The sad reality is that many poorer and financially illeterate people have been tricked by VCs and other grifters into this with billions of dollars spent in advertising. So, no, they don't deserve to lose their money to these assholes. These assholes need to be prosecuted, fined and put to jail if necessary.
People saw the meteoric rise of Bitcoin and got a serious case of FOMO. Everyone wanted to be on the next Bitcoin. This, ultimately, is the American Dream: to get rich by doing nothing other than getting lucky and being able to say how smart you are. Not by creating any kind of value.
People should be honest and admit (at least to themselves) that they didn't understand what they were investing in let alone believe in it fundamentally. They just wanted to get rich.
First, I have never actually seen any comments here disavowing themselves of responsibility. It is always aimed at protecting others and this is rooted in the obvious fact that a very large number of people are not (and we do not expect them to be) experts in investment. That assets can go up or down is one thing, and nobody can be protected from that, but there is an extensive body of law intended to protect people from outright falsehoods. So I can say, "you should invest in ConCoin, it's going to the moooon" and that maybe is allowed. I cannot say "we have pegged this to the value of the dollar if I know that I have taken no care whatsoever to even try and do that".
Second, refusing to set a floor on falsehoods using regulatory tools makes doing business much more expensive for people who are not scammers. This is a classic "market for lemons" effect. If I have a great idea that I would like to raise money for using, say, a utility token [n.b. not currently allowed] then if the last few such tokens have been exit scams, I will raise no money. Maintaining a certain level of trust is a pool from which we can all draw. It has in fact been shown that growth in low trust economies is systematically lower than in high trust economies.
So then they should stay out of the game. I totally disagree that we need a bunch of bullshit laws protecting people from poor decision making.
Demand side already has responsibility and correct incentives: the fools have been parted from their money. Done.
This goes for small things, like NFT ponzis, and big things, like turning housing into an asset class.
When has housing ever not been an asset class?
Real estate is and was the original asset class.
Within the western world, that has always been the primary basis of one’s wealth until fairly recently.
I think the issue is assuming people who get scammed are at fault for something, just because a more paranoid person would have avoided the scam.
Regulation will not stop me from selling a potato for $100. it will stop me from selling a regular potato for $100 while claiming it cures cancer.
Buying a potato for $100 would be dumb, and nothing stops me from doing it
Buying a cancer-curing potato for $100 is not dumb. Believing a potato can cure cancer because someone else is publicly selling it to me that way in full view of the entire world is not dumb. I would think "oh wow, something about this potato must be cancer-curing because surely this guy knows that if he scams me in front of the public then the public will hold him accountable."
So it is now time to hold people accountable
Basically, it's exactly that.
Now one can be informed but also choose to make stupid decisions. People do this all the time on penny stocks, options, etc... The SEC has no interest in trying to stop them, just making sure they know up from what they are getting into.
Other than that, lies and manipulation are part of the equation. It's a bad decision to blindly trust anyone or anything. You can't separate smelling bs from judgement.
The whole concept of an accredited investor is basically saving people from themselves.
The SEC has a pretty ill defined set of risks they are trying to protect people from. People will find ways to lose their money if they don't have a general "wait, do I have a clue what I'm doing here?" filter.
I agree with personal responsibility but not at the expense of communication.
Imagine if every single person who moved a package was required to open the package and confirm the contents. It may be the only way to accept personal responsibility for its contents, but it's dumb. I am telling you what the contents are and if I am lying to you then I need to be held accountable. Especially if the contents are dangerous and I told you they are safe.
If I write "i owe you a billion dollars for your 64 diamonds" on a minecraft sign you shouldn't be surprised if I don't hold up my end of that.
The more a community holds itself accountable without regulation, the less regulation the community needs. If people always avoided unregulated assets because of your logic - we wouldnt have any regulated markets today.
Non-scams are the norm where I come from and with the people I interact with. Maybe it is cultural. Some cultures held people accountable for their bullshit and some didnt... and now the expectations for responsibility are different. "you should expect to get scammed" vs "if you find a scammer we will deal with them"
>If I write "i owe you a billion dollars for your 64 diamonds" on a minecraft sign you shouldn't be surprised if I don't hold up my end of that.
If you take my 64 diamonds, deny me a billion dollars, and then refuse to give the 64 diamonds back.. that is theft. In minecraft, I would then proceed to remove your health bar, take what I want from you, pour lava buckets on your house, etc. And you should not be surprised by that.
Abusing a lack of regulation causes chaos, and hinders the ability of communities to grow stronger. Weak communities enable unnecessary suffering. There is an ethical responsibility to make an example out of people who manipulate communication to scam others. It is one of the few things nature allowed us to have to enable building communities in the first place.
If scamming is currently the norm, then it is currently hunting season.
I mentioned it to another, but have some humanity and empathy for those less "smart" than yourself.
You're still thinking of it as something people can learn, but psychology / history says otherwise.
This is why I say empathy is important. For you, it's obvious. For others, it's not.
In addition, there are other factors at play, like desperation (when you're living paycheck to paycheck, you _want_ to believe there's a way out).
Everyone has different experiences / situations to grapple with, and as a society we should try to help folks find the happy path and protect them. Especially so for those of us who recognize cons!
So I guess I wouldn't understand the "empathy goes both way" statement.
Your points are certainly valid. I don't think either way results in something perfect or even that good.
The "get rich quick" folks are doing basically the same thing but faster and sometimes with less sense. But hopefully with only a small portion of their savings.
Trusting such claims without proof is stupid/financial illiteracy/YOLO investing (pick your preferred term).
Pulling from the comment I was replying to:
> ... many poorer and financially illeterate people have been tricked ...
That's quite literally disavowing responsibility.
> ... but there is an extensive body of law intended to protect people from outright falsehoods
This is true and the law hasn't quite caught up to crypto scams but think about it this way: even if the scammers get prosecuted--possibly even go to jail--you're 99% likely never getting your money back. And even if you do it'll probably be after wasting years on the effort. Obviously there's a deterrence value to prosecuting scammers and I support that hpappening but you'll almost never get your money back.
> Maintaining a certain level of trust is a pool from which we can all draw. It has in fact been shown that growth in low trust economies is systematically lower than in high trust economies.
I 100% agree and this is something that libertarians and anarchists gloss over completely.
Unsure how you failed to read the emphasis on "themselves" in the comment you're replying to, and the line about protecting others.
Half of this thread believes we should protect people from themselves.
The other half believes people should have the freedom to screw themselves over.
Not sure there's much ground for compromise, given the contradictory nature of those positions.
> The other half believes people should have the freedom to screw themselves over.
Nailed it. It comes down to principles. Do you believe in personal freedom? Or do you prefer authoritarian governments?
If I buy edible stuff I trust that it won't poison me or kill me. If I drive a car I expect it respond to my commands and I expect other drivers to have a minimum amount of knowledge that they can actually assume and understand the risks of driving.
The protections that the SEC and other bodies expect in this area are quite reasonable if you understand that there is no such thing as "personal" freedom; your well-being and successes and failures tie into the rest of society at large. Maybe if you lose part of your savings that might be tolerable for all, but if in the process of making a bad investment you leave yourself and your family homeless, get into drug addiction, and create a large burden to those around you, it's hard to consider that to be a simple personal issue.
