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

[BeanCounter]

Binance, Coinbase, Kraken, Binance.US and KuCoin... there's a hole where FTX used to be, but the other crypto exchanges can take up the slack.  For Coinbase it's an opportunity to poach FTX's customers, which could explain its +12.8% gain on Friday.

Probably not much slack to pick up.   FTX's marks customers are all out of crypto, at least what they had on the exchange.

Hahaha. I didn’t think about it like that but you’re probably right.

[redcedar]

Makes sense to me.

Not because the asset class makes sense but because all of us make similar speculation bets on things we falsely believe are not at the same level of speculation. An employer. A spouse. A sibling. Forever home. Pick something we delude ourselves over.

A 1-5% bet is potatoes, the fingering pig potato size potatoes, to the bigger bets we make all the time on those things we delude ourselves are “less risky” than crypto.

Are you comparing the decision to get married or get a job to investing in crypto somehow? And what the heck are "fingering pig potato size potatoes"?

-W

Edited for fingerling potatoes. The smaller fat finger size potatoes. Some call them pig potatoes as they are fed to pigs.

Yes I am comparing a lot of “normal” decisions to crypto speculation. Most of those decisions are made with similar or even less information or knowledge or wisdom as a crypto purchase. Now success is often viewed through luck or survivorship biased lenses. I knew I had the right spouse. Did you really? I picked an amazing job. Sure you did. Etc etc. After the fact eagle eye hindsight. On what often involved alot of luck or speculation.

[LateStarter]

I wondered how long it would take for the unseemly celebrations to commence here - lol

There's undoubtedly tons of fraud/scams in the crypto world and the sooner each piece is uncovered the better - preferably without inflicting too much pain on the innocent/naive, though significant pain seems inevitable. Hopefully, many are now reconsidering the wisdom of holding significant value in centralised tokens and/or on centralised exchanges, etc.

IMO, there is Bitcoin and there is the bandwagon - and ALL of the bandwagon is suspect. Still holding Bitcoin, still happy to hold, and not worrying about short-term ups and downs . . .

[Metalcat]

I wondered how long it would take for the unseemly celebrations to commence here - lol

There's undoubtedly tons of fraud/scams in the crypto world and the sooner each piece is uncovered the better - preferably without inflicting too much pain on the innocent/naive, though significant pain seems inevitable. Hopefully, many are now reconsidering the wisdom of holding significant value in centralised tokens and/or on centralised exchanges, etc.

IMO, there is Bitcoin and there is the bandwagon - and ALL of the bandwagon is suspect. Still holding Bitcoin, still happy to hold, and not worrying about short-term ups and downs . . .

I'm only celebrating not being spoken down to by morons.

Beyond that, whomever wants to invest in crypto can go nuts.

[waltworks]

Yes I am comparing a lot of “normal” decisions to crypto speculation. Most of those decisions are made with similar or even less information or knowledge or wisdom as a crypto purchase. Now success is often viewed through luck or survivorship biased lenses. I knew I had the right spouse. Did you really? I picked an amazing job. Sure you did. Etc etc. After the fact eagle eye hindsight. On what often involved alot of luck or speculation.

Ok, so I did understand you. That's a pretty bizarre analogy. When getting married (most) people date many people, learn how they get along, meet each other's families/friends, often live together for a while, etc. Lots of information is gathered before making the leap, it's a pretty conservative process in many ways. The investing analogy would probably be value or index fund investing where there's considerable due diligence and pretty high confidence in a good outcome.

The crypto investing equivalent would be getting married in Vegas to someone you met the same night because they're really hot (or seemed that way through beer goggles). Very small chance it'll be great. Very large chance it's a disaster and they're going to disappear with all your money....

-W

[MustacheAndaHalf]

Binance, Coinbase, Kraken, Binance.US and KuCoin... there's a hole where FTX used to be, but the other crypto exchanges can take up the slack. 

I think what most people are taking away from this is that crypto exchanges (FTX was supposedly one of the least risky/most stable) can't handle a run on withdrawals.

That pretty much puts into question *every* exchange, no?

A "run on withdrawals" is difficult when all withdrawals are halted.  What actually happened was Binance targetting FTX, and potential fraud at FTX making them vulerable to collapse.  After Binance's CEO argued with FTX's CEO publicly, Binance announced it was dumping all FTT tokens (tokens created by FTX).  FTT tokens plunged in value on the announcement.

Sam Bankman Fried founded FTX and Alameda.  Earlier, when Alameda got into trouble, Sam's left hand (FTX) loaned his right hand (Alameda) billions to cover losses.  A significant part of the loan was in FTT tokens, which had dramatically fallen in value.  I believe the assets no longer covered the loan, and that made Alameda insolvent.  Because FTX had loaned billions to Alameda, and had no way to get its money back, FTX also became insolvent.

From what I've read, Sam Bankman Fried could go to prison.  The loan was improper, but he also stole customer assets which became part of the loan.  One investor talking on CNBC had to apologize for using profanity on the air, he was so pissed off.  This wasn't a normal run on assets or even a hack - it appears to be fraud.

Sam Bankman-Fried transferred at least $4 billion in FTX funds secured by assets including the crypto exchange's FTT token and shares in the trading platform Robinhood Markets Inc (HOOD) to support Alameda Research after the trading firm suffered a series of losses from deals, according to three people familiar with its operations, Reuters reported Thursday.

https://www.coindesk.com/business/2022/11/10/ftx-used-customer-funds-among-other-assets-to-prop-up-alameda-research-in-may-reuters/

[waltworks]

Yeah, if it's mostly a fraud story, that's even worse for confidence in other crypto exchanges/ventures, though.

-W

[Mr. Green]

If a bank was a new concept and several of them had become insolvent over the last two years and their customers lost all their money, and then in the latest version you found out the bank actually stole customers' money, made bad decisions, and then lost everyone else's money as a result, would you want to give any bank your money? I sure as hell wouldn't.

[havregryn]

We live in Luxembourg in the middle of an epic real estate bubble. How that will go God only knows. Anyway, a year or two ago, some guys decided that they wanted to "make it possible for people who've been priced out of the market to invest in real estate" using "blockchain" and came up with some sort of "tokens" for investing in real estate. You needed a crypto wallet to store these tokens and I still don't really "get" what these tokens were supposed to be but obviously they are SOMEHOW connected to the crypto sphere if they need to be in a crypto wallet (whatever that is).

They were really drumming them up and very eager to explain HOW they would make it possible for anyone to benefit from real estate growth (which was also taken for granted to be eternal) but none of it made any sense. The best I can tell is that the "value" of these tokens is what they say it is, based on their "valuations" of their property portfolio (which remains owned by their company, not by magic tokens).  They don't buy the tokens back from you though and the founder, when asked how one then gets money in exchange for the tokens that have quadrupled in value, appeared to consider that question to be a sign of "not being serious enough about investing". They did however suggest they would, over time, create a secondary market where one could sell their tokens to someone else and make money that way.

Every single fuckin red flag is going off in my head, but young people are lapping this up.
"Investing" in this.

And to make it even more wtf, now everything is going to hell, actual real estate market, actual crypto, but they simply revalued their tokens some percent upwards (because "an independent valuation said so") and all these investors are feeling real smug because this is going even better than they anticipated. Everything else is down, their investment is up. But they have absolutely no way to exchange their investment for money until there is a secondary market and then they're entirely dependent on finding people willing to buy these tokens off of them (and praying to God that not everyone decides to do so at the same time).

Can anyone explain this to me, I mean, I don't intend to "invest" in this, but how is something like this given so much legitimacy!? I feel that 20y ago even my semi-literate grandma would have thought that this sounded like a bad idea, but this crypto generation is somehow genuinely convinced that this is how any investing is supposed to work. Plus, I don't think this is even meant as a scam, the guys seem very GENUINELY convinced that they're bringing real estate speculation to the poor masses, but all I can see is that they're selling some kind of an NFT of a certain % of a certain property. I really, really don't get it.
They insist this isn't anything like crypto or NFT and is in fact more like buying shares in a real estate company but when asked why aren't they then selling shares in their real estate company, no clear response.

I am really curious to hear what people think of this. Because I'm really beginning to feel like I am too old to understand the genius behind it. Is there ANY scenario in which this can sustain itself (not gonna invest, just curious and open to arguments).

[Shane]

I enjoy that no one in my world any ore accuses me of just not understanding why crypto is such an amazing investment.

Exactly a year ago I was hanging out with in-laws who were aggressively condescending me that I just couldn't grasp why crypto was a better investment than the property I was buying in their city.

They're now both priced out of real estate in their own hometown and I'm several hundred percent up on my investment. Their various alt-coin investments??? Well, I just haven't heard anything about those in awhile.

Congratulations on your RE investments! Just curious, why they're up, "in exactly one year", "several hundred percent?" Did you possess some sort of insider knowledge about the market that no one else knew about, or was everyone in your in-laws' town with money to invest just piling it all into crypto, so this amazing RE investment you took advantage of was going untouched, until you came along?...

