What do you think of adding a low% of crypto allocation

[LateStarter]

Fwiw, I think your BTC point re FTX is cogent. I myself have been quite intrigued by the relative stability of both BTC and ETH since FTX's fall. Is its stability evidence that exchanges have little influence on BTC or ETH prices, and investors of those coins should now have little to fear? Are other exchanges propping up the prices, but they will fall after after other exchange collapses? Is some other factor propping up the prices, and if so, will they collapse or have they bottomed?

Why would you expect the FTX fiasco to detrimentally affect Bitcoin ?

At heart, from what we know so far, the FTX fraud revolved largely around 2 things:

1. Abuse of investors' trust in a 3rd party custodian (FTX)
2. The lamest type of 'shitcoin' (FTT) that can be created/inflated at will, at zero cost, by a single controlling party

Bitcoin was developed precisely to address the problems inherent in trusting 3rd parties and the centralised control of an easily inflated 'currency'. FTX has only emphasised the values of the Bitcoin project.

Some spillover contagion is to be expected but, from a broader perspective, this clear-out of rubbish is good for Bitcoin.

What do you think affects Bitcoin's price?

I'm just not bothered about short term price movements, especially those caused by external factors. So long as the security and integrity of the blockchain remains intact and the trend for improving tools and wider adoption continues, the future is bright for Bitcoin.

Can you think of any other 'shitcoins' that can be created/inflated at will, at zero cost, by a single controlling party that are widely used to buy/sell Bitcoin (and whose biggest customer was SBF's Alameda)?

Probably, but again I don't think it matters in the broad scheme of things. These things can cause shocks that whip the price around for a while, but so what ? It's just noise.

I think there are two competing narratives that are inherently at odds. 1. Bitcoin is an investment vehicle to turn $1 into many dollars in the future. I think it's pretty self-evident, the lion's share of Bitcoin (and "crypto" generally) participants believe this. And 2. That Bitcoin is a peer to peer network for transferring value in a decentralized way.

I find 2 to be pretty undeniably true. It's neat in its mechanics. Kind of cute as a proof of concept. But wholly uninteresting as more than a toy project some clever person (people?) made 10+ years ago.

Regardless of what I believe about the investment thing, it *clearly* matters a great deal what popular opinion is about crypto as an investment vehicle. I hope I'm not sticking my neck out too far to suggest: FTX's collapse isn't a trust-building event for the space, generally. Millions of people lost money in this. And Binance's future is looking fairly uncertain right now, as the US Dept of Justice is preparing charges against them for, among other things, money laundering. Binance's own defense attorneys response to the DoJ was basically "Prosecute us and the crypto industry will collapse".

From: https://www.reuters.com/markets/us/us-justice-dept-is-split-over-charging-binance-crypto-world-falters-sources-2022-12-12/

Binance's defense attorneys at U.S. law firm Gibson Dunn have held meetings in recent months with Justice Department officials, the four people said. Among Binance's arguments: A criminal prosecution would wreak havoc on a crypto market already in a prolonged downturn. The discussions included potential plea deals, according to three of the sources.

I predict Bitcoin's price will just continues to drop—maybe quickly, maybe slowly—from here out. The mania is over. Enough truth has been revealed to hopefully prevent any further massive thoughtless buy-ins into the space.

I predict: 99.9% crypto tokens will zero and most exchanges will fail - over the next few years ? decade ? $Billions will be lost, and millions will be hurt, and lawsuits and scandals will abound -  simply because it's nearly all make-a-quick-buck scammy rubbish. And: despite some collateral-damage knocks along the way, Bitcoin will survive and thrive.

[the_gastropod]

Hah. Then sounds like we almost entirely agree. There are an estimated 21,844 cryptocurrencies in the wild. I think 21,844 are worthless silly scams that'll go to 0. You think 21,843 of them will. Close 'nuff for me!

[LateStarter]

Bitcoin was developed precisely to address the problems inherent in trusting 3rd parties and the centralised control of an easily inflated 'currency'. FTX has only emphasised the values of the Bitcoin project.

Some spillover contagion is to be expected but, from a broader perspective, this clear-out of rubbish is good for Bitcoin.

I think it is worthwhile to look at why so many people used the exchanges in the first place, especially given their extremely sketchy outward appearance.  One reason is that on some level you need some sort of brokerage to match up buyers and sellers.   On the next level, if you routinely buy or sell it is a lot easier of the crypto is kept on the exchange, just like a bank holds your regular money or a stock broker holds your stocks.   And finally, some people simply don't have the knowledge or skills to self-custody. 

So I don't see how not having functional exchanges is good for Bitcoin because it just makes adoption that much harder.  And while it is good they are locking up the most blatant criminals, there is nothing to prevent them from being replaced by other criminals.

Yeah, I agree. Good, reliable, honest, trustworthy exchanges / brokers would be nice. In the meantime, be selective and don't leave funds on there any longer than necessary.

I say this is good for Bitcoin because:

• FTX should make people wary of exchanges and leaving funds on them
• FTT should make people wary of centralised thin-air coins

[LateStarter]

Hah. Then sounds like we almost entirely agree. There are an estimated 21,844 cryptocurrencies in the wild. I think 21,844 are worthless silly scams that'll go to 0. You think 21,843 of them will. Close 'nuff for me!

Yup. We're 99.99% on the same page  :-)

[MustacheAndaHalf]

Telecaster, ChpBstrd - In the U.S., wash trades are illegal.  The #2 and #3 crypto exchanges (Coinbase, Kraken) are both registered in the US.  Why does the price of Bitcoin on US based exchanges closely match the price on non-US exchanges?
https://coinmarketcap.com/currencies/bitcoin/markets/

int'l Binance (USDT) ... 16,707.82
US Coinbase (USDT) ... 16,711.13
US Coinbase (USD) ... $16,712.11
int'l KuCoin (USDT) ... $16,713.02
int'l Bitfinex (USD) ... $16,731.00
US Kraken (USDT) ... $16,711.42

And more specifically, do you have data that shows what you claim?  The article talked of wash sales to inflate volume - but do you have evidence of price manipulation in the current price of Bitcoin?

When I see Bitcoin moving with other risky assets, that suggest something responding to financial conditions - not scammers.  For example, comparing TQQQ and BITO this year - both were hit by high inflation ("risk off" environment).  They have moved very close, like you would expect of people selling their riskiest investments.

If Bitcoin's resistence in falling below $40,000 is evidence of a scam, would you also claim the S&P 500 is a scam?  The S&P 500 ETF "SPY" kept refusing to fall below $390 in the past 30 days.  Investors in both Bitcoin and the S&P 500 have lost money this year - so are both scams?    (Obviously I don't believe that, but it helps to apply the same arguments aimed at Bitcoin to something like the S&P 500, to demonstrate the faulty logic)

[Tigerpine]

Wash trades are not illegal per se.  What is illegal is using a loss from a wash sale to made a deduction on taxes.
https://www.schwab.com/learn/story/primer-on-wash-sales

[ChpBstrd]

Hah. Then sounds like we almost entirely agree. There are an estimated 21,844 cryptocurrencies in the wild. I think 21,844 are worthless silly scams that'll go to 0. You think 21,843 of them will. Close 'nuff for me!

Yup. We're 99.99% on the same page  :-)

This reminds me of the joke about atheists and religious people: Out of 20,000 gods, both agree 19,999 of them don't exist! So not a big difference, right!

Telecaster, ChpBstrd - In the U.S., wash trades are illegal.  The #2 and #3 crypto exchanges (Coinbase, Kraken) are both registered in the US.  Why does the price of Bitcoin on US based exchanges closely match the price on non-US exchanges?....

And more specifically, do you have data that shows what you claim?  The article talked of wash sales to inflate volume - but do you have evidence of price manipulation in the current price of Bitcoin?

The prices match across exchanges because arbitrage is easy and trading costs are low enough. I.e. any person on at least two exchanges could buy/sell to arbitrage any difference. The best illustration is forex markets for actual currencies.

The price can go up and down even if exchanges or coin pump-and-dumpers are creating fake trades. Even the pump-and-dumpers have to sell sometime, and money is always moving from one hot thing to another, even if it is the ecosystem of pump-and-dumpers competing with each other. What would we accept as evidence of an artificially-propped-up market? A perfectly linear price trend? I'm not even sure how that outcome could be engineered even in my simplistic model.

But let's be honest. Cryptocurrency promoters and "helper" businesses should be considered guilty-until-proven-innocent at this point. We're well beyond the "few bad apples" argument, and getting into deeper questions about whether anything is safe in this apple barrel, or why we've been offered a barrel with so many poisoned apples in it in the first place. I challenge anyone to remain optimistic about the state of the crypto industry after 10 minutes on https://web3isgoinggreat.com/.

