Author Topic: Cryptocurrencies will cause the next major financial crisis  (Read 2790 times)

less4success

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Cryptocurrencies will cause the next major financial crisis
« on: October 19, 2021, 02:54:08 PM »
No idea when or how, but that's my prediction.

You heard it here first.

ChpBstrd

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Re: Cryptocurrencies will cause the next major financial crisis
« Reply #1 on: October 19, 2021, 07:57:00 PM »
I suppose to analyze this possibility, we have to think through two possible directions which each end in financial doom:

1) The value of cryptos collapses and never recovers. It becomes known as a fad of the 2020s and enters economic history as an epic bubble.
2) Crypto becomes a major asset in most investors' portfolios and a regular medium of exchange on e-commerce websites like Amazon, Walmart, and Ebay.

First let's look at #1. The total "market cap" in dollars for all cryptos is now $2.6T. If that amount of money melted down to nothing over a period of months/years, it would have an impact on crypto holders similar to the effect of The Big One on residents of California. A reallocation of wealth just like this hypothetical caused a major recession and stock market collapse between 2000 and 2003, and it was on the scale of trillions of dollars, just like a crypto collapse would be. Thus, my prediction is that a crypto collapse would have a similar effect on the economy as the dot-com bubble. Millions of young to middle aged tech-savvy white males would lose a significant chunk of their net worth, and this would lead to interesting grievance politics, particularly if the bubble was perceived to be popped by the government and this politically active demographic started demanding "reparations". If a crypto-reparations bill passed, it would be a huge economic stimulus - helicopter money to former crypto holders - although the unfairness of it all would define politics for the next several generations.

Now let's look at #2. The crisis occurs when the Federal Reserve (or any major reserve bank) is no longer able to control the velocity of money or interest rates through their normal means, because of arbitrage channels. E.g. If the Fed buys assets to increase the velocity of dollars, and those new dollars in the marketplace are simply traded for crypto to balance demand for each currency, then the QE has a fraction of the effect on anything other than crypto prices. Similarly, if the Fed raises interest rates to control inflation of the USD, and via arbitrage this also causes interest rates on crypto lending to go up, then maybe people pile out of dollars and into crypto, causing the foreign exchange rate of the USD to actually fall, and the price of imports to keep going up in USD. Soon market participants realize the Fed's multi-trillion dollar balance sheet is no longer the bulletproof inflation insurance policy they thought it was, that interest rates will have to go very, very high to extinguish any bout of future inflation, and that the Fed is similarly less able to prevent deflationary episodes with QE. If they realize this all at once, risk premia could rise and asset prices could collapse. Similarly the USD would steadily lose value, due to no longer being bulletproof. The era of falling interest rates, rising asset prices, dollar supremacy as the world's reserve currency, high Federal Reserve efficacy, etc. would all collapse at once. My prediction is that this sort of world would resemble the deep depressions, sudden booms, and volatile/uncontrolled currency conditions of the late 1800s to early 1920s. In such a future, China's early crypto bans look prescient. As the remaining empire able to completely control its currency and maintain stability, China's digital currency becomes the world's new reserve currency. The American middle class as we know it shrinks dramatically, amid political deadlock, hand wringing, and class warfare over what to do about the cryptocurrency problem without making things worse.

Let's hope for #1.

Fru-Gal

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Re: Cryptocurrencies will cause the next major financial crisis
« Reply #2 on: October 19, 2021, 08:01:45 PM »
I've thought something similar.

Could there be a third scenario where crypto velocity is slowed via carbon taxes for mining and capital gains via the IRS (who is already asking if we've traded crypto in the calendar year)?

Juan Ponce de León

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Re: Cryptocurrencies will cause the next major financial crisis
« Reply #3 on: October 19, 2021, 09:36:56 PM »
I hope they do haha.  No-coiners will be raging.

yachi

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Re: Cryptocurrencies will cause the next major financial crisis
« Reply #4 on: October 20, 2021, 06:51:48 AM »
I've thought something similar.

Could there be a third scenario where crypto velocity is slowed via carbon taxes for mining and capital gains via the IRS (who is already asking if we've traded crypto in the calendar year)?