Untouched? No. I just happened to spot a rising tide before it got too high and had a pile of money that I didn't want to solely dump into the overheated equities market at the time. Between high rents and a red hot market (no, I was not the only one with this idea), I'm up several times what I spent on down payment and repairs. Although, I didn't account for sweat equity.

As for my in-laws, lol, let's just say they're the last people who should be lecturing anyone about financial moves.

Oh, okay. Got it. Sorry, misunderstood and thought you meant the value of the RE had gone up several hundred percent in just one year, which seemed pretty incredible and like there might be an interesting story behind it.

[Shane]

We live in Luxembourg in the middle of an epic real estate bubble. How that will go God only knows. Anyway, a year or two ago, some guys decided that they wanted to "make it possible for people who've been priced out of the market to invest in real estate" using "blockchain" and came up with some sort of "tokens" for investing in real estate. You needed a crypto wallet to store these tokens and I still don't really "get" what these tokens were supposed to be but obviously they are SOMEHOW connected to the crypto sphere if they need to be in a crypto wallet (whatever that is).

They were really drumming them up and very eager to explain HOW they would make it possible for anyone to benefit from real estate growth (which was also taken for granted to be eternal) but none of it made any sense. The best I can tell is that the "value" of these tokens is what they say it is, based on their "valuations" of their property portfolio (which remains owned by their company, not by magic tokens).  They don't buy the tokens back from you though and the founder, when asked how one then gets money in exchange for the tokens that have quadrupled in value, appeared to consider that question to be a sign of "not being serious enough about investing". They did however suggest they would, over time, create a secondary market where one could sell their tokens to someone else and make money that way.

Every single fuckin red flag is going off in my head, but young people are lapping this up.
"Investing" in this.

And to make it even more wtf, now everything is going to hell, actual real estate market, actual crypto, but they simply revalued their tokens some percent upwards (because "an independent valuation said so") and all these investors are feeling real smug because this is going even better than they anticipated. Everything else is down, their investment is up. But they have absolutely no way to exchange their investment for money until there is a secondary market and then they're entirely dependent on finding people willing to buy these tokens off of them (and praying to God that not everyone decides to do so at the same time).

Can anyone explain this to me, I mean, I don't intend to "invest" in this, but how is something like this given so much legitimacy!? I feel that 20y ago even my semi-literate grandma would have thought that this sounded like a bad idea, but this crypto generation is somehow genuinely convinced that this is how any investing is supposed to work. Plus, I don't think this is even meant as a scam, the guys seem very GENUINELY convinced that they're bringing real estate speculation to the poor masses, but all I can see is that they're selling some kind of an NFT of a certain % of a certain property. I really, really don't get it.
They insist this isn't anything like crypto or NFT and is in fact more like buying shares in a real estate company but when asked why aren't they then selling shares in their real estate company, no clear response.

I am really curious to hear what people think of this. Because I'm really beginning to feel like I am too old to understand the genius behind it. Is there ANY scenario in which this can sustain itself (not gonna invest, just curious and open to arguments).

Sounds kinda like an REIT. Maybe they just added the blockchain element to make the "investment" seem sexier to young, gullible "investors"?

[MustacheAndaHalf]

We live in Luxembourg in the middle of an epic real estate bubble. How that will go God only knows. Anyway, a year or two ago, some guys decided that they wanted to "make it possible for people who've been priced out of the market to invest in real estate" using "blockchain" and came up with some sort of "tokens" for investing in real estate. You needed a crypto wallet to store these tokens and I still don't really "get" what these tokens were supposed to be but obviously they are SOMEHOW connected to the crypto sphere if they need to be in a crypto wallet (whatever that is).

People in the U.S. invested in FTX, which was headquartered in the offshore tax haven of the Bahamas.  The project you describe is located in Luxembourg, regulated there, and involves real estate there.  That's a much safer environment to experiment in.
https://www.blochome.com/en/blog

My guess is that they have a corporation own a real estate property, which is very common.  The novel part is equating crypto tokens to the ownership shares.  Fractional real estate investment with crypto thrown in for excitement.  What I'd want to know are the fees they made on setting this up, and why they aren't renting this place and keeping the profits for themselves.

[Metalcat]

I enjoy that no one in my world any ore accuses me of just not understanding why crypto is such an amazing investment.

Exactly a year ago I was hanging out with in-laws who were aggressively condescending me that I just couldn't grasp why crypto was a better investment than the property I was buying in their city.

They're now both priced out of real estate in their own hometown and I'm several hundred percent up on my investment. Their various alt-coin investments??? Well, I just haven't heard anything about those in awhile.

Congratulations on your RE investments! Just curious, why they're up, "in exactly one year", "several hundred percent?" Did you possess some sort of insider knowledge about the market that no one else knew about, or was everyone in your in-laws' town with money to invest just piling it all into crypto, so this amazing RE investment you took advantage of was going untouched, until you came along?...

Untouched? No. I just happened to spot a rising tide before it got too high and had a pile of money that I didn't want to solely dump into the overheated equities market at the time. Between high rents and a red hot market (no, I was not the only one with this idea), I'm up several times what I spent on down payment and repairs. Although, I didn't account for sweat equity.

As for my in-laws, lol, let's just say they're the last people who should be lecturing anyone about financial moves.

Oh, okay. Got it. Sorry, misunderstood and thought you meant the value of the RE had gone up several hundred percent in just one year, which seemed pretty incredible and like there might be an interesting story behind it.

Lol, no, but incidentally the value of my other property I bought last year is arguably double what I paid for it based on current comps, but that's in a very whacky market and might be even harder to sell than the weird Luxembourg crypto shit described above. Lol

[achvfi]

Probably better to listen to MMM and stay out and have lower overall portfolio returns.

LMAO.

In the not too distant future when this is worth next to nothing y'all will be claiming you got out before that happened and are living like kings. Rather than posting percentages of ownership stakes why not start journals and document your actual transactions.  What do you have to lose?  Someone may read 8t and buy more unicorn farts and drive up the value.  Hell it may even become a unicorn poop.

Alright then. Not going to start a new thread at the moment, but I may soon.  Here's the numbers breakdown beyond just my current percentages:

Notes/Dislaimers: 

• On August 1 there was 695k in my retirement stache.  100% VTSAX
• I'm unable to directly buy crypto from my retirement stache, but I do have access to Grayscale Trust products, so when I say I'm buying Eth or BTC, what I really mean is I'm buying their trusts.  It closely, but does not perfectly match the growth of these coins.
   

August Details:

• August 2 - I bought 100k of Crypto...50k Bitcoin Trust (GBTC) and 50k Ethereum Trust (ETHE)
  
• August 20 - I bought 33k more of Ethereum Trust (ETHE)

[/li]
[/list]

August Month End Totals:
      Stache Total: 731k
      Crypto total: 159k
      VTSAX total: 572k

September Month End Totals: No new trades.
      Stache Total: 714k
      Crypto total: 147k
      VTSAX total: 567k

October Details:

• Sold Bitcoin Trust and bout extra ETHE, as well as Grayscale Large Cap (GDLC)
• Purpose of owning GDLC is that it gives me exposure to Bitcoin, Ethereum, Carsano, Solana, Uniswap, Chainlink, Litecoin, and Bitcoin Cash

[li]Additionally, I transferred 180k more from VTSAX into ETHE and GDLC[/li]
[li]Finally, I transferred unneeded cash from checking and bought 3k each of the following: Enjin, Polkadot, Avalanche, Aave, Chainlink, VeChain, as well as 3k of Ethereum[/li][/list]

October Month End Totals:
     Stache Total: 770k plus 20k in non-retirement account
      Crypto total: 395k
      VTSAX total: 395k

      Breakdown:
           ETHE - 155k
           GDLC - 217k
           Enjin - 3k
           Polkadot 3k
           Avalanche 3k
           Aave 3k
           Chainlink 3k
           VeChain 3k
           Ethereum 3k

How is this portfolio doing now? Hopefully you got out before downturn.

[theninthwall]

I wondered how long it would take for the unseemly celebrations to commence here - lol

I think part of that is that the crypto community does a lot of shouting on the way up, but there is hardly any noise on the way down. When a lot of people are getting sucked in and putting up money they can’t afford to lose, the community needs to be accountable.

[mistymoney]

Yes I am comparing a lot of “normal” decisions to crypto speculation. Most of those decisions are made with similar or even less information or knowledge or wisdom as a crypto purchase. Now success is often viewed through luck or survivorship biased lenses. I knew I had the right spouse. Did you really? I picked an amazing job. Sure you did. Etc etc. After the fact eagle eye hindsight. On what often involved alot of luck or speculation.

Ok, so I did understand you. That's a pretty bizarre analogy. When getting married (most) people date many people, learn how they get along, meet each other's families/friends, often live together for a while, etc. Lots of information is gathered before making the leap, it's a pretty conservative process in many ways. The investing analogy would probably be value or index fund investing where there's considerable due diligence and pretty high confidence in a good outcome.

The crypto investing equivalent would be getting married in Vegas to someone you met the same night because they're really hot (or seemed that way through beer goggles). Very small chance it'll be great. Very large chance it's a disaster and they're going to disappear with all your money....

