Crypto-currency

[Singuy]

Crypto is to me is extremely annoying. People everywhere asks me if they should invest into this, including 60 year old with poor credit scores and debt. I see crypto to be the spark that will start a huge economic crash because last time we had people this excited about an asset class that does nothing but makes you money was the housing bubble.

So yeah, I wish Cryptos doesn't exist. It's a stupid concept as a currency due to its volatility. The support for cryptos are random. One day a company would accept it, the next day they wouldn't(Steam just pulled out of crypto due to it's volatility). Many cryptos are popping up including dog coins or whatever, trying to be the next big thing. It is a huge waste of electricity to have these miners trying to make as much as possible while bringing 0 value to the world. Honestly it's a gigantic ponzi scheme and one day someone is going to pull the rug under everybody....it's kind of what happens to every get rich quick product since the beginning of time.

We don't need another form of money. In fact with automation, we should be moving off money.....

[corn18]

The big 3 cryptocurrencies are only worth $347B total market cap, so if it crashes, it won't take down the economy.

[disneysteve]

Despite my thread asking for folks to explain bitcoin, I still don't understand what it is or how it has come to be a form of money. It's being generated out of thin air and people somehow decided that it had value. There's nobody controlling it. At least when I have a dollar in my hand, I know that there is a major government standing behind it.

Still, it will be interesting to see what happens in the future. First the bubble has to burst and the market has to stabilize.

[Singuy]

The big 3 cryptocurrencies are only worth $347B total market cap, so if it crashes, it won't take down the economy.

The economy is usually taken down by strong greed follow by strong fear. Bit coin crash into nothing will ruin some lives. It can cause increase bankruptcy due to mindless spending on bit coin via credit card, which in turn causes interest rate to go up even more, which causes more defaults. It all starts with a negative feedback loop. The housing market crash caused a negative feedback loop which caused banks to stop borrowing, starving small businesses, which caused lay offs, which then caused more defaults, and then caused even less loans approved by the banks...and things just got out of hand.

[Tabs]

Despite my thread asking for folks to explain bitcoin, I still don't understand what it is or how it has come to be a form of money. It's being generated out of thin air and people somehow decided that it had value. There's nobody controlling it. At least when I have a dollar in my hand, I know that there is a major government standing behind it.

I agree with you.

The short and dirty version of it is that, imagine a PC program that is designed to automate functions and services akin to what your typical bank would normally do for you. Then, you take that program and install it into a whole bunch of other regular computers, allowing them to double check each other to make sure all the affairs seem to be in order. The result is the ability to take the banking and government middle man out of your financial equation.

For whatever reason, some parties like the idea of decentralized banking services. For them, this paradigm has value, and so, they are willing to accept their form of currency.

The problem here is that we are also seeing a gigantic bubble forming from people who don't seem to understand or care what it is, so long as it is a massive bull run that they can hopefully make a quick buck off of it. In that light, it literally does not matter what it is, be it digital currencies or tulip bulbs. They just want to make quick and easy money, and you know what, I get that. In fact, I am quite OK with that. It's their mad money, and I think they know the risks....

My only beef is when someone comes along and proclaims it like it's the second coming of Jesus. That then makes no sense to me. Speculate if you wish, but at the end of the day, centralized banking systems and decentralized banking systems will never get along. They are fundamentally at odds with each other.

And as you have mentioned, in order to gain legitimacy, all currencies, including cryptocurrencies, must have large backers willing to insure it somehow; preferably a large, established government body, or at least some large corporations willing to dip their toes. At least precious metals enjoy universal backing as a value store. I can even take gold down to the local pawn shop and sell it. Cryptocurrency is just not quite there.

My only qualification is that I also believe centralized banking systems can very much learn and improve their own system by adopting this technology for their own use. I don't know what the future holds, but I think there is both a big promise and a big bubble here.
Anyway, hope this shorter explanation helps.

[corn18]

The economy is usually taken down by strong greed follow by strong fear. Bit coin crash into nothing will ruin some lives. It can cause increase bankruptcy due to mindless spending on bit coin via credit card, which in turn causes interest rate to go up even more, which causes more defaults. It all starts with a negative feedback loop. The housing market crash caused a negative feedback loop which caused banks to stop borrowing, starving small businesses, which caused lay offs, which then caused more defaults, and then caused even less loans approved by the banks...and things just got out of hand.

$347 billion Bitcoin, Lite Coin, Ethereum
$25 trillion Total value of US Stock Markets
$30 trillion U.S. Residential Real Estate Market

Somebody's going to feel pain when the cryptocurrency bubble bursts, but it shouldn't cause a recession like the housing bubble or the dot com bubble.