The people who thought FTX was legit because of all the other lemmings the million other users? They lost all their money. The people who used hundreds of other exchanges, wallets, and other services over the years lost all their money. There are literally stories of website operators disappearing into thin air with tens of millions of dollars in client money. Those who did their "due diligence" looking for negative press reports, weeding out services with anonymous owners, sticking with the most mainstream services, and reading the Twitter feed from the owner of their preferred helpers? Yea they got conned by FTX.

Now we're told to just use Binance, Kraken, or Coinbase, because they're legitimate, and it's like "how many times can I fall for the same scam?" Why could they not be run just like FTX? There's no way to audit them, and regulators seem to be unable to get over the definition of securities and interference from members of Congress who received donations from the industry.

 

[Telecaster]

Telecaster, ChpBstrd - In the U.S., wash trades are illegal.  The #2 and #3 crypto exchanges (Coinbase, Kraken) are both registered in the US.  Why does the price of Bitcoin on US based exchanges closely match the price on non-US exchanges?
https://coinmarketcap.com/currencies/bitcoin/markets/
<snip>

I can't prove anything of course, but I believe it to be the simplest explanation and is the best fit for what we know.  Wash trades are as old as dirt.  Individuals and organizations colluding to manipulate prices is also as old as dirt.   There is nothing novel that needs to be created here.   All you need are motivated individuals/organizations and a lightly regulated/non-regulated space--which we have in spaces--and it would be absolutely shocking if it wasn't happening.

And if you look at the charts for SPY and BTC, they don't look anything at all alike.   Over the last year, BTC has three clear plateaus.  SPY has no clear plateaus.  Charts themselves prove nothing, but the BTC chart looks really odd.  It doesn't look like charts for stocks at all. 

[Telecaster]

Wash trades are not illegal per se.  What is illegal is using a loss from a wash sale to made a deduction on taxes.
https://www.schwab.com/learn/story/primer-on-wash-sales

Unfortunately, we're talking about two different things with the same name.   Generically, a wash trade is any kind of fake trade.   What you're talking is what most people talk about and mean then they say wash trade.    In your example, you sold stock to someone else and bought it back.  In this case, we're talking about when the buyer and seller are the same entity, or perhaps two entities who are colluding.  That's illegal in the US for stocks.  I don't know about crypto. 

[Tigerpine]

Wash trades are not illegal per se.  What is illegal is using a loss from a wash sale to made a deduction on taxes.
https://www.schwab.com/learn/story/primer-on-wash-sales

Unfortunately, we're talking about two different things with the same name.   Generically, a wash trade is any kind of fake trade.   What you're talking is what most people talk about and mean then they say wash trade.    In your example, you sold stock to someone else and bought it back.  In this case, we're talking about when the buyer and seller are the same entity, or perhaps two entities who are colluding.  That's illegal in the US for stocks.  I don't know about crypto.

Yes, that is different from what I had in mind. 

[maizefolk]

The people who thought FTX was legit because of all the other lemmings the million other users? They lost all their money. The people who used hundreds of other exchanges, wallets, and other services over the years lost all their money. There are literally stories of website operators disappearing into thin air with tens of millions of dollars in client money. Those who did their "due diligence" looking for negative press reports, weeding out services with anonymous owners, sticking with the most mainstream services, and reading the Twitter feed from the owner of their preferred helpers? Yea they got conned by FTX.

Now we're told to just use Binance, Kraken, or Coinbase, because they're legitimate, and it's like "how many times can I fall for the same scam?" Why could they not be run just like FTX? There's no way to audit them, and regulators seem to be unable to get over the definition of securities and interference from members of Congress who received donations from the industry.

You seem to be operating under the incorrect assumption that FTX was one of the main exchanges regular people were using to buy and trade crypto, when a bunch of it's volume was coming from A) HFT crypto "hedge funds" like the failed Three Arrows trading with super high leverage and B) Alameda, which was losing a bunch of money on the exchange, which made it easier for hedge funds to make money, which kept the trading volume high.

Could Binance be run the same way as FTX? Sure. I don't know that they are, but it's a legitimate risk to talk about. Their business model is honestly a lot like FTX's in that they're creating futures and various sorts of leveraged products to draw in prop shops and crypto hedge funds.

Could Coinbase? No. The critical difference is that coinbase is a publicly traded company incorporated and operating within the USA. If you'd asked me a year ago what the safest exchange is -- the one I'd advise my grandmother to use if she insisted she wanted to buy crypto -- I'd have said coinbase. If you'd asked me, "but what about FTX?", despite following crypto reasonably closely I would have first had to google the name. I then would have said "no way am I sending my money, let alone advising my grandmother to send her money, to some weird company based on a Caribbean island."

Crypto hedge funds were willing to take the risk because FTX let them trade with more leverage and it was easier to make (or lose) more money. But FTX never looked like the safest exchange to anyone.

[MustacheAndaHalf]

Telecaster, ChpBstrd - In the U.S., wash trades are illegal.  The #2 and #3 crypto exchanges (Coinbase, Kraken) are both registered in the US.  Why does the price of Bitcoin on US based exchanges closely match the price on non-US exchanges?....

And more specifically, do you have data that shows what you claim?  The article talked of wash sales to inflate volume - but do you have evidence of price manipulation in the current price of Bitcoin?

The prices match across exchanges because arbitrage is easy and trading costs are low enough. I.e. any person on at least two exchanges could buy/sell to arbitrage any difference. The best illustration is forex markets for actual currencies.

The price can go up and down even if exchanges or coin pump-and-dumpers are creating fake trades. Even the pump-and-dumpers have to sell sometime, and money is always moving from one hot thing to another, even if it is the ecosystem of pump-and-dumpers competing with each other. What would we accept as evidence of an artificially-propped-up market? A perfectly linear price trend? I'm not even sure how that outcome could be engineered even in my simplistic model.

But let's be honest. Cryptocurrency promoters and "helper" businesses should be considered guilty-until-proven-innocent at this point. We're well beyond the "few bad apples" argument, and getting into deeper questions about whether anything is safe in this apple barrel, or why we've been offered a barrel with so many poisoned apples in it in the first place. I challenge anyone to remain optimistic about the state of the crypto industry after 10 minutes on https://web3isgoinggreat.com/.

The people who thought FTX was legit because of all the other lemmings the million other users? They lost all their money. The people who used hundreds of other exchanges, wallets, and other services over the years lost all their money. There are literally stories of website operators disappearing into thin air with tens of millions of dollars in client money. Those who did their "due diligence" looking for negative press reports, weeding out services with anonymous owners, sticking with the most mainstream services, and reading the Twitter feed from the owner of their preferred helpers? Yea they got conned by FTX.

Now we're told to just use Binance, Kraken, or Coinbase, because they're legitimate, and it's like "how many times can I fall for the same scam?" Why could they not be run just like FTX? There's no way to audit them, and regulators seem to be unable to get over the definition of securities and interference from members of Congress who received donations from the industry.

Who said the part after "Now we're told"?  What I said is to use data.  Up above, I showed the prices of Bitcoin on the largest crypto exchanges.  You can click the link, click to each exchange's market, and see the price for yourself.  Do you have data that contradicts that?

Bitcoin sold off rapidly as inflation fears mounted, losing value much faster than the S&P 500 or Nasdaq.  And it looks like 3x Nasdaq ETF "TQQQ" and Bitcoin futures ETF "BITO" closely match - suggesting investors are driving the price, not fake information.  That's again something you can see for yourself: use "compare" on Google (search TQQQ, click "compare", enter "BITO", and look at YTD).

I didn't tell you to "just use Binance, Kraken, Coinbase" - where did you get that from?  What I said is that Coinbase and Kraken are exchanges registered in the US, and by that I meant they are subject to US law.

[Travis]

Circular trading of tokens behind a curtain was BitConnect's bot model, but with the addition of guaranteeing investors a fixed return on investment which required a Ponzi scheme to keep the money coming in.  They claimed they were trading tokens on an open exchange and sending users the profit from those trades, but after the system collapsed it turned out 75% of the tokens were owned by BitConnect.


Regarding Binance's claim that charging them with anything could collapse crypto exchanges, I imagine there are DoJ and SEC types replying "we'll take that bet."

[MustacheAndaHalf]

Back in July 2021, Coinbase got fined based on am employee who created two projects that wound up wash trading with each other:

The Commodity Futures Trading Commission today issued an order filing and settling charges against digital asset exchange operator Coinbase Inc., based in San Francisco, California, for reckless false, misleading, or inaccurate reporting as well as wash trading by a former employee on Coinbase’s GDAX platform.

https://www.cftc.gov/PressRoom/PressReleases/8369-21

Sometimes it appears as an unintended consequence of people trying to reach VIP level with higher volume of trades in their account, like with Binance in July 2022:

A community manager at Mandala Exchange noticed on Friday that a large volume of Bitcoin had been suddenly traded within a short period of time, but Bitcoin’s price had barely changed. This suggested that a large number of traders were buying and selling, keeping the price more or less stable.