-W

I think you're going a bit too far here.

I'd take marriage to a hot stranger who at least seems nice and compatible during a 5-6 hour meeting any day over investing in crypto.

I'd also wager that plenty of those marriages do and can work out fine, at least compared to 'regular' marriages - which also frequently implode. We only hear about the big vegas wedding blow ups, I think a lot are probably no worse than the standard we dated for 2 years marriages.

[talltexan]

I've continued to invest in crypto and share my moves over in my journal, and...it's been emotionally draining. Losing money hurts, but it's also psychologically very trying.

But, sure, if I were getting Alpha from it, I'd probably wonder why I was so restrained....

[mistymoney]

We live in Luxembourg in the middle of an epic real estate bubble. How that will go God only knows. Anyway, a year or two ago, some guys decided that they wanted to "make it possible for people who've been priced out of the market to invest in real estate" using "blockchain" and came up with some sort of "tokens" for investing in real estate. You needed a crypto wallet to store these tokens and I still don't really "get" what these tokens were supposed to be but obviously they are SOMEHOW connected to the crypto sphere if they need to be in a crypto wallet (whatever that is).

They were really drumming them up and very eager to explain HOW they would make it possible for anyone to benefit from real estate growth (which was also taken for granted to be eternal) but none of it made any sense. The best I can tell is that the "value" of these tokens is what they say it is, based on their "valuations" of their property portfolio (which remains owned by their company, not by magic tokens).  They don't buy the tokens back from you though and the founder, when asked how one then gets money in exchange for the tokens that have quadrupled in value, appeared to consider that question to be a sign of "not being serious enough about investing". They did however suggest they would, over time, create a secondary market where one could sell their tokens to someone else and make money that way.

Every single fuckin red flag is going off in my head, but young people are lapping this up.
"Investing" in this.

And to make it even more wtf, now everything is going to hell, actual real estate market, actual crypto, but they simply revalued their tokens some percent upwards (because "an independent valuation said so") and all these investors are feeling real smug because this is going even better than they anticipated. Everything else is down, their investment is up. But they have absolutely no way to exchange their investment for money until there is a secondary market and then they're entirely dependent on finding people willing to buy these tokens off of them (and praying to God that not everyone decides to do so at the same time).

Can anyone explain this to me, I mean, I don't intend to "invest" in this, but how is something like this given so much legitimacy!? I feel that 20y ago even my semi-literate grandma would have thought that this sounded like a bad idea, but this crypto generation is somehow genuinely convinced that this is how any investing is supposed to work. Plus, I don't think this is even meant as a scam, the guys seem very GENUINELY convinced that they're bringing real estate speculation to the poor masses, but all I can see is that they're selling some kind of an NFT of a certain % of a certain property. I really, really don't get it.
They insist this isn't anything like crypto or NFT and is in fact more like buying shares in a real estate company but when asked why aren't they then selling shares in their real estate company, no clear response.

I am really curious to hear what people think of this. Because I'm really beginning to feel like I am too old to understand the genius behind it. Is there ANY scenario in which this can sustain itself (not gonna invest, just curious and open to arguments).

interesting. Do they have a portfolio of properties they've been buying? Are the properties rented and generation income?

[mistymoney]

Probably better to listen to MMM and stay out and have lower overall portfolio returns.

LMAO.

In the not too distant future when this is worth next to nothing y'all will be claiming you got out before that happened and are living like kings. Rather than posting percentages of ownership stakes why not start journals and document your actual transactions.  What do you have to lose?  Someone may read 8t and buy more unicorn farts and drive up the value.  Hell it may even become a unicorn poop.

Alright then. Not going to start a new thread at the moment, but I may soon.  Here's the numbers breakdown beyond just my current percentages:

Notes/Dislaimers: 

• On August 1 there was 695k in my retirement stache.  100% VTSAX
• I'm unable to directly buy crypto from my retirement stache, but I do have access to Grayscale Trust products, so when I say I'm buying Eth or BTC, what I really mean is I'm buying their trusts.  It closely, but does not perfectly match the growth of these coins.
   

August Details:

• August 2 - I bought 100k of Crypto...50k Bitcoin Trust (GBTC) and 50k Ethereum Trust (ETHE)
  
• August 20 - I bought 33k more of Ethereum Trust (ETHE)

[/li]
[/list]

August Month End Totals:
      Stache Total: 731k
      Crypto total: 159k
      VTSAX total: 572k

September Month End Totals: No new trades.
      Stache Total: 714k
      Crypto total: 147k
      VTSAX total: 567k

October Details:

• Sold Bitcoin Trust and bout extra ETHE, as well as Grayscale Large Cap (GDLC)
• Purpose of owning GDLC is that it gives me exposure to Bitcoin, Ethereum, Carsano, Solana, Uniswap, Chainlink, Litecoin, and Bitcoin Cash

[li]Additionally, I transferred 180k more from VTSAX into ETHE and GDLC[/li]
[li]Finally, I transferred unneeded cash from checking and bought 3k each of the following: Enjin, Polkadot, Avalanche, Aave, Chainlink, VeChain, as well as 3k of Ethereum[/li][/list]

October Month End Totals:
     Stache Total: 770k plus 20k in non-retirement account
      Crypto total: 395k
      VTSAX total: 395k

      Breakdown:
           ETHE - 155k
           GDLC - 217k
           Enjin - 3k
           Polkadot 3k
           Avalanche 3k
           Aave 3k
           Chainlink 3k
           VeChain 3k
           Ethereum 3k

How is this portfolio doing now? Hopefully you got out before downturn.

Seconded. Reading these trade, checking the tickers. seems like most down 70/80% from highs last nov.

[mistymoney]

I wondered how long it would take for the unseemly celebrations to commence here - lol

I think part of that is that the crypto community does a lot of shouting on the way up, but there is hardly any noise on the way down. When a lot of people are getting sucked in and putting up money they can’t afford to lose, the community needs to be accountable.

I'm not sure I buy this. We all have access to the same information. And we could all also choose to go through a financial advisor or DIY. If you choose DIY, do your research and make your decisions. Not sure why a community would need to be responsible?

Anyone doing ponzi or other fraud, sure. But just a bunch of people deciding to do the same thing?
We all had our choice to make.

[GuitarStv]

I wondered how long it would take for the unseemly celebrations to commence here - lol

I think part of that is that the crypto community does a lot of shouting on the way up, but there is hardly any noise on the way down. When a lot of people are getting sucked in and putting up money they can’t afford to lose, the community needs to be accountable.

I'm not sure I buy this. We all have access to the same information. And we could all also choose to go through a financial advisor or DIY. If you choose DIY, do your research and make your decisions. Not sure why a community would need to be responsible?

Anyone doing ponzi or other fraud, sure. But just a bunch of people deciding to do the same thing?
We all had our choice to make.

Bitcoin is uncomfortably close to a decentralized distributed pyramid scheme.  There has always been a lot of pressure on people who bought in to crypto to proselytize in order to continue to grow the pyramid.  Without those people buying in at the lower level, all the bitcoins that the early adopters got for less money aren't worth anything.

[LateStarter]

I wondered how long it would take for the unseemly celebrations to commence here - lol

I think part of that is that the crypto community does a lot of shouting on the way up, but there is hardly any noise on the way down. When a lot of people are getting sucked in and putting up money they can’t afford to lose, the community needs to be accountable.

My point was that "doing a 'told ya so' dance", etc. is parroting the same attitude as "have fun staying poor". It's obnoxious and juvenile - pot meet kettle.

[HPstache]

Probably better to listen to MMM and stay out and have lower overall portfolio returns.

LMAO.

In the not too distant future when this is worth next to nothing y'all will be claiming you got out before that happened and are living like kings. Rather than posting percentages of ownership stakes why not start journals and document your actual transactions.  What do you have to lose?  Someone may read 8t and buy more unicorn farts and drive up the value.  Hell it may even become a unicorn poop.

Alright then. Not going to start a new thread at the moment, but I may soon.  Here's the numbers breakdown beyond just my current percentages:

Notes/Dislaimers: 

• On August 1 there was 695k in my retirement stache.  100% VTSAX
• I'm unable to directly buy crypto from my retirement stache, but I do have access to Grayscale Trust products, so when I say I'm buying Eth or BTC, what I really mean is I'm buying their trusts.  It closely, but does not perfectly match the growth of these coins.
   