[disneysteve]

$347 billion Bitcoin, Lite Coin, Ethereum
$25 trillion Total value of US Stock Markets
$30 trillion U.S. Residential Real Estate Market

Somebody's going to feel pain when the cryptocurrency bubble bursts, but it shouldn't cause a recession like the housing bubble or the dot com bubble.

I agree. The real estate crash affected millions of people, normal everyday people who made stupid investments and got wiped out. This bubble doesn't involve nearly as many people and not nearly as many regular folks. Plus the real estate crash affected banks, mortgage companies, realtors, and other institutions. Bitcoin crashing won't have that effect.

[james.hendrickson]

I agree. The real estate crash affected millions of people, normal everyday people who made stupid investments and got wiped out. This bubble doesn't involve nearly as many people and not nearly as many regular folks. Plus the real estate crash affected banks, mortgage companies, realtors, and other institutions. Bitcoin crashing won't have that effect.

Some people are selling their houses to buy bitcoin. Its starting to look an awful lot like a bubble to me.

https://www.cnbc.com/2017/12/11/people-are-taking-out-mortgages-to-buy-bitcoin-says-joseph-borg.html

[disneysteve]

Some people are selling their houses to buy bitcoin.

Yes, but that's an aberration. I think the number of people doing that is infinitesimally small compared to the number of people who bought homes they couldn't possibly afford with nothing down and interest-only loans in the mid-2000s.

[james.hendrickson]

Yes, but that's an aberration. I think the number of people doing that is infinitesimally small compared to the number of people who bought homes they couldn't possibly afford with nothing down and interest-only loans in the mid-2000s.

DS - agreed. My major objection is that bitcoin is looking an awful lot like a bubble. I think this for four reasons.

1. First, some people are exhibiting extreme behavior (e.g. selling their houses) to get ahold of bitcoin. This is similar to narrative descriptions of past bubbles - for example, no-doc loans being given to people who can't afford them in 2007 during the real estate crisis.

2. People who don't normally invest and have little investing experience are piling onto bitcoin. Bitcoin is conceptually difficult to understand. This is behavior similar to past bubbles - specifically stocks in the early 2000s. Plumbers and painters who normally wouldn't invest, started giving out stock tips.

3. Bitcoin & blockchain technology is unregulated and attracts people whose background is questionable, like Tai Lopez and Brock Pierce. What classically happens during a financial bubble, when financial markets do nothing but go up, is scams and dishonesty proliferate as people are distracted by the potential of immense profit. This is happening now.

3. The pattern of asset value increase for bitcoin is looking an awful lot like past bubbles. From zerohedge.com



4. Bitcoin has no intrinsic value. Unlike the US dollar, there is no large institution, history or standing army to back up its value and insure stability. All the rise in price, as near as I can tell, is pure speculation.

At this point I would not touch bitcoin with a ten foot pole. I'd find out of favor blue chip companies and invest in them.

[disneysteve]

DS - agreed. My major objection is that bitcoin is looking an awful lot like a bubble.

I totally agree. I wasn't contesting that point at all.

[Gailete]

I never have heard of the Mississippi Buble, but have heard of the tulip one. Can you imagine paying $1K for one bulb? It was crazy but did help spread around insterest in a very lovely flower. One bulb planted could be ruined by critters eating it, or the weather not being conducive to them growing and sprouting. And it wasn't like you can hold a bulb in a safe for years on end waiting for it's value to go up, as in reality it would have been going down because it wasn't getting to do what tupil bulbs are meant to do; grow and show off a lovely flower.

To me the Bitcoin thing sounds the same and I had never heard of the other ones. It sounds like so much monopoly money, with money from the game of Life thrown in and a few other games with fake money. None of it is worth anything other than to help you win the game.

[QuarterMillionMan]

FYI, when paying with credit card the cryptos showed up immediately in my account. However when paying by bank account it takes 4-5 days and it shows as pending but it did lock in at the price point at which I executed the trade. This is a slight bummer because I wanted to sell my Ethereum and Lite Coin today and make a quick $500 profit but it says that the transaction will be completed by Dec 16. I can't sell what I don't have yet which is a little bummer but it is what it is.

[QuarterMillionMan]

BTW my bank account shows that the funds had been withdrawn and I received the confirmation emails for my purchases. Not sure why it takes so long.

[corn18]

FYI, when paying with credit card the cryptos showed up immediately in my account. However when paying by bank account it takes 4-5 days and it shows as pending but it did lock in at the price point at which I executed the trade. This is a slight bummer because I wanted to sell my Ethereum and Lite Coin today and make a quick $500 profit but it says that the transaction will be completed by Dec 16. I can't sell what I don't have yet which is a little bummer but it is what it is.

ETH and LTC are both down 15% in the last 24 hours. That lack of liquidity is costly.