To be clear, you do currently owe capital gains on any sales of Crypto: https://www.investopedia.com/articles/investing/040515/are-there-taxes-bitcoins.asp

boarder42

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Re: Cryptocurrencies will cause the next major financial crisis
« Reply #5 on: October 20, 2021, 07:30:43 AM »
let me go copy and paste my statement to a couple buddies from a week ago making the same statement 1 day before the article came out in the guardian.  I 100% agree with this. 

Crypto has a market cap more than 2x the subprime lending market cap in 2008.

People are leveraging investments into this - think silicon valley where they have lots of stock options they dont want to cash due to taxes but they take out loans and buy houses and crypto and whatever else with it.  I'm not sure we understand the amount of debt that crypto is propped up on today. not to mention the amount of debt inside the crypto market with borrowing coins against other coins - if the major coins do crash whats the ramification and spread into the broad markets.

I hope they do haha.  No-coiners will be raging.

no i wont b/c its going to collapse the stock market with it
« Last Edit: October 20, 2021, 07:33:14 AM by boarder42 »

less4success

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Re: Cryptocurrencies will cause the next major financial crisis
« Reply #6 on: October 20, 2021, 08:13:44 AM »
let me go copy and paste my statement to a couple buddies from a week ago making the same statement 1 day before the article came out in the guardian.

What article from the Guardian? Did they beat me to my prediction!?

Edit: found it’s from the Bank of England: https://www.bankofengland.co.uk/speech/2021/october/jon-cunliffe-swifts-sibos-2021

Quote from: jcunliffe
my conclusion is that while a severe [cryptocurrency] price correction would not cause financial stability problems now, all else equal, the current trajectory implies that this may not be the case for very long.

Note: the speech doesn't go very deep, especially with respect to decentralized finance.
« Last Edit: October 20, 2021, 09:18:17 AM by less4success »

boarder42

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Re: Cryptocurrencies will cause the next major financial crisis
« Reply #7 on: October 20, 2021, 08:19:17 AM »
let me go copy and paste my statement to a couple buddies from a week ago making the same statement 1 day before the article came out in the guardian.

What article from the Guardian? Did they beat me to my prediction!?

https://www.theguardian.com/technology/2021/oct/13/bitcoin-could-trigger-financial-meltdown-warns-bank-of-england-deputy

exactly 1 week ago it was the deputy of the bank of england.

I have a text from 1 day before to a couple friends on the path to FIRE making the same statement

JAYSLOL

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Re: Cryptocurrencies will cause the next major financial crisis
« Reply #8 on: October 20, 2021, 08:33:27 AM »
let me go copy and paste my statement to a couple buddies from a week ago making the same statement 1 day before the article came out in the guardian.  I 100% agree with this. 

Crypto has a market cap more than 2x the subprime lending market cap in 2008.

People are leveraging investments into this - think silicon valley where they have lots of stock options they dont want to cash due to taxes but they take out loans and buy houses and crypto and whatever else with it.  I'm not sure we understand the amount of debt that crypto is propped up on today. not to mention the amount of debt inside the crypto market with borrowing coins against other coins - if the major coins do crash whats the ramification and spread into the broad markets.

I hope they do haha.  No-coiners will be raging.

no i wont b/c its going to collapse the stock market with it

I’m faily sure he thinks that’s “cool”, and that crypto will be immune and we’ll all be buying crypto while he says I told you so from his Lamborghini

MustacheAndaHalf

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Re: Cryptocurrencies will cause the next major financial crisis
« Reply #9 on: October 20, 2021, 09:25:11 AM »
Crypto has a market cap more than 2x the subprime lending market cap in 2008.

People are leveraging investments into this - think silicon valley where they have lots of stock options they dont want to cash due to taxes but they take out loans and buy houses and crypto and whatever else with it.
I disagree with blaming subprime loans on the 2008 crash.  Poor people didn't crash worldwide markets - investment banks did.  They created CDOs with 1000x leverage on each mortgage.  They demanded more mortgages to stuff into CDOs and synthetic CDOs, which turned the subprime market into a free for all.  Banks took no risk, and investment banks took no risk - it was whoever got the investment that took all the risk.  Like the investment banks, Moody's and S&P went along for the fat fees, helping lend trust to things they didn't understand.  Leverage and corruption caused the 2008 crisis, not poor people buying houses.