August Details:

• August 2 - I bought 100k of Crypto...50k Bitcoin Trust (GBTC) and 50k Ethereum Trust (ETHE)
  
• August 20 - I bought 33k more of Ethereum Trust (ETHE)

[/li]
[/list]

August Month End Totals:
      Stache Total: 731k
      Crypto total: 159k
      VTSAX total: 572k

September Month End Totals: No new trades.
      Stache Total: 714k
      Crypto total: 147k
      VTSAX total: 567k

October Details:

• Sold Bitcoin Trust and bout extra ETHE, as well as Grayscale Large Cap (GDLC)
• Purpose of owning GDLC is that it gives me exposure to Bitcoin, Ethereum, Carsano, Solana, Uniswap, Chainlink, Litecoin, and Bitcoin Cash

[li]Additionally, I transferred 180k more from VTSAX into ETHE and GDLC[/li]
[li]Finally, I transferred unneeded cash from checking and bought 3k each of the following: Enjin, Polkadot, Avalanche, Aave, Chainlink, VeChain, as well as 3k of Ethereum[/li][/list]

October Month End Totals:
     Stache Total: 770k plus 20k in non-retirement account
      Crypto total: 395k
      VTSAX total: 395k

      Breakdown:
           ETHE - 155k
           GDLC - 217k
           Enjin - 3k
           Polkadot 3k
           Avalanche 3k
           Aave 3k
           Chainlink 3k
           VeChain 3k
           Ethereum 3k

How is this portfolio doing now? Hopefully you got out before downturn.

Seconded. Reading these trade, checking the tickers. seems like most down 70/80% from highs last nov.

@aceyou

[maizefolk]

I wondered how long it would take for the unseemly celebrations to commence here - lol

I think part of that is that the crypto community does a lot of shouting on the way up, but there is hardly any noise on the way down. When a lot of people are getting sucked in and putting up money they can’t afford to lose, the community needs to be accountable.

If one doesn't start out with a view about what is or isn't a good investment a priori, this argument sounds an awful lot like the people who were constantly arguing against investing in the stock market at all time highs, predicting we'd all come to regret our decisions when the next bear market came, and then complained that there weren't more people panicking and selling low when actual market corrections came in 2018, and then in 2020, and again this year in 2022.

Crypto may well be a terrible thing to invest in, but the simple fact that something has gone down in price doesn't, in of itself, mean it was a bad decision to buy it. Otherwise any time the stock market went down it would also mean it was a bad idea to buy stocks (it wasn't).

Don't expecting people to publicly wail and gnash their teeth if the evidence you're expecting to convince them that their (probably) bad investment was bad wouldn't be strong enough evidence to convince you your (probably) good investment was good.

[MustacheAndaHalf]

Bitcoin is uncomfortably close to a decentralized distributed pyramid scheme.  There has always been a lot of pressure on people who bought in to crypto to proselytize in order to continue to grow the pyramid.  Without those people buying in at the lower level, all the bitcoins that the early adopters got for less money aren't worth anything.

That's not a pyramid scheme, unless you disagree with this definition:

A pyramid scheme is a business model that recruits members via a promise of payments or services for enrolling others into the scheme, rather than supplying investments or sale of products

https://en.wikipedia.org/wiki/Pyramid_scheme

Pyramid schemes are illegal.  Bitcoin has a regulated futures market in the U.S.  The U.S. government does not agree with you.

[ChpBstrd]

Bitcoin is uncomfortably close to a decentralized distributed pyramid scheme.  There has always been a lot of pressure on people who bought in to crypto to proselytize in order to continue to grow the pyramid.  Without those people buying in at the lower level, all the bitcoins that the early adopters got for less money aren't worth anything.

That's not a pyramid scheme, unless you disagree with this definition:

A pyramid scheme is a business model that recruits members via a promise of payments or services for enrolling others into the scheme, rather than supplying investments or sale of products

https://en.wikipedia.org/wiki/Pyramid_scheme

Pyramid schemes are illegal.  Bitcoin has a regulated futures market in the U.S.  The U.S. government does not agree with you.

I know this conversation has been had before, but let's unpack the definition:

"a business model": The people who create a cryptocurrency have, in the past, sold some or all of what they created for personal profit (in government currencies). That's why there are thousands of cryptocurrencies. Wallets, exchanges, and cryptocurrency financial media are all businesses.

"that recruits members via a promise of payments": The hoped-for promise of payment is the sort of exponential increase bitcoin saw between 2011 and 2018. There was also lots of talk about bitcoin and other cryptos being inherently deflationary by design. Near the peak, there were ads playing during the Superbowl trying to recruit members. People talked about the FOMO all the too-cautious people would feel when a cryptocurrency became a worldwide medium of exchange, and you'd have to buy in the future at $1M per coin or something like that.

"for enrolling others into the scheme": Crypto enthusiasts were all over social media for years touting their coins as the next big thing, in an attempt to cause cryptocurrencies to become a major world currency, which would increase their value exponentially again. There are millions of cryptoshilling videos on YouTube and every other site/app, made by people who were already holding cryptocurrency.

"rather than supplying the sale of investments or other products": The sale of investments part of this definition can be confusing, because even Bernie Madoff sold investments! The problem was that his investments were fictional records in a ledger that were thought by his clients to represent actual assets in the real world that exists outside Madoff's bookkeeping. The people who say cryptocurrency should have a value of $0 would compare cryptocoins with shares held in a Bernie Madoff account. For many years, it was possible to trade and redeem such shares for dollars, as is usually the case with such schemes, but eventually the lack of a tie to actual assets will be the undoing. As for the other products part of the definition, cryptocurrencies have yet to be adopted as a medium of exchange because they are more costly, slower, and much more risky to transact than government fiat currencies. They are constantly being hacked - often by insiders at these "wallets" and "brokerages" - recirculated by the hackers, and then hacked again, creating a loop that feeds upon the new money contributed by naive new buyers.

In terms of legality, a mistake by a political or legal system does not transform a pyramid scheme into an investment that has any other outcome than a pyramid scheme would have. It does not mean wallets and brokerages are not able to hack their own customers, cover their tracks in the perfect crime, and launder the coins. It does not mean the government can recover or will insure your coins when someone steals them from you. It does not mean any cryptocurrency will ever fulfill its promise of replacing government fiat currencies as a medium of exchange. It does not mean new recruits are not necessary if crypto is going to appreciate or at least not collapse. It does not change the nature of cryptocurrency into something economically promising or even legitimate. All it means is that the government said to a corporation that they have permission to set up a betting market on a derived asset that could go to zero. That permission doesn't change a particular coin into a non-scam.

[FINate]

Can always count on The Onion for some humorous social commentary: Man Who Lost Everything In Crypto Just Wishes Several Thousand More People Had Warned Him

[GuitarStv]

Bitcoin is uncomfortably close to a decentralized distributed pyramid scheme.  There has always been a lot of pressure on people who bought in to crypto to proselytize in order to continue to grow the pyramid.  Without those people buying in at the lower level, all the bitcoins that the early adopters got for less money aren't worth anything.

That's not a pyramid scheme, unless you disagree with this definition:

A pyramid scheme is a business model that recruits members via a promise of payments or services for enrolling others into the scheme, rather than supplying investments or sale of products

https://en.wikipedia.org/wiki/Pyramid_scheme

Pyramid schemes are illegal.  Bitcoin has a regulated futures market in the U.S.  The U.S. government does not agree with you.

I know this conversation has been had before, but let's unpack the definition:

"a business model": The people who create a cryptocurrency have, in the past, sold some or all of what they created for personal profit (in government currencies). That's why there are thousands of cryptocurrencies. Wallets, exchanges, and cryptocurrency financial media are all businesses.

"that recruits members via a promise of payments": The hoped-for promise of payment is the sort of exponential increase bitcoin saw between 2011 and 2018. There was also lots of talk about bitcoin and other cryptos being inherently deflationary by design. Near the peak, there were ads playing during the Superbowl trying to recruit members. People talked about the FOMO all the too-cautious people would feel when a cryptocurrency became a worldwide medium of exchange, and you'd have to buy in the future at $1M per coin or something like that.

"for enrolling others into the scheme": Crypto enthusiasts were all over social media for years touting their coins as the next big thing, in an attempt to cause cryptocurrencies to become a major world currency, which would increase their value exponentially again. There are millions of cryptoshilling videos on YouTube and every other site/app, made by people who were already holding cryptocurrency.

"rather than supplying the sale of investments or other products": The sale of investments part of this definition can be confusing, because even Bernie Madoff sold investments! The problem was that his investments were fictional records in a ledger that were thought by his clients to represent actual assets in the real world that exists outside Madoff's bookkeeping. The people who say cryptocurrency should have a value of $0 would compare cryptocoins with shares held in a Bernie Madoff account. For many years, it was possible to trade and redeem such shares for dollars, as is usually the case with such schemes, but eventually the lack of a tie to actual assets will be the undoing. As for the other products part of the definition, cryptocurrencies have yet to be adopted as a medium of exchange because they are more costly, slower, and much more risky to transact than government fiat currencies. They are constantly being hacked - often by insiders at these "wallets" and "brokerages" - recirculated by the hackers, and then hacked again, creating a loop that feeds upon the new money contributed by naive new buyers.

In terms of legality, a mistake by a political or legal system does not transform a pyramid scheme into an investment that has any other outcome than a pyramid scheme would have. It does not mean wallets and brokerages are not able to hack their own customers, cover their tracks in the perfect crime, and launder the coins. It does not mean the government can recover or will insure your coins when someone steals them from you. It does not mean any cryptocurrency will ever fulfill its promise of replacing government fiat currencies as a medium of exchange. It does not mean new recruits are not necessary if crypto is going to appreciate or at least not collapse. It does not change the nature of cryptocurrency into something economically promising or even legitimate. All it means is that the government said to a corporation that they have permission to set up a betting market on a derived asset that could go to zero. That permission doesn't change a particular coin into a non-scam.