“Think this is due to zero fees and people trying to gain VIP tiers,” Zhao explained, adding that Binance would “exclude BTC trading from VIP calculations” and “remove all incentives to wash trade” on the exchange.

https://decrypt.co/104765/after-bitcoin-wash-trading-surges-on-binance-ceo-nixes-incentives

This article spells it out well, but it is unclear which parts are from Dec 2019 and which parts are from a Sept 2021 update.  If accurate and up to date, it also confirms my thesis that US registered exchanges are less likely to have illigal fake trades ("wash trades").

Exchanges and Wash Trading
The most heavily-impacted cryptocurrency exchanges are Bibox and OKEx. Their wash trading comprises more than 75% of all trades. Even after we exclude their wash trading volume, however, they are still among the top 20 exchanges by trading volume.

The cleanest exchanges, on the other hand, are Kraken, Coinbase, Upbit, and Poloniex.

Less than 10% of both Gemini and Binance’s volumes are reportedly wash traded. A previous report showed that Binance’s BTC/USDT market had a real volume of 100%.

In any case, wash trading remains a serious challenge for the space. In fact, it’s one of the main issues that will have to be addressed in order for the US Securities and Exchange Commission (SEC) to approve a Bitcoin ETF.

https://cryptopotato.com/50-of-all-bitcoin-is-subjected-to-wash-trading-report-says/

[waltworks]

I wonder how it's going for @whywork?

-W

[ChpBstrd]

You seem to be operating under the incorrect assumption that FTX was one of the main exchanges regular people were using to buy and trade crypto, when a bunch of it's volume was coming from A) HFT crypto "hedge funds" like the failed Three Arrows trading with super high leverage and B) Alameda, which was losing a bunch of money on the exchange, which made it easier for hedge funds to make money, which kept the trading volume high.

Could Binance be run the same way as FTX? Sure. I don't know that they are, but it's a legitimate risk to talk about. Their business model is honestly a lot like FTX's in that they're creating futures and various sorts of leveraged products to draw in prop shops and crypto hedge funds.

Could Coinbase? No. The critical difference is that coinbase is a publicly traded company incorporated and operating within the USA. If you'd asked me a year ago what the safest exchange is -- the one I'd advise my grandmother to use if she insisted she wanted to buy crypto -- I'd have said coinbase. If you'd asked me, "but what about FTX?", despite following crypto reasonably closely I would have first had to google the name. I then would have said "no way am I sending my money, let alone advising my grandmother to send her money, to some weird company based on a Caribbean island."

Crypto hedge funds were willing to take the risk because FTX let them trade with more leverage and it was easier to make (or lose) more money. But FTX never looked like the safest exchange to anyone.

What I said is that Coinbase and Kraken are exchanges registered in the US, and by that I meant they are subject to US law.

What I gather from the above is that the following are the new criteria to be followed to filter for a legitimate crypto exchange:
  1) Based in the U.S.
  2) Does not cater to hedge funds, focused more on retail traders (except FTX had between 1 and 5 million accounts, particularly from Asia).
  3) Is a household name in the US like Coinbase or increasingly Binance. 

I invite corrections to the above Criteria for Legit Crypto Businesses.

After corrections, would you establish a 5 year blind trust with a five-figure USD investment in Bitcoin? The executor has to follow your criteria exactly and set up one account. If they land on another future FTX, you lose 100%. Once the trust is established, it cannot be changed or revoked. Who's in?

[maizefolk]

What I gather from the above is that the following are the new criteria to be followed to filter for a legitimate crypto exchange:
  1) Based in the U.S.
  2) Does not cater to hedge funds, focused more on retail traders (except FTX had between 1 and 5 million accounts, particularly from Asia).
  3) Is a household name in the US like Coinbase or increasingly Binance. 

I invite corrections to the above Criteria for Legit Crypto Businesses.

After corrections, would you establish a 5 year blind trust with a five-figure USD investment in Bitcoin? The executor has to follow your criteria exactly and set up one account. If they land on another future FTX, you lose 100%. Once the trust is established, it cannot be changed or revoked. Who's in?

Who said anything about new criteria?

Take crypto out of it entirely. At what point in the last fifty years has the phrase: "Just send your money to some business incorporated in the Caribbean, I'm sure it will be safe there" been good financial advice?

There are plenty of other reasons a business might be a bad place to trust with ones money, but I don't buy all these folks wringing their hands saying who could possible have foreseen that something might go wrong with FTX (or Binance for that matter). Leverage is dangerous stuff and US financial regulations typically exist for good reasons. I don't always agree with those reasons but on balance they do an awful lot more good than harm.

To the extend I have any of my net worth invested in tied up in crypto, it's been quite safe for the last nine odd years. I don't anticipate needing to or wanting to interact with it any time in the next five either and I'm not at all worried about it going missing (might good to zero but that's a separate kind of risk).

The only reason to put it on any exchange at all would be to trade (doesn't sound appealing/rewarding) or try to borrow against it/lever myself up (also doesn't sound appealing).

[Travis]

What I gather from the above is that the following are the new criteria to be followed to filter for a legitimate crypto exchange:
  1) Based in the U.S.
  2) Does not cater to hedge funds, focused more on retail traders (except FTX had between 1 and 5 million accounts, particularly from Asia).
  3) Is a household name in the US like Coinbase or increasingly Binance. 

I invite corrections to the above Criteria for Legit Crypto Businesses.

After corrections, would you establish a 5 year blind trust with a five-figure USD investment in Bitcoin? The executor has to follow your criteria exactly and set up one account. If they land on another future FTX, you lose 100%. Once the trust is established, it cannot be changed or revoked. Who's in?

Who said anything about new criteria?

Take crypto out of it entirely. At what point in the last fifty years has the phrase: "Just send your money to some business incorporated in the Caribbean, I'm sure it will be safe there" been good financial advice?

There are plenty of other reasons a business might be a bad place to trust with ones money, but I don't buy all these folks wringing their hands saying who could possible have foreseen that something might go wrong with FTX (or Binance for that matter). Leverage is dangerous stuff and US financial regulations typically exist for good reasons. I don't always agree with those reasons but on balance they do an awful lot more good than harm.

To the extend I have any of my net worth invested in tied up in crypto, it's been quite safe for the last nine odd years. I don't anticipate needing to or wanting to interact with it any time in the next five either and I'm not at all worried about it going missing (might good to zero but that's a separate kind of risk).

The only reason to put it on any exchange at all would be to trade (doesn't sound appealing/rewarding) or try to borrow against it/lever myself up (also doesn't sound appealing).

A lot of folks also seem to act like this is the first time a crypto exchange was shady. FTX is simply the latest, and probably not the last.

[MustacheAndaHalf]

You seem to be operating under the incorrect assumption that FTX was one of the main exchanges regular people were using to buy and trade crypto, when a bunch of it's volume was coming from A) HFT crypto "hedge funds" like the failed Three Arrows trading with super high leverage and B) Alameda, which was losing a bunch of money on the exchange, which made it easier for hedge funds to make money, which kept the trading volume high.

Could Binance be run the same way as FTX? Sure. I don't know that they are, but it's a legitimate risk to talk about. Their business model is honestly a lot like FTX's in that they're creating futures and various sorts of leveraged products to draw in prop shops and crypto hedge funds.

Could Coinbase? No. The critical difference is that coinbase is a publicly traded company incorporated and operating within the USA. If you'd asked me a year ago what the safest exchange is -- the one I'd advise my grandmother to use if she insisted she wanted to buy crypto -- I'd have said coinbase. If you'd asked me, "but what about FTX?", despite following crypto reasonably closely I would have first had to google the name. I then would have said "no way am I sending my money, let alone advising my grandmother to send her money, to some weird company based on a Caribbean island."

Crypto hedge funds were willing to take the risk because FTX let them trade with more leverage and it was easier to make (or lose) more money. But FTX never looked like the safest exchange to anyone.

What I said is that Coinbase and Kraken are exchanges registered in the US, and by that I meant they are subject to US law.

What I gather from the above is that the following are the new criteria to be followed to filter for a legitimate crypto exchange:
  1) Based in the U.S.
  2) Does not cater to hedge funds, focused more on retail traders (except FTX had between 1 and 5 million accounts, particularly from Asia).
  3) Is a household name in the US like Coinbase or increasingly Binance. 

I invite corrections to the above Criteria for Legit Crypto Businesses.

After corrections, would you establish a 5 year blind trust with a five-figure USD investment in Bitcoin? The executor has to follow your criteria exactly and set up one account. If they land on another future FTX, you lose 100%. Once the trust is established, it cannot be changed or revoked. Who's in?

maizefolk said binance could be run like FTX.  We don't know, because binance is based outside the US, and there are rumors the Justice Department is considering criminal charges against its founder.  There is a separate binance.us exchange that nobody has brought up before now, that is much smaller.

Coinbase is a US based exchange.  The CTFT found that between 2015 and 2018, Coinbase had two accounts which sometimes traded with each other, but did not disclose that one of the accounts was run by Coinbase.  So they were doing some wash trades, and received a fine.  I assume they now comply with the law.  I don't know if exchanges outside the US need to adhere to this law.