Still, you raise an interesting point about leverage and Bitcoin.  According to CoinMarketCap, there's $1.2 trillion of BTC in existence, about $40 billion of which trades each day.  The futures market for BTC is even smaller than the daily volume, so that's not leverage.  Some places offer leverage in a margin account, but wouldn't that BTC have to come from somewhere else?  I wonder if there's some kind of leverage with BTC that could cause a greater than trillion dollar impact.

boarder42

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Re: Cryptocurrencies will cause the next major financial crisis
« Reply #10 on: October 20, 2021, 09:32:16 AM »
Crypto has a market cap more than 2x the subprime lending market cap in 2008.

People are leveraging investments into this - think silicon valley where they have lots of stock options they dont want to cash due to taxes but they take out loans and buy houses and crypto and whatever else with it.
I disagree with blaming subprime loans on the 2008 crash.  Poor people didn't crash worldwide markets - investment banks did.  They created CDOs with 1000x leverage on each mortgage.  They demanded more mortgages to stuff into CDOs and synthetic CDOs, which turned the subprime market into a free for all.  Banks took no risk, and investment banks took no risk - it was whoever got the investment that took all the risk.  Like the investment banks, Moody's and S&P went along for the fat fees, helping lend trust to things they didn't understand.  Leverage and corruption caused the 2008 crisis, not poor people buying houses.

Still, you raise an interesting point about leverage and Bitcoin.  According to CoinMarketCap, there's $1.2 trillion of BTC in existence, about $40 billion of which trades each day.  The futures market for BTC is even smaller than the daily volume, so that's not leverage.  Some places offer leverage in a margin account, but wouldn't that BTC have to come from somewhere else?  I wonder if there's some kind of leverage with BTC that could cause a greater than trillion dollar impact.

i havent investigated and don't really plan to take the time but if someone who invests in crypto wants to truly understand the amount of it being borrowed etc. I think it would be prudent to know as an investor as these assets are backed by litterally nothing at least there were homes in the CDO market at some point.  I see people citing all over the place the returns they are getting by staking or in interest so someone is using these coins to make more money than the crazy amount of interest or staking fees they are paying and i have to assume its only being used to speculate further into crypto purchase speculation or mining. i could go dig up posts but i see people claiming 8.8% returns on stable coins and many other claims that are to me like where the F is the money coming from to pay that return on that coin?

MustacheAndaHalf

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Re: Cryptocurrencies will cause the next major financial crisis
« Reply #11 on: October 20, 2021, 10:09:36 AM »
Crypto has a market cap more than 2x the subprime lending market cap in 2008.

People are leveraging investments into this - think silicon valley where they have lots of stock options they dont want to cash due to taxes but they take out loans and buy houses and crypto and whatever else with it.
I disagree with blaming subprime loans on the 2008 crash.  Poor people didn't crash worldwide markets - investment banks did.  They created CDOs with 1000x leverage on each mortgage.  They demanded more mortgages to stuff into CDOs and synthetic CDOs, which turned the subprime market into a free for all.  Banks took no risk, and investment banks took no risk - it was whoever got the investment that took all the risk.  Like the investment banks, Moody's and S&P went along for the fat fees, helping lend trust to things they didn't understand.  Leverage and corruption caused the 2008 crisis, not poor people buying houses.

Still, you raise an interesting point about leverage and Bitcoin.  According to CoinMarketCap, there's $1.2 trillion of BTC in existence, about $40 billion of which trades each day.  The futures market for BTC is even smaller than the daily volume, so that's not leverage.  Some places offer leverage in a margin account, but wouldn't that BTC have to come from somewhere else?  I wonder if there's some kind of leverage with BTC that could cause a greater than trillion dollar impact.

i havent investigated and don't really plan to take the time but if someone who invests in crypto wants to truly understand the amount of it being borrowed etc. I think it would be prudent to know as an investor as these assets are backed by litterally nothing at least there were homes in the CDO market at some point.  I see people citing all over the place the returns they are getting by staking or in interest so someone is using these coins to make more money than the crazy amount of interest or staking fees they are paying and i have to assume its only being used to speculate further into crypto purchase speculation or mining. i could go dig up posts but i see people claiming 8.8% returns on stable coins and many other claims that are to me like where the F is the money coming from to pay that return on that coin?
CDOs are derivatives - they are not backed by anything.  There might be 100 different CDOs all containing / tracking the same mortgage.  And then synthetic CDOs multiply that leverage further, containing many different CDOs.  Once a $250,000 mortgage has turned into $250 million of investments, even if the house could be sold to pay off investments, it's 1000x too little.