Look, if someone comes to my house claiming to be raising money for charity and I givethem money, the following statements can all be simultaneously true:
1. I should take responsibility for checking that they represent a genuine charity;
2. If they are a genuine charity, I should take responsibility for checking that most of my gift will go towards the recipients of the charity and not to operating the charity itself;
3. They should take responsibility for being truthful about who they represent and where the money is going.
Responsibility isn't a zero-sum game. We can encourage everyone to have more financial literacy and awareness of scams and frauds while simultaneously holding grifters responsible for their crimes.
I'm not taking either position here, I'm taking both positions. See also "the difference between advice for individuals and codes of conduct for communities."
Our personal advice is to protect yourself from fraud. Our society's code of conduct is, "don't commit fraud."
The point of prosecuting scammers is not restorative justice[0], but instead punative. You want the penalty for scamming people to be high enough that even the scammers that don't get caught move onto a different grift.
Whether or not punative justice works is very context-sensitive. It requires the crime itself to be something done because it makes money - opportunistic crimes or crimes of passion will not be deterred by high punishments[1]. However, I absolutely do buy the idea that scammers are highly-calculating thieves that can be deterred in this way. They operate highly organized criminal enterprises with their own internal and external security concerns, and respond highly to perceived risk of prosecution[2]. This is why they like to target old people, the marks are easier to scam and less likely to admit being scammed.
That's not to say that we should fall back upon the "personal responsibility" angle, either. It's easy enough to say that it only happens to the financially illiterate, or the elderly, or what have you. This is wrong; there are plenty of scammers out there just waiting to push whatever button you have that will make you send them money. The problem with pushing "personal responsibility" as an angle is that it's a victim-blaming narrative, and one that makes it easy to fancy yourself invulnerable. "I can't get scammed, because I took personal responsibility."
DO NOT DO THIS.
You will laugh at the people who bought into FOMOCoin or sent thousands of dollars to a refund scammer... only to click on, say, a fake FedEx tracking link you got e-mailed and wind up getting hit with some 0day malware that drains your bank account or encrypts your files in seconds. Personal responsibility will not save you from your own sense of invulnerability, because there is no level of responsibility one can take that will ensure that you never, ever get scammed. You can only ever make yourself a less desirable mark.
[0] i.e. putting the thing you stole back
[1] Related note: governments love to insist upon high punishments for crimes more often committed by people on the margins of society (e.g. poor/black/Mexican/some other power minority). At one point, we at least punished businesses the same way, but then Enron happened and the US decided killing an entire accounting firm just to prove a point was going too far.
[2] In one revealing case, Youtuber Mark Rober was able to shut down an entire tech support scammer group on Telegram by merely saying he had their dox[3] and was planning to drop them on a few law-enforcement agencies.
[3] 4chan slang for "personally-identifying information".
Terrible comparison.
FOMOCoin is not pretending to be something different than FOMOCoin. When somebody invests in a shitcoin, they know exactly what it is they are investing in.
When you click on a fake FedEx link, you believe you're clicking on a FedEx link. You've been deceived by blatant deception.
A better comparison to your FedEx example: Investor believes they're investing in FOMOCoin when in fact they are investing in SHITCoin or no coin at all. It was a trick.
I assure you, libertarians and anarchists, or at least the ones who have actually bothered to go beyond the surface, are not unaware of this. You're wielding those monikers as if anyone to bear them would be a fool by definition. It is clear low trust has adverse effects on growth. What is not clear is that unbounded rapid growth is a desirable state of affairs, or that an equilibrium is so important everyone must bow before a central authority/planner with a hand on a brake.
There is nuance your comment as written completely neglects.
Not as far off as you might think
But it’s unfalsifiable gibberish itself to believe our system is some pinnacle of human society
Many problems that plague states that lean into socialism can be traced to capitalists meddling in their affairs through international politics
More rules for thee not for me policy by nations of people who would meltdown over externalized forces dictating their way life. Hardly proof in a vacuum socialism is a sign of the end times when it’s held up apes who can’t communicate except by throwing poop
Your truth is rooted in the empowerment it provides you. No one else has an obligation to your figurative sense of power
Is it the casino foult that their customers loose money because the ambient is so inviting and screams wining?
Casinos are very strictly regulated and must post the exact rules and probability of winning for all their games. If the casino lies about the rules of the game or your chances of winning, then yes it is absolutely their fault and they will be held liable.
I'm pretty sure if I followed the Superbowl ads to crypto.com, I would fail to see these warnings.
Yes, for everyone deeply connected online, who has been following crypto for the last several years, of course we've talked about plenty of warnings many times. But the current marketing campaigns are not aimed at such people.
And yes you could be right it’s just my bubble. But it’s still sad that so many people fall for get rich quick scheme.
Clearly not. There's a pretty clear pattern where many (most?) cryptocurrency enthusiasts avert their eyes from anything except the most transient and limited downsides and are can be quite hostile to anyone who's bearish on cryptocurrency. It's got a strong "power of positive thinking" vibe.
Saying you can't believe people didn't know is just showing lack of empathy in how others form trust. Many of those people form trust by looking at a screen and seeing a nice website with nice logins and nice charts. They look at things with dollar signs and say, "that's a good number there". Others dig in and are curious about how things work. Some laugh when people complain about how much power proof-of-work takes and believe it is the eniventible conclusion to why we don't see aliens out there.
Don't be the wurst person. Be the best! See that all humans need our help from an understanding technology perspective. Know that software can be implemented to take away their choices, or give them more choices than they had before.
Are you suggesting that every Casino publishes an AI derived win rate for poker by law?
I still wouldn't call it perfect play because as soon as someone adopts a fixed strategy, the meta game shifts and it is no longer optimal.
If anything, the assumption is equal play, not perfect play
The meta idea is what I first thought. It’s hard to evaluate though. The ai does not adapt, but continues to beat pros, who are welcome to try and adapt.
I’m curious if there are some zany cheese strats against this kind of AI that work reliably but the answer may be no. The only really practical tool you have that could work is a crazy bluff, but I doubt that’s sustainable.
It doesn’t really matter if perfect play is considered though. Games should be rated assuming equal competence. It’s not misleading if in fact your turn out to be a worse player in a game of skill.
My point is that if the casinos have to post odds, the only odds on a poker table are flat (any deviations from 0 coming from skill differences) minus any rake (with maybe some slight variation if the button doesn't go down an even number of times).
The fact that we cannot define perfect play is irrelevant.
But there's always that separate question of whether it's a moral failing to set out to do what they did in the first place.
And then you dig a little deeper and you can ask, even if we grant for the sake of argument that it's a moral failing, is it the state's responsibility to do anything about that?
And then you can dig even deeper, maybe ease off on the deontological ethics a bit, and instead ask, "What's worse for society in the long run: this behavior, or whatever enforcement mechanisms it would take to curb it?" I'd argue that that's a much more edifying way to frame the question.
My morals don't personally draw that line but it's common enough that you can't dismiss it as preposterous.
Amen to this. Too many people in this thread are shouting from the mountain tops that they hate freedom.
If you can't handle climbing a mountain, you shouldn't do it. It's really this simple. If somebody takes on risk and gets hurt it is their own fault.
Since “customers losing money” is the entire business model and what casinos work to optimize, yes, obviously.
I believe that everyone should do their own research etc but there's a reason there are laws against fraud. There are a lot of people who would get taken advantage of by the unscrupulous if we just decided that it's all about personal responsibility. Yes people should not have the expectation that they will get rich quick but there is also no reason to allow them to be blatantly ripped off either.
