That's a view very much encouraged in the cryptocurrency culture, and in the day-trader culture that preceded it. That with smarts and a little luck, a guy can get the riches he was destined for. The people who fall for it of course never ask where the money is coming from, because if they did they'd figure out it was suckers like them.
So when they see an ad that says, "ITS YOUR CHANCE TO BUY THE MOST POWERFUL CRYPTO COIN" they don't ask why the chance is specifically theirs. They don't ask what "powerful" could mean for a currency. They don't ask who's trying to convince them, or why the convincer can't even punctuate a sentence. They say, "Yes! It's my chance, just like I know I deserve!" And then they put in their engagement ring fund or the house downpayment fund or the money they borrow from family.
And very shortly that money ends up in the pockets of assorted assholes, who are now better funded for their next scam.
At a larger scale, I'm not sure the difference with the NYSE or NASDAQ. I don't vote w/ any of the companies for which I own stock. I just hope I buy low and sell when it is much higher -- just the volumes are large enough that small players can't pump the value of the stock -- but reddit and TikTok has shown even this world can be gamed.
He is up on every new shit-coin, he spouts a little bit about the world changing proposition, he basically does it because "hes not missing out again".
His idea is to drop $100-$1000 as early as possible (like at the ICO or pre-buy whatever) and hope one of these things 100x'es.
Part of him knows this is a fools game, but he is "smarter" and still doesn't want to be left out yet again.
I don't know how many people remember it, but in the 1990s there was a fad for WWJD bracelets, with 10s of millions sold: https://www.mortaljourney.com/2010/11/1900-century/1990-tren...
In 1999 I met a guy who had missed out on a business opportunity around those. He had just bought into what he was sure was the next big thing: Y2K bracelets, which here stood for "Yield 2 King". He was sure that god was sending him this opportunity.
Even then I felt bad for him.
Companies can support higher valuations buy owning more stuff, if their market cap is lower than the stuff they own, then they’re clearly underpriced.
If a company starts paying out higher dividends due to higher profits, then their stock is worth more because otherwise the dividend repayment would trend towards zero (i.e. dividend payment per share ends up larger than the share price)
If a company is doing stock buybacks, then they’re using their profits to prop up the price of their shares.
But in all of these scenarios, the companies are producing profits, which are directly or indirectly used to pay for the increase is share value. Shitcoin on the other hand are zero sum, they produce no new value from their existence, they just store value and move it around a little bit.
Some degree of skill can be used to understand if a specific company is going to improve its situation long term via sound investments in new projects. You can look at companies stated goals and strategy and decide for yourself if those goals are valuable and if the strategy is viable. And thus make an educated call about future value (with appropriate error bars).
With shitcoins there’s nothing to analysis. They fundamentally don’t do anything. Speculating on shitcoins is just trying to guess what a disorganised mass is going to do in the future. There’s no reasonable way to gain any understanding of what their behaviour is going to be, and if it’s going to increase or decrease the value of the shitcoin, because it’s a disorganised mess.
Ultimately the value of a company present and future derived from the fact that it’s organised, and broadly predictable.
Shitcoin value isn’t driven by anything organised, or predictable.
Crypto forums use a lot of in-group language to communicate their shared belief of the crypto project (i.e. hodling, to the moon, etc., etc.) in order to demonstrate their belonging to the community and they summarily reject skeptics essentially as non-believers. It's a quasi-cult mentality but without a true individual leader. These forums then become echo chambers that serve two primary purposes: to continue purging skeptics and to repeat the crypto mantras over and over again without thinking critically. This is effective because it tends to attract people who may exhibit significant intelligence in other aspects of their lives. Where people really get into trouble is when they start thinking: "of course I'm too smart to get wrapped up in a dumb ponzi scheme, and this definitely isn't one."
This makes it really easy for the pump-and-dumpers to manipulate these people into making more and more risky crypto purchases.
Dear God, this really does sum up a lot of people running around trying to get rich nowadays.
There are also layers to the Ponzi scheme. The alt-coin is just the first one. Even if you cash out for a profit, you probably didn’t even sell it for fiat directly, but sold it for some “less risky” currency like Ethereum or Bitcoin. One might argue you’ve only moved from one a smaller Ponzi scheme to a larger one. But then again… trading across pools of risk is widely accepted as a method of generating wealth. So who are we to judge?
This reasoning worked a little better before the Fed raised its rates.
This is the case with all forms of gambling. I think that they know that the money is from others less fortunate. However, human nature seems to make us believe that somehow, we will be the lucky one.
None of that applies to the suckers who bought DOCK based on market manipulation, which is generally a crime. [1] This is more equivalent to Three-card Monte, [2] which may look like a fair game involving cards, but which also preys on the would-be smart.