Yep, this is more or less my argument.  If you don't believe that crypto is a pyramid scheme . . . fine.  But you have to admit that it certainly seems uncomfortably close to one.

[Shane]

"for enrolling others into the scheme": Crypto enthusiasts were all over social media for years touting their coins as the next big thing, in an attempt to cause cryptocurrencies to become a major world currency, which would increase their value exponentially again. There are millions of cryptoshilling videos on YouTube and every other site/app, made by people who were already holding cryptocurrency.

Even this thread seems like part of a broader push by the industry to mainstream crypto. The hardcore crypto bros knew they couldn't get everyone to totally drink the Kool-Aid, but if they could convince normies to just put a small% of their retirement savings into crypto, it could potentially prop up their pyramid scheme for just a little while longer. A couple of irl friends, who I know aren't on this forum, both came to me late last year, right around the time this thread was started in September, 2021, near the top of the crypto bubble, and each asked almost the same exact question as the OP, "What do you think about my putting a small percentage of my investments into crypto?" It's hard for me to believe that this thread, my friends' questions, and the crypto ads during the Superbowl, were all just a coincidence.

[Glenstache]

Bitcoin is uncomfortably close to a decentralized distributed pyramid scheme.  There has always been a lot of pressure on people who bought in to crypto to proselytize in order to continue to grow the pyramid.  Without those people buying in at the lower level, all the bitcoins that the early adopters got for less money aren't worth anything.

That's not a pyramid scheme, unless you disagree with this definition:

A pyramid scheme is a business model that recruits members via a promise of payments or services for enrolling others into the scheme, rather than supplying investments or sale of products

https://en.wikipedia.org/wiki/Pyramid_scheme

Pyramid schemes are illegal.  Bitcoin has a regulated futures market in the U.S.  The U.S. government does not agree with you.

It seemed more like a pump and dump with a frosting of unregulated self-dealing (a-la FTX).

[MustacheAndaHalf]

Bitcoin is uncomfortably close to a decentralized distributed pyramid scheme.  There has always been a lot of pressure on people who bought in to crypto to proselytize in order to continue to grow the pyramid.  Without those people buying in at the lower level, all the bitcoins that the early adopters got for less money aren't worth anything.

That's not a pyramid scheme, unless you disagree with this definition:

A pyramid scheme is a business model that recruits members via a promise of payments or services for enrolling others into the scheme, rather than supplying investments or sale of products

https://en.wikipedia.org/wiki/Pyramid_scheme

Pyramid schemes are illegal.  Bitcoin has a regulated futures market in the U.S.  The U.S. government does not agree with you.

...
"that recruits members via a promise of payments": The hoped-for promise of payment is the sort of exponential increase bitcoin saw between 2011 and 2018. There was also lots of talk about bitcoin and other cryptos being inherently deflationary by design. Near the peak, there were ads playing during the Superbowl trying to recruit members. People talked about the FOMO all the too-cautious people would feel when a cryptocurrency became a worldwide medium of exchange, and you'd have to buy in the future at $1M per coin or something like that.\
...

Your first sentence tries to redefine what "promise of payments" means - you're twisting words to fit your agenda.  Hoping for something isn't a promise - its a hope.  Nobody makes "promises of payments" to those buying Bitcoin, but if you admit that the pyramid scheme theory falls apart.

So here's a more basic question: where is the pyramid?  Every bit of data and software for Bitcoin is 100% transparent and public.  Where is the pyramid?

In 2021 the price of BTC reached over $60,000 and is now under $20,000.  That's not how pyramid schemes work - they do not give greater rewards to those who invest later, and screw over the early members to the scheme.  And this 2021-2022 is not an isolated incident, as Bitcoin has crashed by 80% repeatedly.

It does not promise payments, nor reward people according to a hierarchy.

[MustacheAndaHalf]

Yep, this is more or less my argument.  If you don't believe that crypto is a pyramid scheme . . . fine.  But you have to admit that it certainly seems uncomfortably close to one.

I didn't state my beliefs, I pointed to flaws in the claim of a "pyramid scheme".  And I'll ask you the same question: where is the pyramid?  Where is the hierarchy of Bitcoin?

[Telecaster]

There are two components here:   Cryptocurrency and crypoexchanges.   By definition, most cryptocurrency itself is not a Ponzi.   It is best described as a speculative bubble--like Beanie Babies.   No one says "invest in Bitcoin and I'll pay you interest."   People buy Bitcoin (and most crypto) in the belief it will increase in price.

Cryptoexchanges like FTX, Celsisus, Pancakeswap, etc. are 100% Ponzis.  They promise high rates interest (which they call rewards) which are usually paid by a token they print themselves and require new investors to remain solvent.   That checks every single box of a Ponzi scheme. 

[maizefolk]

Cryptoexchanges like FTX, Celsisus, Pancakeswap, etc. are 100% Ponzis.  They promise high rates interest (which they call rewards) which are usually paid by a token they print themselves and require new investors to remain solvent.   That checks every single box of a Ponzi scheme.

Celsius is a case we know the most about: It sounds like they were making unhedged investments and loans in cryptocurrency while accepting customer deposits in cyptocurrencies that were essentially equivalent to US dollars. They paid high interest rates in (faux) USD, but could cover those interest costs because the value of free floating cryptocurrencies were increasing faster than Celsius was paying out interest to its depositors.

Their business model worked well so long as free floating cryptocurrencies were increasing in value fast. And it blew up as soon as free floating cryptocurrencies moved strongly in the other direction. They almost certainly committed fraud in assuring people that their deposits were "safe". They were at a minimum negligent in not hedging against price declines (although if they had hedged properly it would probably have cost enough that their business model wouldn't work, maybe that should have been a warning sign). It looks like they may have committed a whole other set of crimes in marketing to non-accredited investors.

The critical thing that distinguishes celsius from a ponzi scheme is that a ponzi scheme promises people high and safe returns from a business that doesn't exist, and uses new investor's money to pay out withdrawals from earlier investors. Celsius promised high and safe returns from a business that did exist (it just wasn't actually safe), and when the business blew up and celsius lost their depositors' money they stopped paying out money and declared bankruptcy*, rather than pretending everything was fine and using new customers' deposits to pay old customers' withdrawals.

FTX may have been an actual ponzi scheme. It is quite clear they didn't have actual assets to match customer deposits. If you have a chance to read Matt Levine's latest breakdown of their balance sheet, it's definitely worth doing. Short excerpt below.

Spoiler: show

If you blithely add up the “liquid,” “less liquid” and “illiquid” assets, at their “deliverable” value as of Thursday, and subtract the liabilities, you do get a positive net equity of about $700 million. (Roughly $9.6 billion of assets versus $8.9 billion of liabilities.) But then there is the “Hidden, poorly internally labeled ‘fiat@’ account,” with a balance of negative $8 billion.[1] I don’t actually think that you’re supposed to subtract that number from net equity — though I do not know how this balance sheet is supposed to work! — but it doesn’t matter. If you try to calculate the equity of a balance sheet with an entry for HIDDEN POORLY INTERNALLY LABELED ACCOUNT, Microsoft Clippy will appear before you in the flesh, bloodshot and staggering, with a knife in his little paper-clip hand, saying “just what do you think you’re doing Dave?” You cannot apply ordinary arithmetic to numbers in a cell labeled “HIDDEN POORLY INTERNALLY LABELED ACCOUNT.” The result of adding or subtracting those numbers with ordinary numbers is not a number; it is prison.[2]

...

And then the basic question is, how bad is the mismatch. Like, $16 billion of dollar liabilities and $16 billion of liquid dollar-denominated assets? Sure, great. $16 billion of dollar liabilities and $16 billion worth of Bitcoin assets? Not ideal, incredibly risky, but in some broad sense understandable. $16 billion of dollar liabilities and assets consisting entirely of some magic beans that you bought in the market for $16 billion? Very bad. $16 billion of dollar liabilities and assets consisting mostly of some magic beans that you invented yourself and acquired for zero dollars? WHAT? Never mind the valuation of the beans; where did the money go? What happened to the $16 billion? Spending $5 billion of customer money on Serum would have been horrible, but FTX didn’t do that, and couldn’t have, because there wasn’t $5 billion of Serum available to buy. FTX shot its customer money into some still-unexplained reaches of the astral plane and was like “well we do have $5 billion of this Serum token we made up, that’s something?” No it isn’t!

*It isn't clear this was a choice on their part. Their business blew up at a time when people were pulling money out of crypto rather than putting it in. I'm not sure they could have gotten the new flow of customer deposits necessary to keep a ponzi scheme running even if they'd wanted to go down that road.

[achvfi]

There are two components here:   Cryptocurrency and crypoexchanges.   By definition, most cryptocurrency itself is not a Ponzi.   It is best described as a speculative bubble--like Beanie Babies.   No one says "invest in Bitcoin and I'll pay you interest."   People buy Bitcoin (and most crypto) in the belief it will increase in price.