If tether haven't maintained the level of reserves they need to maintain the peg (and honestly I can't see how the possibly could have adequate reserves) then it seems a pretty straightforward case of fraud.
Not even close, even now. And the earlier stuff was almost insulting. Like the claim in 2019 that they were depositing $3.5 BILLION, per WEEK, into a bank, a deposit rate that would exceed AT&T, Samsung, Alphabet (Google).
Hah. No. The bank "deputy CEO" (who was 33) in an interview noted that the Bahamas had two banking licenses. But couldn't name them. And in any case, wasn't sure which his bank had, but he knew they had one of them. "And possibly the other".
Now that's the actual con, or at least a pipe dream. Hard work is never enough.
Luck plays a huge factor but few who get lucky, and then rich, will ever admit to that part.
This seems like a bad faith, intentional misunderstanding of the concept of hard work. You're right, mindless hard work (with no proactive consideration for your own life trajectory) is not enough to "make it". If you take the first minimum wage job you find and you work hard at that job for 40 years, you're not going to make it. That doesn't invalidate the American Dream. The American Dream isn't "if you work hard, the American Dream fairy will appear and present you with a house, a car and a white picket fence", it's "if you work hard at making it, you can quite easily make it". This presupposes that a given worker will take responsibility for their ability to earn, and be willing to course correct if they are not on a good path toward "making it".
> Luck plays a huge factor but few who get lucky, and then rich, will ever admit to that part.
Nonsense. The goal of the American Dream was never to be Jeff Bezos. It was to live a comfortable life. In that sense, the American Dream is being realized by the vast majority of Americans every day. The median income of a middle-class household in this country is 78K,[0] which puts them in the ~94th percentile in global income.[1]
[0]https://www.pewresearch.org/fact-tank/2018/09/06/the-america... [1]https://www.washingtonpost.com/graphics/2018/business/global...
I am not implying it is all luck, but there is never no luck involved in success.
If uou're going to make a historical argument, please follow through.
Now everyone are just 'temporarily impoverished billionaires', which is why the whole scam continues to hold itself up.
The Steinbeck that your are (mis)quoting is from the 30's. Misquote because Steinbeck was talking about how the majority of the ""socialists"" at the time were "most of the so-called Communists I met were middle-class, middle-aged people playing a game of dreams. I remember a woman in easy circumstances saying to another even more affluent: 'After the revolution even we will have more, won't we, dear?'"
So the feeling of entitlement is much older and across political lines.
Hence, thanks, but looking back to the 30's isn't relevant here.
If I openly leave a gold bar in the back seat of my car and don't lock the car and then park it in a major city it will get stolen. Is the thief to blame here? Absolutely. Could I have done more to protect my valuables? Absolutely.
So with any scam, you can say the scammers are bad (which is true) but the scammed could also have done more to protect themselves. Both of these things can be true at the same time.
I've seen no better example of this than Russia's unjustifiable invasion of Ukraine. Is Russia the bad guy? Absolutely. Have the US (through NATO, primarily) and Ukraine made mistakes along the way too? Absolutely. Does this make the US and Ukraine responsible for the invasion? No.
Please, for your own sake, get out of this binary thinking.
Disavowing responsibility from the scammed actually does people a huge disservice. It's not victim-blaming. It's a teachable moment.
E.g. instead of having a never-ending discussion on how exactly a perpetrator/victim share blame, we can shelve the discussion on what share of the blame goes towards the victim, and instead focus on how to best deal with the scammers.
If we get trapped in a never-ending discussion on blame sharing, we never get to deal with the scammers through action (this is what I meant by muddying the waters, it’s an involuntary and voluntary phenomenon that can delay action indefinitely).
People just don't go around handing out money. Early Bitcoin miners went through the effort of setting up mining rigs (which is no longer practical for an individual). They actually did something, and had some skin in the game. Did they hang on to those early coins until this year? I have no idea.
But people that just buy into coins because OMG its the next big thing, are purely speculating, which is nothing more than a form of gambling. Do I feel sorry for people with a gambling addiction? Yes I do, and I know someone that 'retired early (35)' to play poker professionally.
To much of the coin and NFT space to me smells of a combination of pyramid scheme and MLM. By its very nature it rejects regulation, it is decentralized. Which is one of the reasons, to me, that it is suspect.
Playing poker professionally is not a retirement, and no one really playing poker for income is addicted, I can assure you (at least not for long).
These days, playing live is the only way to get an edge (correct me? Been a while), and that would be a boring, nauseating job, right around the pay scale and routine of “club bouncer” if you’re good.
I played poker for my sole income for three years after college, traveling the world playing online. It was occasionally a lot of fun, morally painful, so stressful and not very well compensated. I would be rich now if I’d gone straight into programming instead of spending my 20s “avoiding work” by working my ass off to monetize my hobbies.
At peak covid, all the games dried up and even the pros went slumming. I personally saw Phil Ivey at a 2/5 game (!) at the Aria on a random Monday because that was the only game going and he hadn’t had any live practice in quite a long time.
If social was full of people showing off all the stiff they bought with the Nigerian Prince’s money maybe. Seems more like a lottery to me, but even that feels like a poor analogy.
The difference is crypto has made people wealthy, probably with a large luck component and others want in on that.
Grifters should be punished for their scams, and it's also acceptable for "investors" on these scams to lose their money i think (that's a hard punishment already; no need for anything extra). Thinking of it the other way around: as a society, it wouldn't be nice to bail out or compensate these "investments", as doing so would encourage people to keep doing throwing their money on things they don't have any clue about and expect to be compensated if it turns out bad.
You're missing the point. When somebody makes a poor decision on an investment, they are not a "victim".
One of the ways that a power structure discriminates against low-IQ people (born that way) is by ignoring their suffering because ‘they deserve it for being stupid/easily taken advantage of.’
Insurance agencies are wrestling with this because as society ages, there are known drops in IQ the make the elderly more susceptible to scams, because low-IQ behavior correlates with high-trust behavior (because they have to rely more on others for survival). Some agencies are offering scam insurance for the elderly.
As we age, the likelihood that we are scammed approaches 1. Scammers take advantage of this situation and society would be better off if scammers were taken care of by the state.
1. Anyone can invest all they want in a diversified portfolio of approved investments (non-penny-stock public companies, mutual funds and exchange-traded funds with modest fees, insured bank accounts, etc.).
2. Anyone can also invest in any other dumb investment; you just have to go to the local office of the SEC and get a Certificate of Dumb Investment. (Anyone who sells dumb non-approved investments without requiring this certificate from buyers goes to prison.)
3. To get that certificate, you sign a form. The form is one page with a lot of white space. It says in very large letters: “I want to buy a dumb investment. I understand that the person selling it will almost certainly steal all my money, and that I would almost certainly be better off just buying index funds, but I want to do this dumb thing anyway. I agree that I will never, under any circumstances, complain to anyone when this investment inevitably goes wrong. I understand that violating this agreement is a felony.”
4. Then you take the form to an SEC employee, who slaps you hard across the face and says “really???” And if you reply “yes really” then she gives you the certificate.
5. Then you bring the certificate to the seller and you can buy whatever dumb thing he is selling.
6. If an article ever appears in the Wall Street Journal in which you (or your lawyer) are quoted saying that you were just a simple dentist, didn’t understand what you were buying and were swindled by the seller’s flashy sales pitch, then you go to prison.