I'll do the leg work to verify the claim if you can site any exchanges.
Edit: the video only got 40,000 views though. https://news.ycombinator.com/item?id=32068788
There’s a couple different angles with these coins. First, there’s plain old hype where regular people see XX% gains in a day and jump in. There’s also groups that decide ahead of time to do coordinated pumps, which helps feed into the hype. There’s also a LOT of bots that follow these trends and also ones that simply gamble by buying up some amount of a coin the instant it appears on Uniswap et al, with the assumption that it’ll probably pump at least a bit in the short term.
What do you need to have a daily traded volume of $1m? Lets find examples.
E.g. 1 - you need e.g. 1k people trading $1k
Is that unrealistic? I don't know. The world is a very big place with a lot of stupid people. But wait! all of these morons use stupid leverage. Many of these platforms give you 100x. Yes, really.
Here's a few more ways that you can get $1m daily:
e.g. 2 - 1k people putting up $10 with 100x leverage
e.g. 3 - 100 people putting up $100 with 100x leverage
Neither of these look unrealistic to me.
I'm old enough to have lived the .com bubble as an adult, and almost everybody knew/suspected it was a bubble, and that 95% of the business would fall at some point in the near future. But if you believed that it would last at least one more year, and you can squeeze a 20% profit, and you can do it leveraged 10x... it's just too tempting to many.
Fast forward 7 or so years, housing bubble, same tune: it was a main talking point, everybody knew it was a bubble and unsustainable, but very few predicted the burst to 2007 (and even the ones who did were the same that predicted it to 2004, 2005 and 2006). You are in 2004, everybody saying "this is a bubble" and waiting. In 2005 people still waiting looked like losers, while 2004 buyers laughed and I-told-you.
Nobody wants to be a loser, and some people should beat the market or get fired. Only way to beat the market? Ride the bubble. And the rational way to ride a known bubble is leveraged: you enter the market, profit heavily, and ideally exit (it almost never works). You know you cannot ride a bubble expecting it to rise forever, you know it's going to crash, so you need to enter and exit ASAP.
Or 2 people, who pass $1K "worth" of coin back and forth 1k times.
it's more efficiently, as you can replace the people with for loops.
My point was that wash trading isn't the only explanation.
The real question is why only this amount of wash trading and why everyone doesn’t do a billion.
You can't fool everyone all the time, but the transactions (volume etc) are likely intended to be realistic enough to fool some people sometimes.
So my explanation has more explanatory power than yours.
100x$100 is $10k no matter how much you lie that your shitcoin is worth 100x what people will pay for them. And that's diminishing your yield making it marginal whether you're matching your opportunity cost.
It's not worth 100x. You don't understand how leverage works, clearly.
I thought leverage was effectively borrowing on anticipated gains. So I would spend $100 to, get credit to the tune of $10k, then buy my crypto with that. But, here we're talking about people buying a coin and the _seller_ saying the coin is worth 100x and so skipping the step of using fractional reserve to 'create' the funds (the loan amount) to exchange for crypto and just going straight to a deceit.
With leverage there's a debt written to counter the credit, here that doesn't seem to be happening.
So, where am I misunderstand the situation here?
- Put $100 as deposit.
- They borrow you 10k to buy 100 shitcoins for $100 each (instead of 1 you can really afford), so 10k of shitcoins with the condition that if the coin price falls below $99 your position is liquidated and you lose all.
Note that there's no seller saying "the coin is worth X", it just trades at that price.
It's pretty simple.
They put in $10 to borrow 100x$10 to buy $1000 worth of the coin. If the coin price goes down 1%, the borrower is wiped out.
You don't need fractional reserves for leverage.
If that is all with the coin seller/creator then you're not actually borrowing the money they're just saying 'that $10 token you bought from me 1s ago is worth $1000, you're rich'; you bought $10 worth of coins, the market price is $10, there's no actual leverage involved it's just a deceit.
If the seller is taking the $10 you pay to a different institution, borrowing $1000, then buying the coins, then legitimately they can say it's $1000 of coins. It's still clearly a scheme. The company lending that money are morons in this case unless they are doing it knowing full well that they are going to need to pursue people for the debt.
This is a meaningless word salad.
You have an account with an exchange. Taking a position with leverage 100x just means that every time the instrument moves $1 up, your account goes $100 up, and when it moves $1 down, your account goes $100 down.
You just made me realize how much cash trading platform probably are making using leverage. That explain why they were so quick to add theses coins. I'm curious to know how they manage the risk though.
My understanding is that leverage is profitable to trading platforms, not because the fees are bigger, but because bigger leverage is "more fun" and so people trade more.
I don't know, you might be right.
Do you mean a percentage of the notional value?