I'm not sure what is going on with high yields on stable coins.  Stable coins are the entry point (gateway drug?) to the crypto market.  It's possible there's some shady business going on with Tether (USDT), backed by a company in Hong Kong.  Like a bank run, you never know how much the bank is holding until people try to cash out more than the bank has assets.  I recall that company claimed it would do a full audit, then fired it's auditors before they could finish.

boarder42

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Re: Cryptocurrencies will cause the next major financial crisis
« Reply #12 on: October 20, 2021, 10:27:51 AM »
Crypto has a market cap more than 2x the subprime lending market cap in 2008.

People are leveraging investments into this - think silicon valley where they have lots of stock options they dont want to cash due to taxes but they take out loans and buy houses and crypto and whatever else with it.
I disagree with blaming subprime loans on the 2008 crash.  Poor people didn't crash worldwide markets - investment banks did.  They created CDOs with 1000x leverage on each mortgage.  They demanded more mortgages to stuff into CDOs and synthetic CDOs, which turned the subprime market into a free for all.  Banks took no risk, and investment banks took no risk - it was whoever got the investment that took all the risk.  Like the investment banks, Moody's and S&P went along for the fat fees, helping lend trust to things they didn't understand.  Leverage and corruption caused the 2008 crisis, not poor people buying houses.

Still, you raise an interesting point about leverage and Bitcoin.  According to CoinMarketCap, there's $1.2 trillion of BTC in existence, about $40 billion of which trades each day.  The futures market for BTC is even smaller than the daily volume, so that's not leverage.  Some places offer leverage in a margin account, but wouldn't that BTC have to come from somewhere else?  I wonder if there's some kind of leverage with BTC that could cause a greater than trillion dollar impact.

i havent investigated and don't really plan to take the time but if someone who invests in crypto wants to truly understand the amount of it being borrowed etc. I think it would be prudent to know as an investor as these assets are backed by litterally nothing at least there were homes in the CDO market at some point.  I see people citing all over the place the returns they are getting by staking or in interest so someone is using these coins to make more money than the crazy amount of interest or staking fees they are paying and i have to assume its only being used to speculate further into crypto purchase speculation or mining. i could go dig up posts but i see people claiming 8.8% returns on stable coins and many other claims that are to me like where the F is the money coming from to pay that return on that coin?
CDOs are derivatives - they are not backed by anything.  There might be 100 different CDOs all containing / tracking the same mortgage.  And then synthetic CDOs multiply that leverage further, containing many different CDOs.  Once a $250,000 mortgage has turned into $250 million of investments, even if the house could be sold to pay off investments, it's 1000x too little.

I'm not sure what is going on with high yields on stable coins.  Stable coins are the entry point (gateway drug?) to the crypto market.  It's possible there's some shady business going on with Tether (USDT), backed by a company in Hong Kong.  Like a bank run, you never know how much the bank is holding until people try to cash out more than the bank has assets.  I recall that company claimed it would do a full audit, then fired it's auditors before they could finish.

distrust in one brings regulation and lack of trust to most wouldnt you say?  I mean if tether for example collapses how does that affect the rest of the market - further how much tether is being borrowed and leveraged to by BTC with out actual dollars backing it like its supposed to have - seems to be pretty similar to a CDO no?

ChpBstrd

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Re: Cryptocurrencies will cause the next major financial crisis
« Reply #13 on: October 20, 2021, 11:05:01 AM »
Crypto has a market cap more than 2x the subprime lending market cap in 2008.

People are leveraging investments into this - think silicon valley where they have lots of stock options they dont want to cash due to taxes but they take out loans and buy houses and crypto and whatever else with it.
I disagree with blaming subprime loans on the 2008 crash.  Poor people didn't crash worldwide markets - investment banks did.  They created CDOs with 1000x leverage on each mortgage.  They demanded more mortgages to stuff into CDOs and synthetic CDOs, which turned the subprime market into a free for all.  Banks took no risk, and investment banks took no risk - it was whoever got the investment that took all the risk.  Like the investment banks, Moody's and S&P went along for the fat fees, helping lend trust to things they didn't understand.  Leverage and corruption caused the 2008 crisis, not poor people buying houses.