The Commodity Futures Trading Commission today issued an order filing and settling charges against digital asset exchange operator Coinbase Inc., based in San Francisco, California, for reckless false, misleading, or inaccurate reporting as well as wash trading by a former employee on Coinbase’s GDAX platform.

Another report listed Kraken and Coinbase among the "cleanest" exchanges.  That suggests they do far less of "wash trade" activity, which is consistent with the threat of legal action from the CFTC.  It also provides a basis for comparison with other exchanges, to see if the price of Bitcoin has been inflated.  But as I posted earlier, the price of Bitcoin on these exchanges did not vary much, even outside the US.  I conclude that "wash trades" are not inflating the price of Bitcoin.

While I admire the suggestion of a bet, I don't agree with the premise.  If wash trading doesn't matter to the price of Bitcoin, why would I make investment decisions based on something that doen't matter?

[ChpBstrd]

What I gather from the above is that the following are the new criteria to be followed to filter for a legitimate crypto exchange:
  1) Based in the U.S.
  2) Does not cater to hedge funds, focused more on retail traders (except FTX had between 1 and 5 million accounts, particularly from Asia).
  3) Is a household name in the US like Coinbase or increasingly Binance. 

I invite corrections to the above Criteria for Legit Crypto Businesses.

After corrections, would you establish a 5 year blind trust with a five-figure USD investment in Bitcoin? The executor has to follow your criteria exactly and set up one account. If they land on another future FTX, you lose 100%. Once the trust is established, it cannot be changed or revoked. Who's in?

Who said anything about new criteria?

Take crypto out of it entirely. At what point in the last fifty years has the phrase: "Just send your money to some business incorporated in the Caribbean, I'm sure it will be safe there" been good financial advice?

There are plenty of other reasons a business might be a bad place to trust with ones money, but I don't buy all these folks wringing their hands saying who could possible have foreseen that something might go wrong with FTX (or Binance for that matter). Leverage is dangerous stuff and US financial regulations typically exist for good reasons. I don't always agree with those reasons but on balance they do an awful lot more good than harm.

To the extend I have any of my net worth invested in tied up in crypto, it's been quite safe for the last nine odd years. I don't anticipate needing to or wanting to interact with it any time in the next five either and I'm not at all worried about it going missing (might good to zero but that's a separate kind of risk).

The only reason to put it on any exchange at all would be to trade (doesn't sound appealing/rewarding) or try to borrow against it/lever myself up (also doesn't sound appealing).

A lot of folks also seem to act like this is the first time a crypto exchange was shady. FTX is simply the latest, and probably not the last.

If anyone is aware of a list of shady / not shady crypto businesses, I would be interested to watch it over time and see if the customers of non-shady businesses lose all their money less frequently than the customers of shady ones.

[MustacheAndaHalf]

After corrections, would you establish a 5 year blind trust with a five-figure USD investment in Bitcoin? The executor has to follow your criteria exactly and set up one account. If they land on another future FTX, you lose 100%. Once the trust is established, it cannot be changed or revoked. Who's in?

I already mentioned that I like the idea of a bet, but that "wash trade" isn't an issue to invest in.  In case you want to start a separate discussion, I thought I'd open up the idea: should you invest in Bitcoin right now?  No way.

Financial conditions are still high risk, which punishes high risk assets.  Bitcoin is down 65% in the past year - and actually, Coinbase stock (COIN) has dropped 85% in the past year.  Another crypto stock, Riot Blockchain (RIOT) has dropped 83% in the past 12 months.  If we had certainty that recession was not going to occur, it would still be better to buy COIN or RIOT stock, which has farther to rise in a recovery.

In the first week of this year, I actually had BITO call options that gave me 2x the performance of Bitcoin.  I sold them all on Jan 5 because I felt 2022 would be a high risk year (7% inflation vs under 1% of Fed rate hikes, supply chains, Covid resurgence).  I would rather retain the ability to sell all my crypto when conditions warrent it, and I don't think a blind trust adds anything useful to that.

[Telecaster]

Coinbase is a US based exchange.  The CTFT found that between 2015 and 2018, Coinbase had two accounts which sometimes traded with each other, but did not disclose that one of the accounts was run by Coinbase.  So they were doing some wash trades, and received a fine.  I assume they now comply with the law.  I don't know if exchanges outside the US need to adhere to this law.

So because we know for certain they didn't comply with the law in the past, you now make the assumption they are above board?

Is that a good assumption?  Is that smart? 

Here's my assumption:  People who are known to be criminals are are in fact criminals, and if they screwed you once they will screw you again.  I might be going out on a limb, but I think that position is reasonable and defensible. 

If you want to give known criminals your money because you think they can invest it better than you,  knock yourself out.  But is this really a hill you want to die on? 

[maizefolk]

Coinbase is a US based exchange.  The CTFT found that between 2015 and 2018, Coinbase had two accounts which sometimes traded with each other, but did not disclose that one of the accounts was run by Coinbase.  So they were doing some wash trades, and received a fine.  I assume they now comply with the law.  I don't know if exchanges outside the US need to adhere to this law.

So because we know for certain they didn't comply with the law in the past, you now make the assumption they are above board?

Is that a good assumption?  Is that smart? 

Here's my assumption:  People who are known to be criminals are are in fact criminals, and if they screwed you once they will screw you again.  I might be going out on a limb, but I think that position is reasonable and defensible. 

If you want to give known criminals your money because you think they can invest it better than you,  knock yourself out.  But is this really a hill you want to die on?

The problem with this criteria (some employees of an organization didn't follow the law and so their employer paid a fine when they were caught) is that it also describes almost every bank in america:

https://www.nasdaq.com/articles/bofa-tops-fines-blacklist-with-us$82bn-payouts-in-last-20-years-2021-02-15

[Travis]

What I gather from the above is that the following are the new criteria to be followed to filter for a legitimate crypto exchange:
  1) Based in the U.S.
  2) Does not cater to hedge funds, focused more on retail traders (except FTX had between 1 and 5 million accounts, particularly from Asia).
  3) Is a household name in the US like Coinbase or increasingly Binance. 

I invite corrections to the above Criteria for Legit Crypto Businesses.

After corrections, would you establish a 5 year blind trust with a five-figure USD investment in Bitcoin? The executor has to follow your criteria exactly and set up one account. If they land on another future FTX, you lose 100%. Once the trust is established, it cannot be changed or revoked. Who's in?

Who said anything about new criteria?

Take crypto out of it entirely. At what point in the last fifty years has the phrase: "Just send your money to some business incorporated in the Caribbean, I'm sure it will be safe there" been good financial advice?

There are plenty of other reasons a business might be a bad place to trust with ones money, but I don't buy all these folks wringing their hands saying who could possible have foreseen that something might go wrong with FTX (or Binance for that matter). Leverage is dangerous stuff and US financial regulations typically exist for good reasons. I don't always agree with those reasons but on balance they do an awful lot more good than harm.

To the extend I have any of my net worth invested in tied up in crypto, it's been quite safe for the last nine odd years. I don't anticipate needing to or wanting to interact with it any time in the next five either and I'm not at all worried about it going missing (might good to zero but that's a separate kind of risk).

The only reason to put it on any exchange at all would be to trade (doesn't sound appealing/rewarding) or try to borrow against it/lever myself up (also doesn't sound appealing).

A lot of folks also seem to act like this is the first time a crypto exchange was shady. FTX is simply the latest, and probably not the last.

If anyone is aware of a list of shady / not shady crypto businesses, I would be interested to watch it over time and see if the customers of non-shady businesses lose all their money less frequently than the customers of shady ones.

A non-exhaustive list of crypto exchanges undone by fraud or stupidity:
FTX
BlockFi
Three Arrows Capital
Voyager
Celsius
Luna/Terra/Anchor
BitConnect
Quadriga

None of these include crypto exchanges where an outside actor broke in and stole coins from depositors.

[ChpBstrd]

What I gather from the above is that the following are the new criteria to be followed to filter for a legitimate crypto exchange:
  1) Based in the U.S.
  2) Does not cater to hedge funds, focused more on retail traders (except FTX had between 1 and 5 million accounts, particularly from Asia).
  3) Is a household name in the US like Coinbase or increasingly Binance. 

I invite corrections to the above Criteria for Legit Crypto Businesses.

After corrections, would you establish a 5 year blind trust with a five-figure USD investment in Bitcoin? The executor has to follow your criteria exactly and set up one account. If they land on another future FTX, you lose 100%. Once the trust is established, it cannot be changed or revoked. Who's in?

Who said anything about new criteria?

Take crypto out of it entirely. At what point in the last fifty years has the phrase: "Just send your money to some business incorporated in the Caribbean, I'm sure it will be safe there" been good financial advice?

There are plenty of other reasons a business might be a bad place to trust with ones money, but I don't buy all these folks wringing their hands saying who could possible have foreseen that something might go wrong with FTX (or Binance for that matter). Leverage is dangerous stuff and US financial regulations typically exist for good reasons. I don't always agree with those reasons but on balance they do an awful lot more good than harm.