It's easy to say "they should have known" better because in absolutist terms it's correct. But you're focusing on the 'what' and not the 'why'.
For example: https://rollcall.com/2021/09/07/left-behind-by-financial-sys...
"Normal" investing is complicated, and stacked against regular people. Now we're asking people to understand blockchain and cryptography as well as investing. Yet it's sold as democratisation of investing. I mean, seriously.
You buy a low-cost index fund (either S&P 500 or total market (Russell 3000, Wilshire 5000)), and depending on your risk tolerance, a bond fund as well.
You can have global diversification with one ETF or mutual fund:
* https://www.youngandthrifty.ca/picking-the-best-all-in-one-e...
You just delegated the choice of winners and losers in your economy to an elite cadre of individuals, completely disconnected from boots on the ground life problems.
Symptoms of your decision may include:
Tendency to centralize.
Preferrntial treatment of large incumbents for ease of implementing regulations.
Higher barriers to entry over time.
Decreased feedback loop with regards to reigning in egregious business malbehavior.
Index investing does nothing but perpetuate a small handful of winners, and divests the majority of people from their most important role of being capital allocators.
Part of it, is being bad at it at some point. That's how you get better and increase overall world awareness.
Buy a broad based, low cost index fund. What exactly is complicated about that?
> and stacked against regular people.
How so?
Something about the chance of life changing returns in intoxicating. Personally I'd be thrilled with a 20% annual return in "normal" investments, but somehow crypto doubling or even tripling in a year is boring because we're all after the 100x+ return. Maybe it's because psychologically it just feels like more of a lottery ticket.
I have a relative in wealth management and went through a period where clients asked about bitcoin frequently. He told me his rule of thumb is: "If you've heard of it, it's probably already too late."
Which leads me to an idea: classify crypto as a casino.
But only bitcoin bidders need to admit that they love lording their “smarts” over others? Seems like you are doing it yourself.
AFAIK, the original American Dream was getting rich through smart work and entrepreneurship.
Not winning the lottery.
What is the 1% you think aren't scams?
Or perhaps every single one has a core of 1% sincere intention at its heart. After all, you can rather confidently say you have a receipt.
Money laundering. The one use case where NFTs are actually effective.
Holy projection batman. I agree that much of crypto is rampant speculation, but pretty much all of the legitimate uses of crypto is done in stable coins. People don't have money sitting in tether because they wanted to get rich.
I’m sorry, but it’s worse than that. Whenever I’ve said “Tether is a scam waiting to blow up, and the evidence is obvious”, none of my smart peers had anything to say, either.
The BTC price is hells high by this fake USD money printer.
At least people are collectively waking up.
Brrrr.
I mean there are also other stories; an acquaintance (he invested in my business with cash in 2018) got out end 2017 with around 60m$ in cash; he was a waiter making minimum wage who borrowed 50k$ from his family who remortgaged their house (not rich people but at least house owners) in 2014 and gambled his families future and accidentally (he was a real believer, but the 'business scams' around blockchain made him a non-believer) gambled right. It's a weird casino.
Maybe it is my circle (but I read it on reddit all the time the past 10 years though) but the financially illiterate seem far more likely to 'invest' with borrowed money, do not diversify and put 'everything on red'/all-in kind of thing and then don't know what to do when that goes wrong (lie to their spouses and kids about it). An senior sales guy of my (then) company invested ALL his money and borrowed more (totaling many millions) in a Dutch web stock (worldonline) and lost everything; his wife, son, house, cars; basically life.
As in, it's easy to be the best in your local club, but it's a real wake-up call when you try out at a regional.
Terra certainly has an element of complicated financial dynamics behind it such that people who know a little--but not a not--may think it's the greatest idea since sliced bread, and get eaten by the professionals. I agree with you there.
But a lot of the crypto ecosystem seems to be much more mundane than that. As far as I can tell, there isn't any financial wizardry behind NFTs; they're just a sort of weird social phenomena (is it a game? is it a market? is it sports betting?) where you can buy a thing at a price that has no basis in reality except insofar as someone else might buy the thing at an even higher price. I think that many--most?--people "investing" in NFTs realize and embrace the greater fool theory.
But, importantly, it seems to me that a random yahoo might actually be better able to predict when the gravy train will stop than an elite trader. So in some sense, it's quite egalitarian (if also stupid)!
The Luna "automatic peg" stuff is genuinely clever, but with genuinely surprising implications (at least for me, a casual observer/layperson) for dynamic instability.
But yes, I agree with you; they will be taking most the winnings because it's their job. That doesn't mean you cannot make money as an amateur. The real naive people can just send their money directly to the Blackrock bank account; saves a lot of stress.
If your luna stop loss was done in UST, you are also effed, even if you took the precaution of stop loss, because the "stable"coin dipped. Not saying that this was "safe" to do, but there are surely people out there who did this and got screwed, and I guess that would feel terrible.
Absolutely; there are proud whales saying they lost millions and laughing (not sure why) but I am very sorry for the people who lost a few k$ and now are in deep shit because they didn’t understand what they were doing. The ‘how can this be; I will get my money back right?’ type of thing.
A lot of crypto grifters (and even mainstream celebrities) have been actively encouraging these people to sink literally all their capital in coins or NFTs with unrealistic promises and FOMO. They did this because they knew it would work and drive up prices enough for them to be able to cash out by dumping their worthless void money on the unwashed masses.
Let’s be real, much of the market activity is money laundering, ransomware and other payoffs, and Chinese people bypassing currency controls.
It’s no coincidence that China cracked down on miners and the price dropped a few months ago. It’s plain as day now that with Russia being removed from the internet and most markets, buy-side demand for crypto is sinking.
First movers want to sound and convince others they are right and “now” is the right time to step in.
Most of it can be debunked if you had a good economy course that tells you how value is created.
Unfortunately, reality is a harsh mistress.
Now they might find some new investors, but it will only delay the inevitable.
Sounds like a classical pump-and-dump scheme.
Also known as "please continue holding the bag".
See Reddit's "apecoin" subreddit, which had two suicide threats yesterday.
Outside NFTs? C'mon. Signed JSON blobs with a URL you pay for? All equally worthless.
Let's not "my god is better than your god" this.
Why would NFTs be worth anything more than the digital tulip bulbs of cryptocurrencies? NFTs are just as worthless IMHO.
NFTs are a bit like celebrity signatures. They are worth what someone will pay. If a celebrity verifiably digitally signs something and they only do it once, that is worth something to some people as a collectible. It is not worthless as long as someone is willing to pay something. And, like other collectibles the market can have huge swings and sometimes never recover (like all my baseball cards lol).
For one thing, they're by definition tied to a shitty blockchain and you have to deal with any potential bullshit affecting said chain including fees, slow transactions, potential scams, etc. For another, they're not really an object, just a bit of json pointing likely pointing towards a flat image hosted somewhere else (that anyone can freely access via the link). Sure, they enjoyed a brief popularity and lots of media attention, but already the NFT marketplace seems to be waking up to the reality that most of these "investments" will never turn a profit. And that's the real issue I see: most of these purchases were not someone who wanted to collect something, they were made by someone who wanted to invest in an asset that would later be worth something. And so the actual value as a "collectible" has been inflated and is due for a huge crash, which is already happening.