Still, you raise an interesting point about leverage and Bitcoin.  According to CoinMarketCap, there's $1.2 trillion of BTC in existence, about $40 billion of which trades each day.  The futures market for BTC is even smaller than the daily volume, so that's not leverage.  Some places offer leverage in a margin account, but wouldn't that BTC have to come from somewhere else?  I wonder if there's some kind of leverage with BTC that could cause a greater than trillion dollar impact.

i havent investigated and don't really plan to take the time but if someone who invests in crypto wants to truly understand the amount of it being borrowed etc. I think it would be prudent to know as an investor as these assets are backed by litterally nothing at least there were homes in the CDO market at some point.  I see people citing all over the place the returns they are getting by staking or in interest so someone is using these coins to make more money than the crazy amount of interest or staking fees they are paying and i have to assume its only being used to speculate further into crypto purchase speculation or mining. i could go dig up posts but i see people claiming 8.8% returns on stable coins and many other claims that are to me like where the F is the money coming from to pay that return on that coin?

The most obvious way to leverage a crypto investment would be going to Interactive Brokers, setting up a margin account, and buying the new Bitcoin ETF BITO at 1.58% margin interest. The initial margin for BITO is 63%, so one could put down $6,300 cash to buy $10,000 of BITO. Margin would be called if your BITO position declined 50%, to $5,000. This is a significant policy changed compared to GBTC, which is still not leverage-able. The WSB kids will be tempted to yolo this way. Actually I'm pretty sure they'll do it.

But wait, it gets crazier. BITO has an options market! I can buy 5X leverage on the direction of BITO through the end of the year. Maybe the WSB kids will consider regular margin to be a boomer trade. BITO even has LEAPS options out to 2024, but the time value is crazy.

@MustacheAndaHalf here's your next crowd trade!

MustacheAndaHalf

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Re: Cryptocurrencies will cause the next major financial crisis
« Reply #14 on: October 20, 2021, 07:42:21 PM »
Quote
... earlier discussion ...

CDOs are derivatives - they are not backed by anything.  There might be 100 different CDOs all containing / tracking the same mortgage.  And then synthetic CDOs multiply that leverage further, containing many different CDOs.  Once a $250,000 mortgage has turned into $250 million of investments, even if the house could be sold to pay off investments, it's 1000x too little.

I'm not sure what is going on with high yields on stable coins.  Stable coins are the entry point (gateway drug?) to the crypto market.  It's possible there's some shady business going on with Tether (USDT), backed by a company in Hong Kong.  Like a bank run, you never know how much the bank is holding until people try to cash out more than the bank has assets.  I recall that company claimed it would do a full audit, then fired it's auditors before they could finish.

distrust in one brings regulation and lack of trust to most wouldnt you say?  I mean if tether for example collapses how does that affect the rest of the market - further how much tether is being borrowed and leveraged to by BTC with out actual dollars backing it like its supposed to have - seems to be pretty similar to a CDO no?
Here's a definition of CDO, and to me, it isn't similar:
https://www.investopedia.com/terms/c/cdo.asp

If Tether (USDT) collapsed, there would definitely be panic in crypto markets.  But I'd probably buy BTC and ETH if prices dropped, because there are other stable coins that could take the place of USDT.  I would expect a significant drop in BTC and ETH prices if that happened, and I'd try and buy some.  After an initial panic, people would switch to other stable coins to sell BTC and other crypto.

While you like to compare this to 2008, I think comparing to 2000-2002 is more apt.  Back then, websites were measured on visitors, not revenue or profit.  Right now, we don't know if crypto currencies will play a useful and valuable role in payments.  There's speculation and uncertainty about what happens in the future.  Many companies collapsed in the dot-com crash, and many crypto currencies could crash if they have no use in the long term.

To me, the risk is like pets.com versus amazon.com.  Maybe BTC will be useless, and drop to be worth nothing.  Or maybe lots of daily transactions will rely on it, making it valuable.  That's the speculation that hasn't been resolved yet.  I'm more worried that BTC won't be useful, which dooms it to an unknown role.