To the extend I have any of my net worth invested in tied up in crypto, it's been quite safe for the last nine odd years. I don't anticipate needing to or wanting to interact with it any time in the next five either and I'm not at all worried about it going missing (might good to zero but that's a separate kind of risk).

The only reason to put it on any exchange at all would be to trade (doesn't sound appealing/rewarding) or try to borrow against it/lever myself up (also doesn't sound appealing).

A lot of folks also seem to act like this is the first time a crypto exchange was shady. FTX is simply the latest, and probably not the last.

If anyone is aware of a list of shady / not shady crypto businesses, I would be interested to watch it over time and see if the customers of non-shady businesses lose all their money less frequently than the customers of shady ones.

A non-exhaustive list of crypto exchanges undone by fraud or stupidity:
FTX
BlockFi
Three Arrows Capital
Voyager
Celsius
Luna/Terra/Anchor
BitConnect
Quadriga

None of these include crypto exchanges where an outside actor broke in and stole coins from depositors.

Yes, but that's the past. I'd like to know if anyone can predict ahead of time which exchanges will lose their clients' assets in the future. I.e. comments above implied it is easy to spot the shady versus not-shady exchanges. Can anyone tell me with confidence which exchanges, funds, or wallets will exist by some time in the future, say 24 months from now?

[Travis]

In my completely amateur opinion, the ones that act the most like actual regulated brokerages (assuming you're able to actually peek behind the curtain).

[MustacheAndaHalf]

Coinbase is a US based exchange.  The CTFT found that between 2015 and 2018, Coinbase had two accounts which sometimes traded with each other, but did not disclose that one of the accounts was run by Coinbase.  So they were doing some wash trades, and received a fine.  I assume they now comply with the law.  I don't know if exchanges outside the US need to adhere to this law.

So because we know for certain they didn't comply with the law in the past, you now make the assumption they are above board?

Is that a good assumption?  Is that smart? 

Here's my assumption:  People who are known to be criminals are are in fact criminals, and if they screwed you once they will screw you again.  I might be going out on a limb, but I think that position is reasonable and defensible. 

If you want to give known criminals your money because you think they can invest it better than you,  knock yourself out.  But is this really a hill you want to die on?

You might try reading that report more carefully.  A former employee created a problem that at times traded with another Coinbase account.  That's happenstance, not criminal intent.

"... wash trading by a former employee ..."
"between January 2015 and September 2018"
"Coinbase operated two automated trading programs, Hedger and Replicator, which generated orders that at times matched with one another. "
https://www.cftc.gov/PressRoom/PressReleases/8369-21

The CFTC said this ended in Sept 2018.  When the CFCT supports your view, you agree with them, but when they say it ended in 2018 you think they're wrong?

There was another article in 2019 updated in 2021 that showed Coinbase was one of the cleanest exchanges in terms of "wash trades".  So the CFTC says Coinbase stopped in 2018, and another article 1 or 3 years later gave them a clean bill of health.  You're assuming things not reflected in the links I provided.

[lifeanon269]

Yes, but that's the past. I'd like to know if anyone can predict ahead of time which exchanges will lose their clients' assets in the future. I.e. comments above implied it is easy to spot the shady versus not-shady exchanges. Can anyone tell me with confidence which exchanges, funds, or wallets will exist by some time in the future, say 24 months from now?

Which kind of drives the entire point of bitcoin home that the entire reason it exists is to take custody of your own bitcoin rather than relying on a third-party institution. If someone isn't comfortable doing that, then maybe bitcoin just isn't for them.

[index]

Yes, but that's the past. I'd like to know if anyone can predict ahead of time which exchanges will lose their clients' assets in the future. I.e. comments above implied it is easy to spot the shady versus not-shady exchanges. Can anyone tell me with confidence which exchanges, funds, or wallets will exist by some time in the future, say 24 months from now?

Which kind of drives the entire point of bitcoin home that the entire reason it exists is to take custody of your own bitcoin rather than relying on a third-party institution. If someone isn't comfortable doing that, then maybe bitcoin just isn't for them.

Without the exchanges BTC has no liquidity and is next to worthless. Trusted intermediaries are necessary or else the only way to exchange cypto for fiat becomes person to person...

[theolympians]

Yes, but that's the past. I'd like to know if anyone can predict ahead of time which exchanges will lose their clients' assets in the future. I.e. comments above implied it is easy to spot the shady versus not-shady exchanges. Can anyone tell me with confidence which exchanges, funds, or wallets will exist by some time in the future, say 24 months from now?

Which kind of drives the entire point of bitcoin home that the entire reason it exists is to take custody of your own bitcoin rather than relying on a third-party institution. If someone isn't comfortable doing that, then maybe bitcoin just isn't for them.

Without the exchanges BTC has no liquidity and is next to worthless. Trusted intermediaries are necessary or else the only way to exchange cypto for fiat becomes person to person...

If memory serves, that was supposed to be a feature of crypto: no intermediary. No bank, escrow etc. We just send bitcoin to everyone, it was going to make banks banks not a major factor, it was going to be utopia for the common man.

[GuitarStv]

Yes, but that's the past. I'd like to know if anyone can predict ahead of time which exchanges will lose their clients' assets in the future. I.e. comments above implied it is easy to spot the shady versus not-shady exchanges. Can anyone tell me with confidence which exchanges, funds, or wallets will exist by some time in the future, say 24 months from now?

Which kind of drives the entire point of bitcoin home that the entire reason it exists is to take custody of your own bitcoin rather than relying on a third-party institution. If someone isn't comfortable doing that, then maybe bitcoin just isn't for them.

Without the exchanges BTC has no liquidity and is next to worthless. Trusted intermediaries are necessary or else the only way to exchange cypto for fiat becomes person to person...

If memory serves, that was supposed to be a feature of crypto: no intermediary. No bank, escrow etc. We just send bitcoin to everyone, it was going to make banks banks not a major factor, it was going to be utopia for the common man.

That was back when they were pretending that it was going to be a currency.

[theolympians]

Yes, but that's the past. I'd like to know if anyone can predict ahead of time which exchanges will lose their clients' assets in the future. I.e. comments above implied it is easy to spot the shady versus not-shady exchanges. Can anyone tell me with confidence which exchanges, funds, or wallets will exist by some time in the future, say 24 months from now?

Which kind of drives the entire point of bitcoin home that the entire reason it exists is to take custody of your own bitcoin rather than relying on a third-party institution. If someone isn't comfortable doing that, then maybe bitcoin just isn't for them.

Without the exchanges BTC has no liquidity and is next to worthless. Trusted intermediaries are necessary or else the only way to exchange cypto for fiat becomes person to person...

If memory serves, that was supposed to be a feature of crypto: no intermediary. No bank, escrow etc. We just send bitcoin to everyone, it was going to make banks banks not a major factor, it was going to be utopia for the common man.

That was back when they were pretending that it was going to be a currency.

The idea of crypto as a currency is a self-contradiction. If you buy a bitcoin 9or any other), there is no reason to use as a currency today, as it was touted as bring worth more in the future. So that thinking would naturally inhibit its use as a currency.

[LateStarter]

Yes, but that's the past. I'd like to know if anyone can predict ahead of time which exchanges will lose their clients' assets in the future. I.e. comments above implied it is easy to spot the shady versus not-shady exchanges. Can anyone tell me with confidence which exchanges, funds, or wallets will exist by some time in the future, say 24 months from now?

Which kind of drives the entire point of bitcoin home that the entire reason it exists is to take custody of your own bitcoin rather than relying on a third-party institution. If someone isn't comfortable doing that, then maybe bitcoin just isn't for them.

Without the exchanges BTC has no liquidity and is next to worthless. Trusted intermediaries are necessary or else the only way to exchange cypto for fiat becomes person to person...

If memory serves, that was supposed to be a feature of crypto: no intermediary. No bank, escrow etc. We just send bitcoin to everyone, it was going to make banks banks not a major factor, it was going to be utopia for the common man.

Just to point out the obvious . . .

The 'no intermediary' feature of Bitcoin concerns the transfer of Bitcoin between different parties. This IS a peer-to-peer / 'no intermediary' process.

Clearly, there is a need for a mechanism through which to acquire Bitcoin before you can participate in that. The current primary method for doing this is via centralised (and largely unregulated) exchanges. As we have seen, this is not without risk. Maybe we will soon see some regulation. Maybe a decentralised / trustless solution will appear. Maybe . . .

In the meantime, you can:

• Manage the risk by choosing your exchange / broker carefully. Maybe onshore, maybe a public co, etc. Also, there are Bitcoin-only brokers that are (imo) at the safer end of the spectrum simply because they're not participating in / promoting the alt-coin shitshow.
• Minimise your exposure by self-custodying your Bitcoin immediately following purchase. 1 hour exposure = 0.01% of 1 year exposure.