I know some are meant to carry benefits towards the holder, like exclusive access to X service or community... that is a small minority currently though, and many of those benefits are shaping up to be just empty promises, and even then an NFT seems like a poor vehicle for systems that could have been done better without any "decentralization" or crypto integration.
NFTs are worth nothing to me, but so are celebrity signatures. That doesn't mean they are generally worthless b/c people collect all sorts of stuff.
Mobile games have taken this much further, with people buying fungible tokens for hundreds of dollars for the enjoyment they get, though this has become questionable as more of the game is engineered towards feeding an addiction which will cause players to pay more for their enjoyment.
The issue is the approximate cap on this value. Even by the inflated standards of whales paying for mobile games, we still see a cap of value around $1,000s for a month of value. Thus an NFT that provides value in a similar ecosystem should be able to max out at a similar evaluation, assuming it is tied to a system with as much investment in the fun as the big hit mobile games (which is often quite a lot of investment compared to what any single player, even whale, is spending).
We see NFTs going for much more than that in systems that have far less investment in being enjoyable, which I think can be contributed to people investing to get rich by selling at an even higher price.
In conclusion, I think that NFTs can have some inherent value, as much as fungible tokens in a game can, but that such value would be far below where the market currently is. Someone should only spend as much on NFTs when the enjoyment they get from spending on NFTs matches the enjoyment that similar amounts of money would bring from their other hobbies.
One of the big appeals from crypto people is essentially “all money is bullshit, so buy my bullshit”. The even nuttier people would position Bitcoin as gold.
It's because they know. I think everybody knows that crypto is a bubble. I think everybody believes everyone else that buys into it is dumb, financially illiterate, whatever. The crypto market has been propped up and boosted by an influx of people like that, each one knowing it's a bubble, believing everyone else is an idiot... but still wanting a slice of the pie, just in case there's another big wave coming and they will make it rich themselves. It's an interesting study in idk, doublethink? Self-delusion? Wishful thinking?
I lauched at friends of my fatherinlaw back in 2018 when they were buying bitcoin at 15k. Obviously it popped.
Today it's down 50% on ATH, but it's still more than double it's 2018 bubble level.
If you meant “in the future it may be again more than double its 2018 bubble level” you could have phrased it more clearly.
The 2018 peak was above 19k, by the way.
Today it will buy you €96, ¥13000, CHF100, £82
Not a great deal of movement
Is BTC any more greater fool than USD? If so, why do you believe so?
Source: savings accounts.
> It's because they know. I think everybody knows that crypto is a bubble.
You're conflating 2 different things. Your parent poster was talking about Tether specificly and why it's a scam. Whether the whole asset class is in a bubble or not is a whole different discussion.
Six years ago daily usdt volumes would not break 3 percent of bitcoin trade volume. Now they routinely break three hundred percent. It is an indisputable scam and needs the flush it so richly deserves. And I say this as somebody pro crypto who honestly wants to see legitimate crypto do what it can for the world. Transparently manipulating this market the way it has for so long now is not doing that. We need real prices.
There was a very brief period when bitcoin might have been the start of such a thing. When companies were adding support for it, and people were spending 200+ bitcoin on pizza, actually doing useful things like transferring money internationally, etc.
But these days? It's all speculation, gambling, and HODLing to the moon.
Maybe in the future we'll have a cryptocurrency which is actually usable as a currency, spent, and being in circulation, not being mined and hoarded by people who expect 1000000% returns.
Constant booms, busts, and panics. The period of the most financial instability in history occurred under the gold standard.
A dollar is X milli-ounces of gold, a Pound Stirling is Y milli-ounces.
They are effectively pegged at an X:Y ratio. But currency pegging has issues in practice, with Governments only able to keep it stable within certain limits. Outside those limits bad things will happen if you don't update the peg ratio. But when using a gold standard, if you have to adjust how much gold your unit of currency is worth, it makes people upset. If you make a dollar worth less gold people with dollars get quite upset. Also if people expect such a redenomination will be occuring, it can cause on run on the gold reserves.
Meanwhile, if you make a dollar worth more gold, you piss off anybody holding gold.
The changing of the ratio is even worse if you are using precious metal coinage that have the specified amount of gold (or silver, for the silver-standard) in them. If the ratio needs to change, now you have all this money with a face value, precious metal content mismatch.
And all this is on top of the fact by using the gold standard, the rate of gold mining can heavily impact the economy.
Imagine a world of 100 people and 100 dollars.
If the population doubles, and the 100 dollars remains fixed, the value of the dollar has increased.
If more dollars are not printed to maintain some inflation, people will slow spending hoping for 300 people the next year.
Now, in the case of BTC, it’s not global population that matters, but the population of interested users, which could go from 10,000 to 100,000,000 in months. If BTC can’t be mined fast enough to maintain a balance of coins/users as interest skyrockets, it is, by definition, deflationary.
I have heard the argument that deflation is just an unthinkable disaster for my entire life but I'm not convinced, rather it seems like a convenient excuse for countries to print their way out of budgetary problems.
That's the key. With a deflationary currency you want to keep the money, but need to buy goods. With an inflationary currency you want to buy the goods, so you only keep as much money as you need. This means that an inflationary market has shorter dependency chains, less disruptions (because value is more easily predictable) and generally runs more efficiently. Deflationary value incentivizes consuming less; inflationary value incentivizes consuming more. This is why economies grow and produce more value.
Of course this can be overdone by having an inflation that's so fast that deep production chains become impossible to manage, so you generally want inflation that's low enough that investment-based value gain is not affected, but high enough that money is not a viable investment vehicle.
Remember that money is what you have instead of something useful.
edit: For instance, if you have hyperinflation, you cannot buy a fabrication machine for your factory, because the monetary value of the machine grows faster than your ability to save money. The best use of money is always consumptively spending it immediately. This is also inefficient. So you want to balance between those two problems.
This might be true for food, but a lot of our economy is based on investments and things we don't strictly need. Why would I give money to a startup if I can simply leave it on my bank account and have a guaranteed return?
> Conversely in in an inflating currency scenario yes I might spend the money sooner than I would otherwise, but then in the future I won't be able to spend it again, why is it so much better that I buy today instead of tomorrow?
Because it keeps the money in circulation. You might spend the money, but that money then gets to a business. This business also doesn't want money lying around, so they might, for example, build something. Which gives the money to a building company. Which then gives the money back to the worker. That's a lot of movement and value creation. Also, you really want to spend or invest the money sooner, since you won't get as much for your money if you buy something tomorrow instead. With deflation, this whole reasoning is reversed - why would you spend any more money than necessary, if you can buy much more with it tomorrow? You wouldn't and this kills the economy.
The only thing it's useful for is financial crime though - if your problem is just making a payment you can do it in dollars relatively easily and safely.
Transferring money from the EU to UK, or EU to USA, Peru, or Canada get more complicated and expensive though. Those are the kind of transfers I had in mind.
There are transferwise, and similar services, but even so it's not as cheap as it should/could be.
I was visiting Montreal from the US a couple decades ago, and I wanted to exchange some US dollars for Canadian, and in the financial center, I found five different exchanges with five different rates. I had to walk about six blocks total to hit them all, but the difference between the lowest and highest was significant.