Cryptoexchanges like FTX, Celsisus, Pancakeswap, etc. are 100% Ponzis.  They promise high rates interest (which they call rewards) which are usually paid by a token they print themselves and require new investors to remain solvent.   That checks every single box of a Ponzi scheme. 

I was watching movie, Big Short. Adopting a dialog from it..

If Cryptocurrency is dog shit, crypto derived financial products is dogshit wrapped in cat shit.

https://www.youtube.com/watch?v=3U8nDMCjAMA

[BicycleB]

The critical thing that distinguishes celsius from a ponzi scheme is that a ponzi scheme promises people high and safe returns from a business that doesn't exist, and uses new investor's money to pay out withdrawals from earlier investors. Celsius promised high and safe returns from a business that did exist (it just wasn't actually safe), and when the business blew up and celsius lost their depositors' money they stopped paying out money and declared bankruptcy*, rather than pretending everything was fine and using new customers' deposits to pay old customers' withdrawals.

FTX may have been an actual ponzi scheme. It is quite clear they didn't have actual assets to match customer deposits. If you have a chance to read Matt Levine's latest breakdown of their balance sheet, it's definitely worth doing.

Well put!

I agree about Celsius. I agree about the end state of FTX. I won't be surprised if what happened at FTX was about the same as Celsius, but then when they ran short, FTX covered up at first and thus morphed into a Ponzi, though arguably distinguished by hope that it would turn around (where a true Ponzi can't have such a hope). Regardless, the depth of FTX's failure convinces me that we're closer to the end of crypto as an appealing greater-fool case than I thought and that has moved me to attempt selling my nice registered crypto-related ETFs.

Ironically, the day before FTX scandal broke, the roughly flat performance of crypto in recent months had made me wonder if its descent had run its course and it would soon join stocks in at least a temporary rally. Prior to that I'd been thinking of crypto as roughly a leveraged stock play, with swings now predominantly correlated to S&P but larger in %,  so I had bought another 3/4% of portfolio or so in the same ETFs, BITW and BITQ. Wrong move!

The result is that until tomorrow, when the trades settle, I cannot sell any of the crypto ETFs without violating SEC rules (at least, it would be a Good Faith violation of the customer agreement that the ETF vendor needs to comply with SEC rules, and I might suffer restrictions thereby). I currently intend to sell them. At today's prices, net loss on the adventure roughly 1/2 % of portfolio.

PS. Yeah, I read Levine's column. Great stuff.

ETA 11/15: While it starts with an ad, Upper Echelon's Nine Circles of Crypto Hell video contains incisive comments explaining his metaphor, summarizing and commenting on SBX's place in the cypto industry. (Actual title is "It All Comes CRASHING Down - Crypto in Chaos".) https://www.youtube.com/watch?v=ieu3VzKkp1c

[Mr. Green]

If you try to calculate the equity of a balance sheet with an entry for HIDDEN POORLY INTERNALLY LABELED ACCOUNT, Microsoft Clippy will appear before you in the flesh, bloodshot and staggering, with a knife in his little paper-clip hand, saying “just what do you think you’re doing Dave?” You cannot apply ordinary arithmetic to numbers in a cell labeled “HIDDEN POORLY INTERNALLY LABELED ACCOUNT.” The result of adding or subtracting those numbers with ordinary numbers is not a number; it is prison.

That is fantastic.

[ChpBstrd]

Bitcoin is uncomfortably close to a decentralized distributed pyramid scheme.  There has always been a lot of pressure on people who bought in to crypto to proselytize in order to continue to grow the pyramid.  Without those people buying in at the lower level, all the bitcoins that the early adopters got for less money aren't worth anything.

That's not a pyramid scheme, unless you disagree with this definition:

A pyramid scheme is a business model that recruits members via a promise of payments or services for enrolling others into the scheme, rather than supplying investments or sale of products

https://en.wikipedia.org/wiki/Pyramid_scheme

Pyramid schemes are illegal.  Bitcoin has a regulated futures market in the U.S.  The U.S. government does not agree with you.

...
"that recruits members via a promise of payments": The hoped-for promise of payment is the sort of exponential increase bitcoin saw between 2011 and 2018. There was also lots of talk about bitcoin and other cryptos being inherently deflationary by design. Near the peak, there were ads playing during the Superbowl trying to recruit members. People talked about the FOMO all the too-cautious people would feel when a cryptocurrency became a worldwide medium of exchange, and you'd have to buy in the future at $1M per coin or something like that.\
...

Your first sentence tries to redefine what "promise of payments" means - you're twisting words to fit your agenda.  Hoping for something isn't a promise - its a hope.  Nobody makes "promises of payments" to those buying Bitcoin, but if you admit that the pyramid scheme theory falls apart.

So here's a more basic question: where is the pyramid?  Every bit of data and software for Bitcoin is 100% transparent and public.  Where is the pyramid?

In 2021 the price of BTC reached over $60,000 and is now under $20,000.  That's not how pyramid schemes work - they do not give greater rewards to those who invest later, and screw over the early members to the scheme.  And this 2021-2022 is not an isolated incident, as Bitcoin has crashed by 80% repeatedly.

It does not promise payments, nor reward people according to a hierarchy.

Regarding promises of payments,

a) Convicted Ponzi scheme ringleader Bernie Madoff did not promise specific returns, he simply delivered high returns for many years. Investment money rushed toward him by word of mouth and from people chasing past performance. If we want to get strictly legalistic, we could say Madoff only committed accounting fraud and should have been acquitted of running a Ponzi because he didn't specify a dollar or percentage outcome. But most people will accept that Madoff was clearly a Ponzi scheme even if he didn't promise a specific return on investment. Not telling people they'll earn a specific number made him more credible. We can't be thrown off by one optional detail in the definition of a Ponzi scheme, or else we make the same mistake as Madoff's victims.

b) People on Wall Street Bets, Facebook, and YouTube were literally drawing cartoon rockets symbolically taking cryptocoins to the moon. They were literally posting pictures of the luxury cars they allegedly bought with crypto gains. Meanwhile the crypto-intellectuals were talking about how whatevercoin was going to take over the role of the US dollar in international exchange, and how each coin could go to at least some outrageous price target, like $100k, $200k, $500k, $750k, $1M - they were throwing numbers out all over the place and extrapolating from 2011-2018.

Regarding transparency, the blockchain itself may be transparent in theory, but what is transparent about how you got your coins stolen, who now owns them, or why the exchange / wallet / brokerage you had to use as a non-technical user just disappeared with all your money? This is where theory collides with real life.

There are over 1M FTX account holders who looked as hard as they could, and couldn't spot the reason they were about to lose their entire investment in what was the world's most legitimate looking exchange! They got conned, just like the victims of dozens of other hacks, collapses, pump and dumps, etc. It's fair to assume lots of people only think they own the coins their financial helper displays on the screen, and that the actual coins were sold long ago or the money laundered long ago. It's easy to post a fake number of bitcoins owned on the screen.

It's odd to say the various falls in the value of Bitcoin prove it's not a Ponzi scheme. Eventually going down is exactly what Ponzi schemes do. Enron stock went up and down for a while, until it went down to zero. Yet I'd say price action is the last thing we should be looking at, since it appears that more than half of all these "transparent" price discovery trades are fake: https://www.forbes.com/sites/javierpaz/2022/08/26/more-than-half-of-all-bitcoin-trades-are-fake/?sh=785cd6c56681

[MustacheAndaHalf]

While I believe Madoff promised 12% returns, call that a Ponzi scheme.

It's odd to say the various falls in the value of Bitcoin prove it's not a Ponzi scheme. Eventually going down is exactly what Ponzi schemes do. Enron stock went up and down for a while, until it went down to zero.

Enron soared but once it fell 50%, it never recovered.
https://www.famous-trials.com/enron/1791-stockchart

When the 2008 crisis arrived, Madoff's Ponzi scheme collapsed.  In a fraud case, the FBI doesn't recover people's fake gains, just their investments.  By that measure, they recovered 88% of the money involved in Madoff's ponzi scheme.
https://www.justice.gov/opa/pr/justice-department-announces-total-distribution-over-4-billion-victims-madoff-ponzi-scheme

In a Ponzi scheme, when a significant drop occurs, new money can't keep up with withdrawals, and the whole thing collapses.  That happened to Madoff.  And yet when Japanese crypto exchange Mt Gox was hacked, Bitcoin didn't collapse.  It lost 99% of its value, and then recovered.  I'm not aware of any Ponzi scheme that has collapsed 95% or more and recovered, because a drop of that magnitude causes a Ponzi scheme to collapse.