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Re: Cryptocurrencies will cause the next major financial crisis
« Reply #15 on: October 20, 2021, 08:20:03 PM »
But wait, it gets crazier. BITO has an options market! I can buy 5X leverage on the direction of BITO through the end of the year. Maybe the WSB kids will consider regular margin to be a boomer trade. BITO even has LEAPS options out to 2024, but the time value is crazy.

@MustacheAndaHalf here's your next crowd trade!
What the ****, you're right!  Yahoo Finance doesn't show it, but Vanguard "trade options" shows BITO calls with various expirations (and decent volume).  I find it amusing that GBTC, which has been around for years, has no options market.  Meanwhile BITO is literally a couple days old, and it has a fairly deep options market extending to 2024 expirations.

Looking at BITO calls expiring 31 Dec 2021, I see the $41 strike has a last trade of $8.45, which is 5.12x leverage.  To beat buying shares, BITO has to rise more than 18% in two months.  Even with Jan 2024 calls at $41 strike, if BITO doubles in two years, options lose out (+65%) to buying shares (+100%) because of the time value cost.

I don't think I usually follow a crowd trade?  My favorite calls are deep in the money, which is an unpopular way to use options.

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Re: Cryptocurrencies will cause the next major financial crisis
« Reply #16 on: October 20, 2021, 09:36:37 PM »
But wait, it gets crazier. BITO has an options market! I can buy 5X leverage on the direction of BITO through the end of the year. Maybe the WSB kids will consider regular margin to be a boomer trade. BITO even has LEAPS options out to 2024, but the time value is crazy.

@MustacheAndaHalf here's your next crowd trade!
What the ****, you're right!  Yahoo Finance doesn't show it, but Vanguard "trade options" shows BITO calls with various expirations (and decent volume).  I find it amusing that GBTC, which has been around for years, has no options market.  Meanwhile BITO is literally a couple days old, and it has a fairly deep options market extending to 2024 expirations.

Looking at BITO calls expiring 31 Dec 2021, I see the $41 strike has a last trade of $8.45, which is 5.12x leverage.  To beat buying shares, BITO has to rise more than 18% in two months.  Even with Jan 2024 calls at $41 strike, if BITO doubles in two years, options lose out (+65%) to buying shares (+100%) because of the time value cost.

I don't think I usually follow a crowd trade?  My favorite calls are deep in the money, which is an unpopular way to use options.
Long and deep calls offer a lower risk way to catch the froth of the Bitcoin trade, because you can only lose the value of the call. If demand for long calls goes through the roof like it did for GME and AMC earlier this year, then whoever is selling those calls has to buy BITO as a hedge or buy other calls, which could push BITO’s price above NAV or force it to buy more Bitcoin. Will options trades on the Bitcoin ETF attract so many gamblers that it pushes up Bitcoin? I think it will, but I’m already levered to the gills and hate crypto anyway. If I had any cash I’d probably sell a put, knowing that if I was assigned I could earn back most assignment losses by selling a covered call.

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Re: Cryptocurrencies will cause the next major financial crisis
« Reply #17 on: October 23, 2021, 10:04:30 AM »
My concern is that crypto becomes "too big to fail" now that Wall Street and Congressrats get to play in it and then taxpayers get to bail it out.

I'm not versed enough to understand leveraging/futures but otherwise it seems like the pool of crypto owners is much smaller than 2000-02 tech stock owners, and of course is far more of a global pool. Still, the contamination probably would affect all of us. That's why I am resentful the US never regulated this market or put effort into taxing gains.
« Last Edit: October 23, 2021, 10:14:17 AM by harvestbook »

boarder42

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Re: Cryptocurrencies will cause the next major financial crisis
« Reply #18 on: October 23, 2021, 10:36:11 AM »
My concern is that crypto becomes "too big to fail" now that Wall Street and Congressrats get to play in it and then taxpayers get to bail it out.

I'm not versed enough to understand leveraging/futures but otherwise it seems like the pool of crypto owners is much smaller than 2000-02 tech stock owners, and of course is far more of a global pool. Still, the contamination probably would affect all of us. That's why I am resentful the US never regulated this market or put effort into taxing gains.