[LateStarter]

The idea of crypto as a currency is a self-contradiction. If you buy a bitcoin 9or any other), there is no reason to use as a currency today, as it was touted as bring worth more in the future. So that thinking would naturally inhibit its use as a currency.

No reason ? Are you suggesting that the only reason to spend is that your currency is becoming increasingly worthless ?

People would presumably continue to spend on food and other essentials rather than starve and freeze, etc.

People might(?) spend less on non-essential items. When did that become a bad thing here (or for society, or for the environment, etc.) ?

People might(?) think more long-term and/or more cautiously with regard to investments and loans, etc. Is that a bad thing ?

[Telecaster]

No reason ? Are you suggesting that the only reason to spend is that your currency is becoming increasingly worthless ?

People would presumably continue to spend on food and other essentials rather than starve and freeze, etc.

People might(?) spend less on non-essential items. When did that become a bad thing here (or for society, or for the environment, etc.) ?

People might(?) think more long-term and/or more cautiously with regard to investments and loans, etc. Is that a bad thing ?

A couple thoughts.  One is there is a chicken and egg problem.  Crytpo can't become widely accepted as a currency until people start widely using it as a currency.  But Bitcoin maximalists--like say, Michael Saylor--don't advocate spending, they advocate holding.  And the benefits are framed mostly in terms of getting rich in the future "have fun staying poor"  instead of in terms of day-to-day advantages which is what is needed for widespread adoption.  A real world example is Wikipedia, which was an early adopter of crypto donations and started accepting crypto donations in 2014.  Wiki stopped accepting crypto in 2022 because so few people were donating that way it wasn't worth the hassle.  So if people aren't using crypto now, when?

The other is that we don't have to speculate what would happen in the event of a deflationary currency, we have many examples from history.  If there is an expectation that prices will be lower in the future, then future wages need to be lower too.  And the easiest way to do that is cut payroll.   And cutting payroll means less spending, which means more deflation, which means more payroll cuts, and so on.  Again, this is not hypothetical.  That is what is known to happen.   

[LateStarter]

No reason ? Are you suggesting that the only reason to spend is that your currency is becoming increasingly worthless ?

People would presumably continue to spend on food and other essentials rather than starve and freeze, etc.

People might(?) spend less on non-essential items. When did that become a bad thing here (or for society, or for the environment, etc.) ?

People might(?) think more long-term and/or more cautiously with regard to investments and loans, etc. Is that a bad thing ?

A couple thoughts.  One is there is a chicken and egg problem.  Crytpo can't become widely accepted as a currency until people start widely using it as a currency.

I don't see a chicken/egg problem - quite the opposite.
Bitcoin can be, and is being, narrowly accepted as a currency while people narrowly use it as a currency. This started from zero and it's not clear why the widening trend can't/won't continue.
Every new adopter makes it better for everyone already using it and more attractive to everyone not currently using it, ie. Network Effect.

But Bitcoin maximalists--like say, Michael Saylor--don't advocate spending, they advocate holding.  And the benefits are framed mostly in terms of getting rich in the future "have fun staying poor"  instead of in terms of day-to-day advantages which is what is needed for widespread adoption.

I can't speak for MS, but . . . I think his original focus was on how a rich man could best protect his wealth, ie. buy and hold. Since those early days there has been far more talk of the wider implications of Bitcoin and the wider potential for Bitcoin, eg. as a means of exchange (via Lightning), etc. - particularly amongst the unbanked and/or in unstable countries. And now, Microstrategy has announced plans to release Lightning-based (ie. Bitcoin_spending) software applications in 2023.

Most other maximalists seem to have a broad outlook on what Bitcoin is and what it could become, and they do much more to advance it than just promote buy&hold.

A real world example is Wikipedia, which was an early adopter of crypto donations and started accepting crypto donations in 2014.  Wiki stopped accepting crypto in 2022 because so few people were donating that way it wasn't worth the hassle.  So if people aren't using crypto now, when?

A quick Google shows that the Wiki decision to stop accepting crypto donations was more about avoiding association with the ongoing environmental debate and scam concerns. Furthermore, it was initiated and pushed by the creator of web3isgoinggreat.com - clearly someone with a crypto-axe to grind. It definitely wasn't a simple 'not worth the hassle' decision.

The other is that we don't have to speculate what would happen in the event of a deflationary currency, we have many examples from history.  If there is an expectation that prices will be lower in the future, then future wages need to be lower too.  And the easiest way to do that is cut payroll.   And cutting payroll means less spending, which means more deflation, which means more payroll cuts, and so on.  Again, this is not hypothetical.  That is what is known to happen.

Invert every up/down word in that paragraph to see just some of the perils of an inflationary currency.

And, note that Bitcoin is not inherently deflationary. Bitcoin is disinflationary with a slight tendency towards being deflationary due to lost coins.

Regardless, Jeff Booth outlines some interesting thoughts on deflation in The Price of Tomorrow. In a nutshell, that technology just IS deflationary and that we live in an exponentially_increasingly_technological (and hence, exponentially_increasingly_deflationary) world, so we'd do well to get used to it and adapt to it. It's a good and succinct read - I've struggled to find fault with much of what he says.

[MustacheAndaHalf]

In the meantime, you can:

• Manage the risk by choosing your exchange / broker carefully. Maybe onshore, maybe a public co, etc. Also, there are Bitcoin-only brokers that are (imo) at the safer end of the spectrum simply because they're not participating in / promoting the alt-coin shitshow.
• Minimise your exposure by self-custodying your Bitcoin immediately following purchase. 1 hour exposure = 0.01% of 1 year exposure.

I think people are focused on this more in light of FTX's collapse.  FTX's former CEO, ironically, wanted to start FTX to properly handle leveraged products without collapsing.  But the safer route is an exchange that doesn't offer leverage, like with U.S.-based exchanges.

FTX also raises a separate legal question: if someone bought Bitcoin on FTX, then sent that Bitcoin to their own wallet (self-custodying)... would they be subject to clawbacks?

The current CEO of bankrupt FTX plans to claw back political donations.  But if he wants billions back from Binance's CEO, he could have a legal fight on his hands.  CZ could argue he offered to buy FTX, suggesting he was ignorant of the fraud, and a day later saw the books and declined to go further.

[MustacheAndaHalf]

... (other quoted messages removed for brevity) ...

Without the exchanges BTC has no liquidity and is next to worthless. Trusted intermediaries are necessary or else the only way to exchange cypto for fiat becomes person to person...

If memory serves, that was supposed to be a feature of crypto: no intermediary. No bank, escrow etc. We just send bitcoin to everyone, it was going to make banks banks not a major factor, it was going to be utopia for the common man.

That was back when they were pretending that it was going to be a currency.

The idea of crypto as a currency is a self-contradiction. If you buy a bitcoin 9or any other), there is no reason to use as a currency today, as it was touted as bring worth more in the future. So that thinking would naturally inhibit its use as a currency.

Even now with inflation near 7%, the U.S. has a more stable economy than many countries and various reliable means of payment.  If you look only at examples in the U.S., you are sampling from people who don't need to change.

In countries like Venezuela, it's a different story with uncertain inflation, unreliable means of transfer, and people who work outside the country sending money back to family in Venezuela.

Chainalysis, a startup that researches blockchain transactions, in a 2020 report ranked Venezuela third on its Global Crypto Adoption Index, largely due to the high volume of bolivar transactions.
...
In Venezuela, crypto is mainly used to hedge against inflation that causes bank deposits to sharply depreciate in weeks or even days.

https://www.reuters.com/technology/venezuelas-economy-regresses-crypto-fills-gaps-2021-06-22/

[ChpBstrd]

In the meantime, you can:

• Manage the risk by choosing your exchange / broker carefully. Maybe onshore, maybe a public co, etc. Also, there are Bitcoin-only brokers that are (imo) at the safer end of the spectrum simply because they're not participating in / promoting the alt-coin shitshow.
• Minimise your exposure by self-custodying your Bitcoin immediately following purchase. 1 hour exposure = 0.01% of 1 year exposure.

I think people are focused on this more in light of FTX's collapse.  FTX's former CEO, ironically, wanted to start FTX to properly handle leveraged products without collapsing.  But the safer route is an exchange that doesn't offer leverage, like with U.S.-based exchanges.

FTX also raises a separate legal question: if someone bought Bitcoin on FTX, then sent that Bitcoin to their own wallet (self-custodying)... would they be subject to clawbacks?

The current CEO of bankrupt FTX plans to claw back political donations.  But if he wants billions back from Binance's CEO, he could have a legal fight on his hands.  CZ could argue he offered to buy FTX, suggesting he was ignorant of the fraud, and a day later saw the books and declined to go further.

But if one's financial intermediary is not loaning out one's crypto deposits to try and earn a spread, how do they make money? By charging transaction fees? If fractional banking was outlawed in the crypto world, for example, the only crypto exchanges/banks/brokerages would have to charge commissions. Otherwise, if there was no way to earn money, they couldn't exist. This is why there is no free Western Union.

