit is too good to be true; or to notice that there’s no guaranteed security; or that long transaction times aren’t simply optimizable; or that there are no rules; or that every attempt at rules either fails with having centralized party, or gets nowhere; or …
The only hard part is knowing there is no magical solution for your material security, let along one involving money sloshing around with no oversight over promises of more magic. Yeah, it’s hard, because the rest of the system is also terrible and lying to you, so why not something that seems to grow to the moon?
Pension fund exposure to crypto isn’t remotely big enough to cause them to collapse. The entire market cap of crypto is less than a trillion dollars. US public pension funds alone have over $4trn of assets, and the vast majority of that is in bog standard bonds and shares, with a fair bit of real estate and some private equity thrown in. A really reckless pension fund might have, say, 5% exposure. But that would be a huge outlier.
There are some crypto-heavy hedge funds, some of which have already blown up, but the rest of the financial system generally steers clear of them and the government is definitely not going to bail them out.
Financial Times, today:
They were still taking FTT deposits until today!
My understanding is it made him an awfully large amount of money. He knew exactly what he was doing.
This has probably been posted before somewhere but worth reposting.
Wow, they both nailed it and Charlie Munger was hilarious.
He is part of the monied establishment these days. It’s been 30 years since he was an upstart wunderkind.
Berkshire is up 4% YTD vs -14% for the S&P and -26% for Nasdaq. I suspect their outperformance will continue through the rest of the bear market.
Let’s check in on how some of the biggest crypto currencies are doing, shall we?
If you bought these currencies 1 year ago:
Bitcoin? You’ve lost about 75% of your money.
Ethereum? You’ve lost about 75 % of your money.
XRP? You’ve lost about 75% of your money.
Dogecoin? You’ve only lost about 70% of your money – congratulations!
Polkadot? You’ve lost about 90% of your money.
Solana? You’ve lost about 95% of your money.
And those are the successful currencies. There are plenty (e.g. Luna, FTT) where you would have lost 100% of your money.
I’m dropping MeCoin soon. You give me your money and I live off it. I give you half back in a year. Best performing crypto in existence!
You’re not wrong, of course. But in our research we’re finding that more and more crypto traders are pretty agile about moving their investments, cashing out at plateaus, etc. So for instance, it’s possible that a trader in any of those coins (OK, maybe not Solana) could’ve turned a nifty buy low/sell high profit in just the last two weeks alone. In fact, we were charting what looked very much to us as a profit-taking selloff on BTC, ETH, BNB, UniSwap, and XRP two days before the FTX collapse hit all currencies.
It’s not (quite) day-trading behavior yet. But neither is it stock market investor behavior. I reminds me a great deal of an investment group we worked with two or three years ago who traded along the SPX.
And there are absolutely still true believers who are holding and hoping at over a year, mostly because they were dumb enough to buy something like BTC at $50k in hopes it was headed to 100, or similar nonsense with other currencies. They’re kind of stuck with their sunshine-pumping poor decisions.
I’ve stopped hearing from colleagues/friends crowing about how great crypto is, so this is a positive. Hopefully critical thinking will catch up.
Well, Crypto was a way to try to sell blockchain tech.
It wasn’t probably the best use of blockchain tech.
Clearly.