The US Treasury Secretary and President of the United States have both said crypto needs to be regulated.  If it is a fraud, is the President of the United States involved, and Janet Yellin as well?  And then you claim the Bitcoin Futures market is also a fraud.  How deep into the U.S. government does your fraud claim go?
https://www.whitehouse.gov/briefing-room/statements-releases/2022/09/16/fact-sheet-white-house-releases-first-ever-comprehensive-framework-for-responsible-development-of-digital-assets/

[StashingAway]

In a Ponzi scheme, when a significant drop occurs, new money can't keep up with withdrawals, and the whole thing collapses.  That happened to Madoff.  And yet when Japanese crypto exchange Mt Gox was hacked, Bitcoin didn't collapse.  It lost 99% of its value, and then recovered.  I'm not aware of any Ponzi scheme that has collapsed 95% or more and recovered, because a drop of that magnitude causes a Ponzi scheme to collapse.

It doesn't have to be *exactly* like Enron, or Madoff, or what have you. No doubt bitcoin is different from those analogies. The mechanics are different, the details are new, the timescale isn't predictable. But they all smell of the same stink from certain perspectives.

The US Treasury Secretary and President of the United States have both said crypto needs to be regulated.  If it is a fraud, is the President of the United States involved, and Janet Yellin as well?  And then you claim the Bitcoin Futures market is also a fraud.  How deep into the U.S. government does your fraud claim go?

First off, saying something needs to be regulated is pretty broad. MLMs are "regulated", that doesn't mean they're not a skeezy drain on society. The prez paying creedence by making a consumper protections executive order isn't any more than saying that it is a big deal and needs to be looked at. It's not validating it. Covid and payday loans are regulated by the government, that doesn't make them somehow virtuous.

Second off, the US isn't some paragon of infallible decisions.

[ChpBstrd]

While I believe Madoff promised 12% returns, call that a Ponzi scheme.

It's odd to say the various falls in the value of Bitcoin prove it's not a Ponzi scheme. Eventually going down is exactly what Ponzi schemes do. Enron stock went up and down for a while, until it went down to zero.

Enron soared but once it fell 50%, it never recovered.
https://www.famous-trials.com/enron/1791-stockchart

When the 2008 crisis arrived, Madoff's Ponzi scheme collapsed.  In a fraud case, the FBI doesn't recover people's fake gains, just their investments.  By that measure, they recovered 88% of the money involved in Madoff's ponzi scheme.
https://www.justice.gov/opa/pr/justice-department-announces-total-distribution-over-4-billion-victims-madoff-ponzi-scheme

In a Ponzi scheme, when a significant drop occurs, new money can't keep up with withdrawals, and the whole thing collapses.  That happened to Madoff.  And yet when Japanese crypto exchange Mt Gox was hacked, Bitcoin didn't collapse.  It lost 99% of its value, and then recovered.  I'm not aware of any Ponzi scheme that has collapsed 95% or more and recovered, because a drop of that magnitude causes a Ponzi scheme to collapse.

The US Treasury Secretary and President of the United States have both said crypto needs to be regulated.  If it is a fraud, is the President of the United States involved, and Janet Yellin as well?  And then you claim the Bitcoin Futures market is also a fraud.  How deep into the U.S. government does your fraud claim go?
https://www.whitehouse.gov/briefing-room/statements-releases/2022/09/16/fact-sheet-white-house-releases-first-ever-comprehensive-framework-for-responsible-development-of-digital-assets/

I think it's a fallacy to say "because it once went down X%, it cannot be a Ponzi scheme." If everyone believed this, then it would be easy to run an obvious Ponzi scheme by saying that you lost money in a couple of quarters, and one could be immune from prosecution if your fund went down in a few quarters. A robotic jury would say you were innocent because those quarters of losses violate the rigid definition. The flipside statement, "because it once went up X%, it cannot be a Ponzi scheme" is obviously fallacious, because such a scheme can post positive returns as long as new investors keep putting money in.

The U.S. government has been in a state of policy uncertainty about crypto for years. Is it a currency, a security, or a fraud? It is unclear, because our old laws and language around fraud, laundering, pyramid schemes, securities, accounting, etc. never could have anticipated the possibility of anything like cryptocurrencies. Plus, there seems to be no organizational structure or person to hold accountable. No politician wants to take a stand, because then all the people invested in crypto would blame them for the collapse - better to let it evolve naturally. That's the flaw with being legalistic rather than practical in our definitions - it allows people to invent new schemes that seem to escape one or two definitional points and attain the aura of legitimacy. The government is failing to protect people, but it's not necessarily complicit. The only things that have been regulated are things that fall under current laws, like futures markets or crypto funds like BITO and ETHE, and a lot of people at the SEC didn't think those should be approved.

The SEC dismissed Harry Markopolis' whistle blowing about Bernie Madoff for years, because Madoff's enterprise was considered too big and well-established to be a fraud. Anyone who took this government inaction, or the closure of multiple investigations since 1992, as a legitimacy signal made a disastrous error. There's no substitute for due dilligence and personal skepticism, especially in unregulated markets already rife with fraud.

Madoff's returns were variable, not fixed or promised. Variable returns would have made his proprietary "split strike" collar trading method seem more realistic than if he posted the exact same return every year or promised a certain amount to everyone. From https://www.econcrises.org/2017/04/20/bernard-l-madoff-investment-securities-2008-2009/ :

Madoff’s returns also exhibited a Sharpe ratio that ranged between 2.5 and 4.0 for 15 years in a row—an extreme outlier, to put it mildly.

So no, it wasn't the old-school "earn 10% per week guaranteed return" Ponzi scheme. It looked from the outside like a proprietary wealth management fund, with high but variable returns.

Speaking of looking legitimate, Madoff was a pioneer in using computers for trading, developed the technology that became the NASDAQ, and was once the non-executive chair of the NASDAQ. His firm was once the NASDAQ's largest market maker. He was once on the board of and chairperson of the National Association of Securities Dealers, a self-regulatory body. Madoff also sat on the board of the Securities Industry Association. By all social indicators, he was one of the most legitimate people on Wall Street. These were 100% false signals. It was still a Ponzi, even though Madoff didn't check all the usual boxes.

 

[maizefolk]

Convicted Ponzi scheme ringleader Bernie Madoff did not promise specific returns, he simply delivered high returns for many years. Investment money rushed toward him by word of mouth and from people chasing past performance. If we want to get strictly legalistic, we could say Madoff only committed accounting fraud and should have been acquitted of running a Ponzi because he didn't specify a dollar or percentage outcome.

From a strict legalistic perspective Madoff was convicted of "securities fraud, investment adviser fraud, mail fraud, wire fraud, three counts of money laundering, false statements, perjury, false filings with the United States Securities and Exchange Commission ("SEC"), and theft from an employee benefit plan."

Note that none of those crimes are "running a ponzi scheme." Not because he was acquitted because there isn't a specific law that targets ponzi schemes. Although it would be impossible to conduct an actual ponzi scheme without running afoul of some anti-fraud law or another and you see those crimes heavily represented in the list of things Madoff was actually convicted of.

There are over 1M FTX account holders who looked as hard as they could, and couldn't spot the reason they were about to lose their entire investment in what was the world's most legitimate looking exchange!

I would say CoinBase was and is well ahead of FTX on the criteria of "looking legitimate." Could you explain on what do you base the assertion that FTX was the most legitimate looking exchange in the world prior to its collapse?

[MustacheAndaHalf]

While I believe Madoff promised 12% returns, call that a Ponzi scheme.

Madoff's returns were variable, not fixed or promised. Variable returns would have made his proprietary "split strike" collar trading method seem more realistic than if he posted the exact same return every year or promised a certain amount to everyone. From https://www.econcrises.org/2017/04/20/bernard-l-madoff-investment-securities-2008-2009/ :

Madoff’s returns also exhibited a Sharpe ratio that ranged between 2.5 and 4.0 for 15 years in a row—an extreme outlier, to put it mildly.

So no, it wasn't the old-school "earn 10% per week guaranteed return" Ponzi scheme. It looked from the outside like a proprietary wealth management fund, with high but variable returns.

You're confusing Sharpe ratios with returns.  From the article you posted:

Among the many red flags highlighted by Markopolos was that Madoff’s fund reported having earned 16% average annual returns before fees over 14½ years by using the split-strike conversion strategy.

I don't know Madoff's fees, but 16% before fees drops to about 12.8% after the typical 20% carry for the hedge fund industry.

"Opinion: Bernie Madoff’s Measly 12% Guaranteed Returns Just Wouldn’t Cut It In This Market"
https://hard-money.net/opinion-bernie-madoffs-measly-12-guaranteed-returns-just-wouldnt-cut-it-in-this-market/

[MustacheAndaHalf]

While I believe Madoff promised 12% returns, call that a Ponzi scheme.

It's odd to say the various falls in the value of Bitcoin prove it's not a Ponzi scheme. Eventually going down is exactly what Ponzi schemes do. Enron stock went up and down for a while, until it went down to zero.

Enron soared but once it fell 50%, it never recovered.
https://www.famous-trials.com/enron/1791-stockchart

When the 2008 crisis arrived, Madoff's Ponzi scheme collapsed.  In a fraud case, the FBI doesn't recover people's fake gains, just their investments.  By that measure, they recovered 88% of the money involved in Madoff's ponzi scheme.
https://www.justice.gov/opa/pr/justice-department-announces-total-distribution-over-4-billion-victims-madoff-ponzi-scheme

In a Ponzi scheme, when a significant drop occurs, new money can't keep up with withdrawals, and the whole thing collapses.  That happened to Madoff.  And yet when Japanese crypto exchange Mt Gox was hacked, Bitcoin didn't collapse.  It lost 99% of its value, and then recovered.  I'm not aware of any Ponzi scheme that has collapsed 95% or more and recovered, because a drop of that magnitude causes a Ponzi scheme to collapse.