We're all used to stock brokerages with zero-commission trades, but in the background, they are loaning your shares to short sellers, earning spreads between futures and cash yields, doing options trades, etc. with your assets, and of course selling your data. I have some reservations about all this stuff with stocks, but FTX suggests the model cannot be made to work in the hyper-volatile and unregulated crypto universe where even the biggest counterparties and coins can collapse overnight.

If a crypto website says it is not trading your assets to make money for itself, that raises questions about what possible way they could be earning money if not by stealing depositors' money or doing some Robinhood game of picking a penny off the B/A spreads.

Looking at the broader picture, let's think about how the narrative has shifted:

• 2016: Crypto is going to allow frictionless, free transactions with no intermediaries, transforming the global economy!
• 2019: These noobs who lost their life savings because they left their coins in wallets on sketchy websites are doing it wrong.
• 2022: Here are some guidelines to find a crypto website that is less likely to collapse - um... ooops... - here are NEW guidelines based on the ever-shrinking unique set of characteristics of crypto websites which haven't collapsed... yet.

The point is perhaps to know the business model of your financial helpers, and to steer clear of unregulated markets where some dufus could take on silly amounts of risk and no one would notice.

[index]

Yes, but that's the past. I'd like to know if anyone can predict ahead of time which exchanges will lose their clients' assets in the future. I.e. comments above implied it is easy to spot the shady versus not-shady exchanges. Can anyone tell me with confidence which exchanges, funds, or wallets will exist by some time in the future, say 24 months from now?

Which kind of drives the entire point of bitcoin home that the entire reason it exists is to take custody of your own bitcoin rather than relying on a third-party institution. If someone isn't comfortable doing that, then maybe bitcoin just isn't for them.

Without the exchanges BTC has no liquidity and is next to worthless. Trusted intermediaries are necessary or else the only way to exchange cypto for fiat becomes person to person...

If memory serves, that was supposed to be a feature of crypto: no intermediary. No bank, escrow etc. We just send bitcoin to everyone, it was going to make banks banks not a major factor, it was going to be utopia for the common man.

Just to point out the obvious . . .

The 'no intermediary' feature of Bitcoin concerns the transfer of Bitcoin between different parties. This IS a peer-to-peer / 'no intermediary' process.

Clearly, there is a need for a mechanism through which to acquire Bitcoin before you can participate in that. The current primary method for doing this is via centralised (and largely unregulated) exchanges. As we have seen, this is not without risk. Maybe we will soon see some regulation. Maybe a decentralised / trustless solution will appear. Maybe . . .

In the meantime, you can:

• Manage the risk by choosing your exchange / broker carefully. Maybe onshore, maybe a public co, etc. Also, there are Bitcoin-only brokers that are (imo) at the safer end of the spectrum simply because they're not participating in / promoting the alt-coin shitshow.
• Minimise your exposure by self-custodying your Bitcoin immediately following purchase. 1 hour exposure = 0.01% of 1 year exposure.

Bitcoin can only support 7 transactions per second which is inadequate for use as a currency. The structural shortcomings of BTC make it necessary to use intermediaries i.e. the exchanges. For the exchanges to be trusted, they need to be well regulated which negates the whole P2P argument of BTC in the first place. BTC has value if you are transferring large sums in the 6+ figure amounts. For everyone else, a highly regulated central authority is needed to facilitate transactions.

[MustacheAndaHalf]

In the meantime, you can:

• Manage the risk by choosing your exchange / broker carefully. Maybe onshore, maybe a public co, etc. Also, there are Bitcoin-only brokers that are (imo) at the safer end of the spectrum simply because they're not participating in / promoting the alt-coin shitshow.
• Minimise your exposure by self-custodying your Bitcoin immediately following purchase. 1 hour exposure = 0.01% of 1 year exposure.

I think people are focused on this more in light of FTX's collapse.  FTX's former CEO, ironically, wanted to start FTX to properly handle leveraged products without collapsing.  But the safer route is an exchange that doesn't offer leverage, like with U.S.-based exchanges.

FTX also raises a separate legal question: if someone bought Bitcoin on FTX, then sent that Bitcoin to their own wallet (self-custodying)... would they be subject to clawbacks?

The current CEO of bankrupt FTX plans to claw back political donations.  But if he wants billions back from Binance's CEO, he could have a legal fight on his hands.  CZ could argue he offered to buy FTX, suggesting he was ignorant of the fraud, and a day later saw the books and declined to go further.

But if one's financial intermediary is not loaning out one's crypto deposits to try and earn a spread, how do they make money? By charging transaction fees? If fractional banking was outlawed in the crypto world, for example, the only crypto exchanges/banks/brokerages would have to charge commissions. Otherwise, if there was no way to earn money, they couldn't exist. This is why there is no free Western Union.

We're all used to stock brokerages with zero-commission trades, but in the background, they are loaning your shares to short sellers, earning spreads between futures and cash yields, doing options trades, etc. with your assets, and of course selling your data. I have some reservations about all this stuff with stocks, but FTX suggests the model cannot be made to work in the hyper-volatile and unregulated crypto universe where even the biggest counterparties and coins can collapse overnight.

If a crypto website says it is not trading your assets to make money for itself, that raises questions about what possible way they could be earning money if not by stealing depositors' money or doing some Robinhood game of picking a penny off the B/A spreads.

Looking at the broader picture, let's think about how the narrative has shifted:

• 2016: Crypto is going to allow frictionless, free transactions with no intermediaries, transforming the global economy!
• 2019: These noobs who lost their life savings because they left their coins in wallets on sketchy websites are doing it wrong.
• 2022: Here are some guidelines to find a crypto website that is less likely to collapse - um... ooops... - here are NEW guidelines based on the ever-shrinking unique set of characteristics of crypto websites which haven't collapsed... yet.

The point is perhaps to know the business model of your financial helpers, and to steer clear of unregulated markets where some dufus could take on silly amounts of risk and no one would notice.

Did you mean to reply to another post?  I was talking about people who bought Bitcoin on FTX and self-custodied may or may not be the target of clawbacks.

[StashingAway]

People might(?) spend less on non-essential items. When did that become a bad thing here (or for society, or for the environment, etc.) ?

People might(?) think more long-term and/or more cautiously with regard to investments and loans, etc. Is that a bad thing ?

This may be true of the day to day spending of lower income. But that's not what drives the economy.

The way the economy flows is that there is incentive for the wealthy to re-invest. The default is to invest and lend out your money, because that gets a reliably higher yield than hoarding money. Banks lend money for mortgages, corporations put money in brokerages to be managed, pension funds put their money in the market, etc.  The result of all of this is that potential money hoarders put that money back to use to increase value. There are problems with this (some you pointed out), but the alternative is worse for the everyday person.

In a deflationary environment, "people" might do what you said. But the ultra-wealthy, the 1%ers, would have no reason not to hoard their own money. They could get loans based on their massive collateral and collect and collect, increasing the wealth gap with no way for the lower class to get any back. "People" would be royally screwed; no money flowing back into the economy. Less investments in start up companies, no reason for companies to expand operations, open a new franchise, etc. because their $ is doing great just sitting in the bank increasing value.

The wealth gap is already larger in the BTC space than in USD, and has the trend of getting worse. No thank you from me.

[Telecaster]

A quick Google shows that the Wiki decision to stop accepting crypto donations was more about avoiding association with the ongoing environmental debate and scam concerns. Furthermore, it was initiated and pushed by the creator of web3isgoinggreat.com - clearly someone with a crypto-axe to grind. It definitely wasn't a simple 'not worth the hassle' decision.

The reason I brought up Wikipedia is that it comes from populist, decentralized  "anyone can edit" grass-roots, is self-funded, no pay walls or subscriptions, operates mostly with volunteer labor, and is largely democratic.  It seems logical that there would be some natural overlap between Wiki supporters and crytpo-enthusiasts.  And because Wiki is donor supported, it needs to make it easy to accept payments by as many channels as possible, including across international borders.   So again there seems to be some natural overlap.   And indeed Wiki began accepting crypto donations in 2014, so they were pretty early.   But protecting your reputation is a hassle.   If crypto-donations were flowing over the transom it would be one thing.  But crypto-donations were on the order of about a hundredth of a percent of the total.   A rounding error of a rounding error.   With such little demand, the decision to stop accepting crypto does become pretty simple and the Wiki foundation voted overwhelmingly to stop accepting it.   That goes to my point that even after eight years too few people were donating via crytpo channels to make it worthwhile, and this is an area that would seem to be a natural fit. 

This goes back to the chicken and egg problem, a record 66% Bitcoin did not move in the last year, and 45% has not moved in two years.   

https://cryptoslate.com/over-66-of-the-total-bitcoin-supply-hasnt-moved-in-the-last-one-year-setting-a-record

In order for Bitcoin to be useful as a currency, it needs to circulate.  But the people who own it are holding it. 