Why do you need to convert currency when transferring to someone in another country in the first place? Because the banking infrastructure in that country is denominated in their currency. Because their bank account only permits them to hold balances in that currency. And because only funds in that currency are guaranteed by the banking laws in that country.
If it weren’t for that, currency conversions could be ignored! If everyone in the world had bank accounts that could handle euros, say, you could transfer funds globally; people could make purchases by transferring euros, etc etc.
In fact there’s not a lot stopping you from doing that. You can have an account denominated in whatever currency you like. Provided you don’t care about things like deposit protection.
And that’s all Bitcoin and other crypto really add to the mix - a uniformly available currency for denominating non-deposit-protected balances.
Saying someone committed a financial crime depending on jurisdiction can be entirely different things.
And to be frank, I don't buy that financial Total Information Awareness is necessarily a good thing for a society to have.
Privacy is only useful for crime?
And indeed, digital fiat is used in production all the time and very useful.
So we know USD is a scam and manipulated heavily. Learn about The Fed..
> BTC
And here we have an alternative. This is one of the primary reasons why BTC is so important.
Sunday I was watching Formula 1.
Crypto.com Miami GP was the name of the event, starting straight full of crypto.com ads.
Watching Inter vs Juventus Italian Cup final: crypto.com event sponsor, with Inter sponsoring Inter fan tokens.
It's interesting how desperately crypto space needs $ and euros.
pretty clutch on crypto.com's cringy part, to name themselves crypto dot com. its like they looked at all the people confusing any random bitcoin servicing company for "bitcoin" and was like "you know what would be better than arguing on hackernews about reality? just helping keep confusing them for fun and profit!"
one exchange, a highly lucrative one, bought a bunch of sports sponsorships, due to the fact that they already made a bunch of money, and then advertises itself, like every other company with vertically integrated ad space does.
Yes they do. But for reasons other than that. They also typically have extremely poor risk management (or are completely oblivious to it), and more importantly, they are buying a financial instrument they don’t even understand.
Ponder that for a while.
Does the Constitution mention public schools at all? No. Ponder that for a while.
You know how many people listened to me? None of the people who asked me for advice, and got the above advice indicated in any way that it would keep them away. There was a lot of greed pushing the clueless into poor choices. So now who do we blame?
Honestly there’s enough to go around.
> they don't deserve to lose their money
Do you not believe that people should be responsible for their actions?
It's sad when people make decisions that lead to them losing money. But that's part of freedom: the freedom to fail.
Only 13% of the US population holds student debt, and 80% of student debt is held by earners in the upper 20% of income. But suddenly, we are supposed to cancel all that debt. ?????
Same thing with the market crash in 2008. Oh, we have to bail out all those banks because otherwise pension funds will lose value. Not close completely, but lose value. So a bunch of people with no hope of ever having a pension have to be taxed to bail out existing pensions (in effect). And then AIG having the gall, after effectively failing, and only being propped up by Federal dollars, complaining ten years after that the government unfairly held back some of their profits because the government backing came with stock holdings to back the loan, and AIG had to buy the stock back.
So yeah, Crypto is an issue, but the major banks are also an issue, and people that are stupid (or greedy) about money are an issue.
People who engage in this stuff get very little sympathy from me. They were complicit in an obvious lie because they thought they’d make some easy money.
To the extent that Tether is anywhere, it's in notorious financial law evasion island Grand Cayman.
It's already illegal to supply overseas gambling services to Americans (Pokerstars). Quite a lot of the crypto world would arguably be ruled illegal under existing law if it was prosecuted before an American court - or a British one, or many other jurisdictions. It's just that there's so much of it, it moves so fast, and has enough legitimate-looking political cover that it's escaped so far.
Here's former UK minister Matt Hancock, for example: https://www.cityam.com/my-mission-is-to-make-the-uk-love-cry...
It's not perfect, but I think a ban can be very effective.
Also, I'm tired of hearing cryptocurrency-related stories at social events and in podcasts. If it were illegal, I believe people would be more reluctant in spreading these stories.
Because what we really need is MORE LAWS and more power for the government!! Think of the children!!
The latter are not financially illiterate; they just thought (incorrectly) that they could time the scam better than the other little guys. I have correspondingly less sympathy for them.
I'm a consumer of tether. I know the risks, and I take a calculated risk in using it for some applications. I perceive almost everything in the space as an experiment, and I'm willing to run that experiment. I personally believe that my sentiment is common among those who use and hold crypto assets. Cryptocurrencies are widely perceived as experimental and subject to large unexpected rice declines, hacks and other risks. That goes for stablecoins too.
I don't want you to forcibly prevent people from making any offer they want to me. By doing so, you are violating my right to free association, and assuming you know better than me what's best for me. I am not a child.
Maybe we can give people an option to suspend their rights as free citizens, and subject themselves to your political camp's centralized control, and leave every one else alone to decide for themselves, in accordance with the basic principles of liberal democracy. Is that a fair compromise, or are you going to presume large sections of your fellow citizens are not only financially illiterate, but also are too poor in judgment to realize they are better off under the control of people like you?
> These assholes need to be prosecuted, fined and put to jail if necessary
Who gets put in jail when assholes running a country swindle their people's currency and the peg slips or otherwise they steal from the social wealth of the nation?
This is victim blaming. Nobody deserves to be exploited, robbed or otherwise for any reason.
When former world leaders are turning up and crypto conferences and the industry remains largely unregulated, then can you really blame people for investing?
Yes, you can. You don't have to dig very deep into the crypto world to realize that a lot if not most of the participants have are not plain ol' honest folks making a big ol' mistake giving their hard-earned savings to a slick-talking salesman. They are conscious participants in what they know to be a get-rich quick scheme. They know it is shady, and they don't care, because they think they're going to get out before it crashes. They're motivated by greed, not innocence.
You can recognize this and still support regulation of the industry. One of the big reasons you need regulation is to protect people from their own stupid greed.
What do you think the slick-talking salesman was peddling back in the day?
Not if it was investing. But they are not investing. Investing requires restraint, calculated risk-taking, and understanding of what it is exactly that you're buying.
"yolo all in on Terra" is not investing. It's gambling.
Would you feel sorry for someone who put his entire monthly salary on a single spin of a slot machine? I certainly wouldn't.
Thr only way to do this effectively is blanket regulation on all cryptocurrency, as otherwise you'd end up with an endless cat and mouse game chasing new coins people use to trick people into entering the market and exchanging entrycoins for the latest scamcoins.
This is all pretty terrible in my opinion, because cryptocurrency could've been so much better. Sadly, the idealists who wanted an independent currency were drowned out by the ruthless speculators who are only in it for their personal profits.
There are real victims, but the people dismissing those who constantly warned them, they're not victims, they're idiots.
75 cents on the dollar were recovered. When a crypto scam finally gets pulled off, the suckers get closer to 0 cents on the dollar.
They’ll listen to you next time, won’t they?
Obviously not.
The weird thing about having been on the internet so long is how nobody listens any more - for any idea, no matter how bad, you can find a community built around it, defending it against outsiders. A million micro-cults.
It wouldn't be so bad if there weren't serious negative externalities to the rest of us from this.
No, but they won’t have the capital to spawn another drain on our economy either.
Well they tried to exploit, rob or otherwise me, that is, getting money from thin air without creating any value. How is that fair in any moral system?
(That wasn't what GP said tho.)
It's like if you burn your money in a Las Vegas casino.