The US Treasury Secretary and President of the United States have both said crypto needs to be regulated.  If it is a fraud, is the President of the United States involved, and Janet Yellin as well?  And then you claim the Bitcoin Futures market is also a fraud.  How deep into the U.S. government does your fraud claim go?
https://www.whitehouse.gov/briefing-room/statements-releases/2022/09/16/fact-sheet-white-house-releases-first-ever-comprehensive-framework-for-responsible-development-of-digital-assets/

I think it's a fallacy to say "because it once went down X%, it cannot be a Ponzi scheme." If everyone believed this, then it would be easy to run an obvious Ponzi scheme by saying that you lost money in a couple of quarters, and one could be immune from prosecution if your fund went down in a few quarters. A robotic jury would say you were innocent because those quarters of losses violate the rigid definition. The flipside statement, "because it once went up X%, it cannot be a Ponzi scheme" is obviously fallacious, because such a scheme can post positive returns as long as new investors keep putting money in.

You're putting words in my mouth.  Where did I say the words you quoted?

I think you're misinterpreting the following statement I made:

I'm not aware of any Ponzi scheme that has collapsed 95% or more and recovered, because a drop of that magnitude causes a Ponzi scheme to collapse.

Again, "collapsed 95% or more" and then recovered.  Not some other order as you claim, or separating those statements as if I didn't connect them.  Collapse 95% and recover.

Where are these hypothetical Ponzi schemes that claimed to lose money to draw in customers?  I'm describing what happens in actual Ponzi schemes, and you're describing something else.

[ChpBstrd]

...it would be impossible to conduct an actual ponzi scheme without running afoul of some anti-fraud law or another and you see those crimes heavily represented in the list of things Madoff was actually convicted of.

Yes, Ponzi schemes are just one category covered by fraud laws. I was (unclearly) framing discussion about the strict definition of a Ponzi scheme. I.e. if you were on a jury and your job was to determine if a particular financial activity met the criteria of the definition, would you vote to convict or acquit based on the objection that specific returns were not promised?

I would say CoinBase was and is well ahead of FTX on the criteria of "looking legitimate." Could you explain on what do you base the assertion that FTX was the most legitimate looking exchange in the world prior to its collapse?

Maybe CoinBase does look more legitimate in some ways. Being publicly traded counts for a lot but lots of publicly traded entities have gone bust.

SBF was the children of lawyers who studied financial regulation. SBF was interested in philanthropy and advocated regulation of the crypto industry, which suggests benign motives compared to the greedier side of the industry. FTX was the 2nd largest exchange by their multi-billion-dollar volume (Binance was/is 1st) which would put them in the top tier of "legitimacy" - or at least one would think.

Of course, perceived legitimacy involves us regular people scrutinizing what others post on the internet. If they post legitimate-looking things, the whole enterprise can look legitimate. Maybe the point of this exercise is not to determine that Binance or Coinbase are the more legitimate brokerage, it is to expose the error of the process and realize we cannot accurately see anything inside these organizations.

[maizefolk]

I would say CoinBase was and is well ahead of FTX on the criteria of "looking legitimate." Could you explain on what do you base the assertion that FTX was the most legitimate looking exchange in the world prior to its collapse?

Maybe CoinBase does look more legitimate in some ways. Being publicly traded counts for a lot but lots of publicly traded entities have gone bust.

SBF was the children of lawyers who studied financial regulation. SBF was interested in philanthropy and advocated regulation of the crypto industry, which suggests benign motives compared to the greedier side of the industry. FTX was the 2nd largest exchange by their multi-billion-dollar volume (Binance was/is 1st) which would put them in the top tier of "legitimacy" - or at least one would think.

Of course, perceived legitimacy involves us regular people scrutinizing what others post on the internet. If they post legitimate-looking things, the whole enterprise can look legitimate. Maybe the point of this exercise is not to determine that Binance or Coinbase are the more legitimate brokerage, it is to expose the error of the process and realize we cannot accurately see anything inside these organizations.

More than just being publicly traded, Coinbase is incorporated and regulated in the USA rather than the Bahamas. The main FTX exchange didn't even accept customers based in the USA although they did have a small US subsidiary.

The bigger take away here is that volume is probably not a good metric for which exchanges us regular people pick to trade on, since so much volume is driven by HFT. FTX apparently had a reputation as an exchange where it was easier for HFT traders to make money, perhaps because they were frequently trading against Alameda which was run by the same hopped up on modafanil, adderall and selegiline team* as the main FTX exchange. *Seriously FTX/Alameda has a psychiatrist on staff to prescribe drugs to their employees.

When the CEO of your affiliated hedge fund is tweeting about the joys of regular amphatamine use (presumably of the adderall flavor rather than meth), it is probably a sign that this is not a trustworthy and legitimate business to be working with. And I think we're seeing this in that most of the impact of FTX's collapse seems to be on other crypto-hedge funds and businesses, rather than people -- other than FTX employees -- who had significant fractions of their net worth sitting on that exchange.

[ChpBstrd]

I think it's a fallacy to say "because it once went down X%, it cannot be a Ponzi scheme." If everyone believed this, then it would be easy to run an obvious Ponzi scheme by saying that you lost money in a couple of quarters, and one could be immune from prosecution if your fund went down in a few quarters. A robotic jury would say you were innocent because those quarters of losses violate the rigid definition. The flipside statement, "because it once went up X%, it cannot be a Ponzi scheme" is obviously fallacious, because such a scheme can post positive returns as long as new investors keep putting money in.

You're putting words in my mouth.  Where did I say the words you quoted?

I think you're misinterpreting the following statement I made:

I'm not aware of any Ponzi scheme that has collapsed 95% or more and recovered, because a drop of that magnitude causes a Ponzi scheme to collapse.

Again, "collapsed 95% or more" and then recovered.  Not some other order as you claim, or separating those statements as if I didn't connect them.  Collapse 95% and recover.

Where are these hypothetical Ponzi schemes that claimed to lose money to draw in customers?  I'm describing what happens in actual Ponzi schemes, and you're describing something else.

It sounds like you are proposing a criteria for determining whether a thing is a Ponzi scheme or not. The criteria you specifically stated is if it ever fell 95% and then recovered, it cannot be a Ponzi.

I can come up with examples where historical scams fell by a lower percentage than that, and I can come up with examples where the same person orchestrated a second scheme after the failure or -100% returns of the first, but I am unaware of any other -95% -> +2,000% sequence of return events in the history of Ponzi schemes. Perhaps a scholar of financial fraud could come up with examples, but I am not such a scholar.

My earlier example imagined a Ponzi scheme which lost some amount of money for a couple of quarters, in order to dodge a strict definition and yet still be a Ponzi scheme. I wasn't thinking 95%, but was merely using the thought experiment to show how every other element of a Ponzi could be in place and the reporting of a loss (real or fake) would not change its characteristics or transform it from being a scam to being a legitimate investment.

But why draw the line at 95%? Why not 20% or even 5%? Madoff made up his performance numbers out of thin air for decades, so what does reported performance have to do with the legitimacy of an investment? Would Madoff have become more legitimate if, in a particular year, he reported 10% returns instead of 15%?

I can envision scenarios where a Ponzi scheme reports and maybe actually experiences -95% performance just to convince investors they had obtained six-figure leverage over something, while offering a limited-liability equity product that can only go to zero. Such a lotto ticket would be a great deal - other than being fake - and would attract lots of money after convincing lots of people it couldn't be a scheme because schemes don't ever go down that much.

That's sort of what happened with cryptos. People were reasoning "Why shouldn't I drop $10k into this market? The most I can lose is $10k and it could potentially make me a millionaire if it goes up 100x like it did in the past! These things have more upside leverage than downside."

In the meantime, can we agree that crypto fulfills the other elements of the definition? It's a business model that recruits members who think they'll get a big payment for recruiting others to the scheme rather than supplying the sale of legitimate investments or other products? Can we agree on at least 75-80% of the definition being met?

(Note that price behavior is not part of the definition.)

[GilesMM]

Charlie Munger had this to say about FTX and digital currency in general -

“It’s partly fraud and partly delusion. That’s a bad combination,” Munger said. “I don’t like either fraud or delusion and the delusion may be more extreme than the fraud.”

“If you’ve got a good idea, it’s much easier to push that to wretched access,” Munger added. “Good ideas, carried to wretched excess, become bad ideas. Nobody’s gonna say, ‘I got some shitt that I want to sell you.’ They say – it’s blockchain!’”

[mistymoney]

All will be revealed in the fulness of time.

[BicycleB]

Ponzi or not, followed through on selling, not adding. Loss realized: roughly 0.6% of portfolio.