[GuitarStv]

A quick Google shows that the Wiki decision to stop accepting crypto donations was more about avoiding association with the ongoing environmental debate and scam concerns. Furthermore, it was initiated and pushed by the creator of web3isgoinggreat.com - clearly someone with a crypto-axe to grind. It definitely wasn't a simple 'not worth the hassle' decision.

The reason I brought up Wikipedia is that it comes from populist, decentralized  "anyone can edit" grass-roots, is self-funded, no pay walls or subscriptions, operates mostly with volunteer labor, and is largely democratic.  It seems logical that there would be some natural overlap between Wiki supporters and crytpo-enthusiasts.  And because Wiki is donor supported, it needs to make it easy to accept payments by as many channels as possible, including across international borders.   So again there seems to be some natural overlap.   And indeed Wiki began accepting crypto donations in 2014, so they were pretty early.   But protecting your reputation is a hassle.   If crypto-donations were flowing over the transom it would be one thing.  But crypto-donations were on the order of about a hundredth of a percent of the total.   A rounding error of a rounding error.   With such little demand, the decision to stop accepting crypto does become pretty simple and the Wiki foundation voted overwhelmingly to stop accepting it.   That goes to my point that even after eight years too few people were donating via crytpo channels to make it worthwhile, and this is an area that would seem to be a natural fit. 

This goes back to the chicken and egg problem, a record 66% Bitcoin did not move in the last year, and 45% has not moved in two years.   

https://cryptoslate.com/over-66-of-the-total-bitcoin-supply-hasnt-moved-in-the-last-one-year-setting-a-record

In order for Bitcoin to be useful as a currency, it needs to circulate.  But the people who own it are holding it.

Even bitcoin proponents have largely given up on the idea that it's a currency.

Bitcoin seems to act most like a commodity.  It's a finite resource that is interchangeable with others of the same sort, with a price driven entirely by supply and demand.  Like beanie babies.  Nobody wants to sell you groceries for your beanie baby . . . you just hang on to it in the attic in the hope that it will be worth more later when the next big beanie baby bubble develops.

[Glenstache]

Compare against the question, "What do you think of adding a low% of British Pound allocation" ? 

The OP's closing line is,

Having a huge allocation to Crypto can be dicey but just adding a small percent and annually rebalancing seems a great strategy to enhance returns. What are your thoughts on this?

The premise of the thread is that it is a speculative thing for return hoping that there will be adequate demand (or maybe even adoption) that it will be more valuable in the future than just leaving it as USD.  True believers may be fully bought in on the promise as a currency, but the market volatility, the way crypto has been pitched to the general public, and the content of most of the thread above belies that it is largely viewed as a speculative investment. If a person sees this as not substantially different than an allocation of some other currency, then fine. But I think that if the intent is to use to hold for value (as the numbers cited above for holding time indicate), then the value of a currency isn't really the point in practical terms. There are also people who buy gold to make things rather than buy and hold. But, even gold has only 36% (as of 2021) of market demand going to buy and hold reserves with the rest going to jewelery (55%) and industry (8%).
https://www.statista.com/statistics/299609/gold-demand-by-industry-sector-share/

[index]

Compare against the question, "What do you think of adding a low% of British Pound allocation" ? 

The OP's closing line is,

Having a huge allocation to Crypto can be dicey but just adding a small percent and annually rebalancing seems a great strategy to enhance returns. What are your thoughts on this?

The premise of the thread is that it is a speculative thing for return hoping that there will be adequate demand (or maybe even adoption) that it will be more valuable in the future than just leaving it as USD.  True believers may be fully bought in on the promise as a currency, but the market volatility, the way crypto has been pitched to the general public, and the content of most of the thread above belies that it is largely viewed as a speculative investment. If a person sees this as not substantially different than an allocation of some other currency, then fine. But I think that if the intent is to use to hold for value (as the numbers cited above for holding time indicate), then the value of a currency isn't really the point in practical terms. There are also people who buy gold to make things rather than buy and hold. But, even gold has only 36% (as of 2021) of market demand going to buy and hold reserves with the rest going to jewelery (55%) and industry (8%).
https://www.statista.com/statistics/299609/gold-demand-by-industry-sector-share/

The OP then stated his small percentage was 20% three posts later which I would argue is not a "small percentage".

Really any marketable security can be "viewed" as a currency. The average house costs 1,500 shares of VTI!

The utility of a currency is used to support the sky high valuation of BTC. You can observe the same with Tesla. I was listening to a podcast with Ron Baron talking about his largest investment TSLA. He justified the price by saying every uber/taxi and truck would be owned by TSLA self driving and extrapolating the growth of their auto sales world wide. Sure, if you extrapolate like that the right price for TSLA -> ∞. The same exercise can be used if you extrapolate the value of BTC when you make the assumption 21M BTC will be the only currency and necessitates: (total value of all assets)/21M = terminal value of BTC.   

[Scandium]

Bitcoin can only support 7 transactions per second which is inadequate for use as a currency. The structural shortcomings of BTC make it necessary to use intermediaries i.e. the exchanges. For the exchanges to be trusted, they need to be well regulated which negates the whole P2P argument of BTC in the first place.

This is my big issue with this, to actually get any BTC you (more or less) need to go through a regulated, monitored exchange. "just use coinbase, it's safe". Ok sure, they require I upload a copy of my driver's license! But what if (when..) I want to use BTC to order an assassination or buy some heroin huh? You know; the only things you can use BTC for that you can't (or shouldn't) just use USD! So then what the hell is the point of BTC? For "legit" transactions the existing system is always better. And for "shady" ones you're not actually protected anyway. In fact giving someone cash is probably just easier.

Even back when BTC was ~$50 I wanted to try to just for fun to get some, but totally anonymously. Short of mining myself, it was pretty difficult. At some point you'll need to transfer money to someone to exchange for BTC, and if done online that transaction can always be traced. I think I thought up some scheme involving buying gift cards with cash, but at a store with no security cameras! I gave up, and bought no btc.

[GuitarStv]

I think you're forgetting that blockchain is the future.



I know this because my uncle who can't figure out how to operate his email told me.

[theolympians]

The idea of crypto as a currency is a self-contradiction. If you buy a bitcoin 9or any other), there is no reason to use as a currency today, as it was touted as bring worth more in the future. So that thinking would naturally inhibit its use as a currency.

No reason ? Are you suggesting that the only reason to spend is that your currency is becoming increasingly worthless ?

People would presumably continue to spend on food and other essentials rather than starve and freeze, etc.

People might(?) spend less on non-essential items. When did that become a bad thing here (or for society, or for the environment, etc.) ?

People might(?) think more long-term and/or more cautiously with regard to investments and loans, etc. Is that a bad thing ?

In the USA we have a currency. In any state currency, inflation is an issue. Currencies rise and fall in value. The dollar is the legal tender. The system is built to accept it.

What I was saying about bitcoin remains the same. I remember several years ago, when bitcoin was rocketing a co-worker said," Wow, there was a time when someone bought a pizza for 23,000 bitcoin! Now you could buy one hundred pizzas with a bitcoin!"

That is my point. Why use it now, when it will be worth more later. There is no incentive to spend it now or even later. The lack of common usage inhibits it's adoption.

[theolympians]

A quick Google shows that the Wiki decision to stop accepting crypto donations was more about avoiding association with the ongoing environmental debate and scam concerns. Furthermore, it was initiated and pushed by the creator of web3isgoinggreat.com - clearly someone with a crypto-axe to grind. It definitely wasn't a simple 'not worth the hassle' decision.

The reason I brought up Wikipedia is that it comes from populist, decentralized  "anyone can edit" grass-roots, is self-funded, no pay walls or subscriptions, operates mostly with volunteer labor, and is largely democratic.  It seems logical that there would be some natural overlap between Wiki supporters and crytpo-enthusiasts.  And because Wiki is donor supported, it needs to make it easy to accept payments by as many channels as possible, including across international borders.   So again there seems to be some natural overlap.   And indeed Wiki began accepting crypto donations in 2014, so they were pretty early.   But protecting your reputation is a hassle.   If crypto-donations were flowing over the transom it would be one thing.  But crypto-donations were on the order of about a hundredth of a percent of the total.   A rounding error of a rounding error.   With such little demand, the decision to stop accepting crypto does become pretty simple and the Wiki foundation voted overwhelmingly to stop accepting it.   That goes to my point that even after eight years too few people were donating via crytpo channels to make it worthwhile, and this is an area that would seem to be a natural fit. 

This goes back to the chicken and egg problem, a record 66% Bitcoin did not move in the last year, and 45% has not moved in two years.   

https://cryptoslate.com/over-66-of-the-total-bitcoin-supply-hasnt-moved-in-the-last-one-year-setting-a-record

In order for Bitcoin to be useful as a currency, it needs to circulate.  But the people who own it are holding it.

"Environmental Concerns" what a load of crap. If it was making them $$$ they would continue to accept it. A public statement is the last place I would look to. I agree with telecaster.