There is no comparison to the internet of the late 90s. People were building companies that were adding value and generating revenue using a centralized medium to market and sell products and services in a more connected way. Each new crypto thing invented runs on its own Blockchain code and requires people to assume it has value currently due to fomo and price go up.

Some Blockchain has value thru creating ownership of art and collectible IP that has at least some intrinsic value to someone. BTC is just coins it has no real value other than what people think it does. And then they constantly site how powerful a tool Blockchain is or could be. Which I agree Blockchain likely has value.

But if BTC were compared to something of the internet age it would be a collection of URLs with pictures of gold that people traded.

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Re: Cryptocurrencies will cause the next major financial crisis
« Reply #19 on: October 23, 2021, 09:16:48 PM »
My concern is that crypto becomes "too big to fail" now that Wall Street and Congressrats get to play in it and then taxpayers get to bail it out.
I believe the largest Bitcoin ETF is Grayscale Bitcoin Trust (GBTC) with $8.56 billion in assets.  There's also companies like Coinbase Global (COIN, $80 billion) that would collapse without crypto currencies.  While $90 billion may seem like a lot, several of the largest public companies hold that much in cash.  Convert it to trillions, and that's $0.09 trillion compared to the $41 trillion in the U.S. stock market overall.  It's a fraction of 1%, so we're a long ways from "too big to fail".
https://finance.yahoo.com/quote/GBTC
https://finance.yahoo.com/quote/COIN
https://data.worldbank.org/indicator/CM.MKT.LCAP.CD?locations=US

There is no comparison to the internet of the late 90s. People were building companies that were adding value and generating revenue using a centralized medium to market and sell products and services in a more connected way. Each new crypto thing invented runs on its own Blockchain code and requires people to assume it has value currently due to fomo and price go up.
To intercept and respond to that, I've made that comparison more than once.  The goal of late 1990s dot-com companies was eyeballs, not revenue.  That's how the bubble inflated, and when people resumed using profits as a measuring stick, the dot-com companies collapsed.  All of them, too - even Apple and Amazon lost 90% of their value in the crash.  If it really was about revenue, those companies should have been spared.

The comparison I see is a speculative future.  I mostly see two sides of the Bitcoin debate, that either everyone will spend Bitcoin in the future or that it has no future.  In my view, both "black and white" perspectives are not accurate - we don't know what will occur, including many possibilities between those two points of view.  Bitcoin or other crypto currencies might compete with Visa and Mastercard, or might lose out to app payment methods.

Telecaster

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Re: Cryptocurrencies will cause the next major financial crisis
« Reply #20 on: October 24, 2021, 12:17:55 PM »
The comparison I see is a speculative future.  I mostly see two sides of the Bitcoin debate, that either everyone will spend Bitcoin in the future or that it has no future.  In my view, both "black and white" perspectives are not accurate - we don't know what will occur, including many possibilities between those two points of view.  Bitcoin or other crypto currencies might compete with Visa and Mastercard, or might lose out to app payment methods.

In my view, Bitcoin is a collectable and will have value as long as enough people believe it to be valuable, no different than any other collectable.   The deficiencies of Bitcoin as a currency are so great I see no path to it ever be commonly used in financial transactions. 

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Re: Cryptocurrencies will cause the next major financial crisis
« Reply #21 on: October 24, 2021, 04:25:38 PM »
My concern is that crypto becomes "too big to fail" now that Wall Street and Congressrats get to play in it and then taxpayers get to bail it out.
I believe the largest Bitcoin ETF is Grayscale Bitcoin Trust (GBTC) with $8.56 billion in assets.  There's also companies like Coinbase Global (COIN, $80 billion) that would collapse without crypto currencies.  While $90 billion may seem like a lot, several of the largest public companies hold that much in cash.  Convert it to trillions, and that's $0.09 trillion compared to the $41 trillion in the U.S. stock market overall.  It's a fraction of 1%, so we're a long ways from "too big to fail".
https://finance.yahoo.com/quote/GBTC
https://finance.yahoo.com/quote/COIN
https://data.worldbank.org/indicator/CM.MKT.LCAP.CD?locations=US


Good response.

PS. Liking this thought provoking thread in general. Will be pondering some of the remarks for a while.

 

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