I’m not saying people getting suckered aren’t ultimately responsible for their actions, but at the same time just like a drug addiction, an objective and problem solving perspective is more productive than just judging that person for simply being weak, stupid, gullible, greedy etc.
Gambling is not an addiction. Gambling might become an addiction for some people, like many other things might.
The vast majority of people who 'invested' in crypto (or who go to Las Vegas for that matter) are not addicted. They think it's a way to get rich quick, and some did. They may also not have done their homework.
Sometimes when people make bad decisions and lose there simply isn't anyone else to blame. That's life.
You need to watch "Being Ned Devine" if you have never seen it.
Aren't there some fairly good reasons for finance to be highly regulated?
So what you're saying is people shouldn't expect to be able to massively multiply their wealth, but that directly contradicts the narrative that "anyone can make it" instead of the wealth and opportunities you're born into determining the likely upper limit of what you can hope for.
I'm not disagreeing, but it's absurd to condemn people for falling for "get rich quick" schemes (and as far as those go 20% is unusually low) when the entire society is built around maintaining the lie that getting rich quick is possible as long as you "work smart" (i.e. don't rely on your own physical labor to make money).
It depends on what we understand by "anyone can make it". I would argue that, if understood in terms of "anyone can [become orders of magnitude richer just by picking the right investments]" then that indeed is a narrative that is harmful and should be contradicted. Yes, of course outliers happen, and anyone may become stupidly rich from a low income if they're lucky. That doesn't mean it's a good idea to try, and people on an individual level should be discouraged from taking such huge risks unless they are very consciously aware of the consequences of their likely failure.
The other side of the issue is a systemic one. If a society finds it traumatic to accept that there is a likely upper limit as to what people can hope for based on their wealth and opportunities at birth, there is deeper problem. The problem may be cultural in that a society's members are too instilled with self-centred and unrealistic expectations (i.e. a culture of temporarily embarrassed millionaires), or it may be a deeper economic issue regarding inequality of incomes that makes surviving at certain levels of income without any hope of the smallest improvement leads to greater desperation and dreams of "breaking big". It may be a mix of both.
Coming back to "anyone can make it", it should be defended, but in the sense of "anyone can [reach a level of economic security to live a fulfilling life]". That however is not a principle to encourage the individual through dire straits. Rather, it is a principle that should guide public policy and cultural attitudes as a whole, so as not to have a society like I described earlier. In such a society the population won't feel the need take unrealistic risks only for a chance to get out of a rut or satisfy cultural fantasies. That's not to say it won't happen, anyone can be an outlier.
Maybe the part of society that contains the crypto enthusiasts. Every part of society with a shred of financial experience has been pointing out that 20% is really really high compared to the risk free interest rate. Of course, pointing out that something is unsafe will not make you popular with the people dreaming of getting rich.
Are you saying that the poor are just destined to remain poor?
I'm not saying the narrative they're told is correct, I'm saying the wealth disparities in society are undesirable and if just telling poor people to pull themselves out of poverty is not viable, we need other solutions to address those disparities.
Like you I think large wealth disparities in society are undesirable, but if those come from the way society is set up then society is what is going to have to change. If you really want to change society then set up a movement and convince large groups of people about your viewpoint, but be prepared for hostility from anyone with a vested interest in the status quo.
Or a desperate person.
I think there is more nuance that this. People have been burned by many 'safe' investments over the years (housing, stocks) that they incorrectly view the risk profile as similar so look for higher returns. Much has been written on how we under appreciate actual risk, especially in 'safe' investments.
There's also some YOLO here, but in a calculated way. A safe investment making 1% still means the wealth gap is widening and that person is still eating ramen. Why not swing for the fences, otherwise it doesn't matter anyway.
I've got extremely financially literate friends who are adamant that 30-year variable rate mortgages are 0 risk.
It's not that they don't assess the risk, but the excuses are always "Inflation will eat it away", "There's no way EURIBOR can climb so high I won't be able to afford payments" and "Negative equity? In this housing market?"
Makes me shiver. Especially now that 12 Month EURIBOR rate is above 0%.
Sure, a mortgage is 0 risk if you're buying yourself a home for the next 30 years AND have the cash to buy it outright. If you're buying a financial product, perhaps you should reconsider, because it shouldn't be both. Your primary residence is not an investment.
Buying high and selling low is a sure path to being poor.
So many people just lack the basic literacy to recognize when something sounds too good to be true. And in the crypto market it's worse than that, because all of the memes and in-group behavior functions to drown out warranted skepticism.
Surely you just mint the tokens in exchange for dollars, and then put ~50% of the dollars in zero risk investments (some form of treasury bonds), and then take the 0.5-1% interest per year as your revenue. Tether currently has $81b marketcap so you could be making $400-800m per year doing basically nothing?
It also takes a long time to get this going and there are moderately high costs to a minimally viable financial entity (reporting, compliance). A few years ago they only had a couple billion which makes it hard.
And all of that sets aside the allegation that tether has been printing tethers it’s entire life — that it’s basically never been fully backed by dollars.
Oo, sign me up for some "bunny conjuring", please!
Alternately, "sunny wandering" and "honey squandering" both sound like they could be delightful ways to pass an afternoon. But I can tell you right now that "funny pondering" is hella overrated.
Step 1: find someone willing to give you dollars in exchange for a token that's guaranteed to be worth something between 0 and 1 dollars.
Step 2: find a bank willing to let you be a money transmitter for millions of anonymous pseudo-dollars whose owner you have no idea of, setting off every single money laundering alarm in the building.
This was the biggest red flag behind Tether to me, where we are talking about not millions but billions of pseudo-dollars.
The risk profile is beyond anything reasonable that a bank could or would accept. Tether minting $2bn in a week means $2bn cash inflows from mostly people that the bank probably doesn't know, all for what can only be a negligible fee.
> again - who is on the CP desk at Tether? Who is their account manager at Goldman Sachs? Who do they talk to at, say, the GE corporate treasury? Commercial paper is a short term money market that has to be managed and rolled - you can't just buy and hold the bonds anonymously.
Dan's argument is that the alleged size of their holding implies doing a lot of business, which should be being done by humans making phone calls to each other, and the gossip network doesn't seem to be able to locate any such people. Given that there are market participants whose job is e.g. "today I need to sell $100m of three month commercial debt to someone, time to start calling", one of them ought to know who's running the Tether business.
That nobody can see them in the market is a red flag.
* He was the Deputy CEO according to the interview and his LinkedIn (though there was all sorts of hilarity there, like claiming he graduated HEC Lausanne at 15, and becoming a Professor of Finance somewhere in Lebanon while running multiple funds all over. But after the disastrous interview, he was quickly deleted from the bank's website. And then re-added when people started questioning that. And then removed again when the bank hurried to "revamp" their website (to a WordPress installation, no less, and gaining 15 years of experience in the process).
Given the space and the degree to which they refuse to reveal normal financial information, I assume they’re either directly involved in fraud/money laundering or are treating other cryptocurrency companies’ debt as far more stable than it actually is. This is such a common criticism and there’s no reason why you’d keep it this secretive if the news was good.
You do exactly this, but you don't proof it to anybody. Then there is constant doubt and the price can fall down a bit, e.g. to 0.97.
Then, you buy back your stable coins and you make an additional nice profit.
As long as there is no other more trusted stable coin demand will increase again and you will regain your market share.
Literally the only new thing about blockchains is an ecologically destructive brute-force solution to the byzantine generals problem. However, it turns out nobody except CS students cares much about that, so they have to dress it up with cartoon apes and web3 buzzwords.
The US is actually building their own similar service (based directly on UK FPS), which will be available...eventually https://www.theclearinghouse.org/payment-systems/rtp/institu...
Tether have a great business model but seem to spend 90% of their time falsifying reserves instead. It certainly gives the impression they're planning on taking the capital rather than interest. They're already in breach of the NYAG agreement, with three+ more cases pending.
It actually seems like a great project for e.g. Fidelity or Vanguard to set up a mutual fund that doesn't pay interest. With the name recognition it would be immediate #1 stablecoin assuming they offered the same level of audit scrutiny and reserves breakdown as their other products (i.e. 100x anything offered in the cryptocurrency space currently).
You're assuming "bodging" wasn't part of the plan all along
Btw, not only sovereign nations have these issues. Your bank also tries to maintain a peg between one dollar in its account books and one dollar in government money. Similar (but more roundabout) for things like Amazon gift cards.
For a country without an established, credible central bank a currency board can be a big economic improvement over trying to issue their own native fiat currency.
(Even better from an economic point of view is for the country not to issue a government currency at all, but let the market handle that.
When the government is particularly inept, you can see the (black) market trying to fix currency issues even when the government actively tries to prevent that.)
Let's say you're a hedge fund looking for a one-way bet that will profit massively in a crypto crash (that stablecoins can't survive) and has no downside except carrying costs. Enter Tether, Terra, etc. Risk of loss at initial sale of 1, very low because tokens will not increase in value to 1.5 or 2. Profit potential? 100%. Everyone with a dash of creativity and a fund probably already is short these coins and has been for some time. "The Big Short" of 2022.
The former is really inconvenient, especially if you want to transfer money. The latter is only available to a select few companies.
Everything is else at most assets denominated in (= pegged to) USD.
Does your critique apply to all these other categories as well? Why or why not?
This suggests that we need to look into the engineering details of a building (or peg arrangement) to determine whether we can trust it, instead of just declaring all building (or all pegs) 'nonsense'.
If there's oak and pigeons involved, that doesn't change much---apart from being might inconvenient.
The problem algorithmic stable coins is that the backing is either non-existent or at best really suspect.
Tether is a bit better in that they at least claim to have real world backing, but they don't tell you what it is, so you can't trust it.
Btw, the backing for a token denominated in USD doesn't have to be USD.
Eg most banks back their deposits with all kinds of assets and bonds, not just physical cash (or balanced at the Fed).
Having a few reserves in USD on hand is important, but in the longer run it's more important that the worth of your backing assets is reliably higher than your liabilities. The difference between the two is your equity cushion.
Oh, is that all?
To have a zero-risk peg you need to have as much reserve currency as you have issued currency; if you issue 1e6 fun-bucks that are pegged at 1:1 with the USD, you need 1e6 dollars.
If your country has banks, and you allow those banks to engage in fractional reserve banking, and you make guarantees to depositors that you will make them whole no matter how terrifyingly bad those banks are at their job, then holding dollars at 1:1 is insufficient. And depending on what kind of reserve requirements you have, the multiplier can get very large very quickly.
If you allow commercial banks to operate, then, as they say, you can fuhgeddaboutit. No amount of assets backing your peg can possibly be sufficient. You can push the tail out further, but such guarantees will only make your commercial banks more aggressive and increase the systemic cost of a failed peg.
If you choose to issue sovereign debt in your pegged currency, or support pension funds for your citizens, or anything like that, then ... don't peg your currency. Issue your own sovereign currency and get yourself some nuclear weapons.
Yes, I am suggesting that fractional reserve banking is a good thing. You hold reserves for short-term convenience, so that in the normal course of business, you can redeem immediately on demand. You hold the rest of your balance sheet in different assets, so you can earn a return. (And you make contractual arrangements with your token holders that you have the option of taking your time to redeem, in return for a prohibitive interest rate. At least that's what happened historically in eg Scotland. This was called the 'option clause'.)
You are right that if your liabilities are in thing A, and your assets are in thing B, there's always a non-zero risks that the value of B might drop below the value of A. Even if at the moment, B is much more valuable than A.
You can make that risk pretty small. Small enough that it's comparable to eg the risk of all your computers being hacked, the risk of your CEO running away with bags of cash, the risk of the government just seizing your business, the risk of an asteroid impact hitting your cash vault, etc.
What makes you think this particular risk is special? It's just one of the risks holders of your liabilities take. I don't see how this particular risk should make banks more aggressive?
Btw, commercial banks (and other companies) in most countries are allowed to have liabilities in foreign currencies. Or liabilities in assets that are not currencies at all.
> If you choose to issue sovereign debt in your pegged currency, or support pension funds for your citizens, or anything like that, then ... don't peg your currency. Issue your own sovereign currency and get yourself some nuclear weapons.
Many countries get lower interest rates when issuing debt in a currency they don't control. The creditors weigh both default risk and inflation risk. It's not obvious to me why eliminating all default risk in favour of inflation risk would be an unambiguously good thing?
Before the USD became a full fiat currency (but was instead pegged to gold, silver or a combination of the two at various times), the US issued debt just fine.
Also keep in mind that even if a sovereign issues debt in a pegged currency or a foreign currency they don't control, they can just decide not to pay anyway. That's what Argentina did a few times.
Of course, your creditors won't like that. But they won't like excessive inflation either. Six of one, half a dozen of the other.
Though, the mess with TerraUSD has clearly knocked a bunch of people's confidence in Tether. I wouldn't be entirely surprised to see it crash.
Terra Luna was a slow antelope on the savanna.
Just as it has quickly every other time this has happened. It reconverges, unlike UST, because they actually redeem your Tether for dollars when you ask.
Free pizza on whoever is wrong.
You mean like the USD?
They invested $$$ and the company became insolvent?
Don't the investors loose?
Would you feel the same way about people who loose money to “I’m calling from Microsoft IT”-type scams?
For example, at Kraken the margin cost is currently typically 0.02% per 4 hours. This is not something you want to maintain while waiting for an event that could take years to materialize. And that's for modest leverage (up to 5x), I imagine it's even more expensive for the 100x leverage you were looking for.
https://support.kraken.com/hc/en-us/articles/206161568-What-...
If you meant that seriously, it’s extremely poor quality advice. Leverage is neither free nor cheap. And taking 100% leverage is obscenely risky. Your characterization of it as ‘risk free’ is the most dangerous part. At 100% leverage, small swings could lead to calls you simply cannot afford.
Any suggestion that such glitches could have been engineered by the exchanges who are closely connected to Tether is, of course, nothing but malicious slander.
I never thought I’d see it actually happen, and I’m kind of blown away I’m in the same thread. It’s actually possible for the hardcore believers to snap out of it, and that’s the unquestionably greatest thing I’ve heard in three long years. There is hope. I was genuinely starting to wonder.
Note that this isn’t personal and I had no idea who he was until five minutes ago. I just type some shit in the username box every time I sign up.
Welcome back buddy how’s it feel
And this doesn't only apply to crypto, look at how many countries with currency pegs can maintain that when their economy turns down, and then look at how many people actually seek to own the currency at that point rather than a currency backed by something (like a gigantic economy).