Cryptocurrency

[JCS]

Bitcoin was about 70K and months later about 16K. That's all I need to know about the strongest cryptocurrency in the market.

People who are serious about BTC don’t view it through the lens of months. It’s a long term asset. If I look at my Roth over the past year it’s very depressing also. But when I zoom out to 3-4 years it’s encouraging. BTC is the same.

Many people in the space are advocates of DCA. Buying small amount daily or weekly so you’re not chasing the highs and lows. For example if I bought $25 a week the past three years this is what I would have.


BTC is not for people that need to check it weekly or monthly. You have to believe in its long term value. So I get why people are turned off to it. I would only advocate for people buying if they believe in its long term value. If not then that’s ok. They’ll just get burned by it.

[GJM]

https://www.wsj.com/articles/treasur...9066067?page=1

Snippet:

The cryptocurrency industry must follow the U.S. Treasury Department’s anti-money-laundering and sanctions regulations to prevent bad actors from abusing platforms known as “mixers” to launder illicit funds, a senior official said.

Mixers, which enable users to exchange cryptocurrencies with relative anonymity, can be a way for illicit actors to obfuscate the ownership and movement of funds while making it harder for law enforcement to have visibility into the transfers, Elizabeth Rosenberg, the Treasury assistant secretary for terrorist financing and financial crimes, said in a speech Friday.

“The challenge is that while these services often operate as money transmitters and thus have regulatory reporting obligations, they may deliberately operate in a noncompliant manner to make it more difficult for regulators and law enforcement to trace illicit funds,” she said in the speech delivered at the Crypto Council for Innovation, a Washington-based trade association that lobbies on behalf of the crypto industry.

[David S.]

If an EMP weapon is used....

Isn't an EMP a localized weapon? Unless it takes out every. single. Bitcoin node in the entire world, then Bitcoin continues to work.

You just have to replace your fried device and sign back in. That would be inconvenient. It's not the end of Bitcoin.

[Maple Syrup Actual]

I'm crypto agnostic; I mostly agree with Warren Buffett (arguing with him seems pointless generally; by any objective measure of success he's thousands to millions of times better with money than I am) but I do think that Bitcoin does one thing, which is give big stakeholders a feeling that there is somewhere untouchable for their money to go.

Up until very recently I think this was beginning to develop "mainstream" appeal, to the extent that people wealthy enough to use BC as a sort of specialty hedge can be considered to have a mainstream segment, precisely because of Sam Bankman-Fried's connections to the Democratic party. I suspect money was beginning to flow in from a different user base as FTX was seen as a legitimate and "friendly" institution for elite money.

Early days but I think the collapse of FTX and revelations of the scam being run are going to scare off money at a higher level than Mt Gox, say. Mt Gox burned the weird nerds, but FTX probably burned big time Democratic donors. I haven't looked into it, this is just a guess...but I bet if you looked at lists of the top 100 D donors, and were able to connect those names to BC holdings, I SUSPECT that there would have been a ton of them with real money at FTX, just because of who SBF's family are and how he had been treated in some media up until a couple of weeks ago.

Anyway I am not in crypto because I don't trust that the appeal of the "placing funds beyond the reach of government" function will either A) prove to be true in the long run, or B) ultimately outweigh the volatility.

Whoever made the point early in the thread that assessing any given asset is totally dependent on date selection is bang on. You shift the time frame around on tons of stuff, you turn winners to losers and vice versa.

The thing is, if you're invested in stuff that only pays when you sell it, that's the whole story. There's no BC dividend. Either you buy low and sell high, or you don't get anything. Not that there's no money to be made that way; of course there is and I think there's room still to make a pile of money off bitcoin as a currency speculator if that's your thing. I don't get into it myself because I don't think I have the risk tolerance and I don't think I have the level of specialized understanding necessary to do well on currency markets.

My ETFs are mostly ones I have to sell in order to benefit from but at least in theory, they represent some fraction of ownership in a company that has assets etc etc. My stocks are almost entirely investments in companies where I understand what they do and what they own, and in a lot of cases they're dividend-paying stocks because the asset earns for me if I just keep it. Bitcoin is really the polar opposite there so it'll probably never be something I consider an investment; I could see making volatility trades with it (which I sometimes do with other stocks when I see something heavily discounted) if I had the available capital, though. FTX jitters are probably driving down prices almost as far as they're going to go right now; there will be a bounce pretty soon, I'll bet. If you have the money to make the bet, there's probably gains to be had.

But as an actual system for doing anything, there I'm pretty much a full BC skeptic, personally. I get what it offers but I think the drawbacks outweigh the advantages.

[GJM]

https://www.cnbc.com/2022/11/21/gray...-concerns.html

KEY POINTS
Grayscale, the asset manager running the world’s largest bitcoin fund, said in a statement Friday that it won’t be sharing its proof of reserves with customers.
“Due to security concerns, we do not make such on-chain wallet information and confirmation data publicly available through a cryptographic Proof-of-Reserve, or other advanced cryptographic accounting procedure,” Grayscale wrote in a statement.

[MickAK]

I don't think I have the level of specialized understanding necessary to do well on currency markets.

Or probably the desire for an Adderall addiction.

There's enough resources available nowadays to turn yourself into a pro but goodness, what a miserable life. My friends that stayed all in are miserable, even the outwardly healthy ones. No amount of money is worth that to me.

[Maple Syrup Actual]

Or probably the desire for an Adderall addiction.

There's enough resources available nowadays to turn yourself into a pro but goodness, what a miserable life. My friends that stayed all in are miserable, even the outwardly healthy ones. No amount of money is worth that to me.

Yeah, if there's one thing I've learned in life, it's that trying to turn a fun hobby, like using drugs, into a full time occupation really sucks all the fun out of it.

[GJM]

Crypto is the latest version of the Wild West. What does it say about the state of transparency and risk management, when one of the largest players just tells the bankruptcy court $1.7 billion with a b has gone missing. And even savvy investors were hit.

WSJ:

The collapse of FTX has placed Sequoia SEQ -1.85%decrease; red down pointing triangle Capital in an unfamiliar position: damage control mode.

The early backer of Apple Inc., Alphabet Inc.’s Google, and Airbnb Inc.—and one of Silicon Valley’s most successful venture-capital firms—apologized to its fund investors in a conference call Tuesday for its $150 million loss on the crypto exchange FTX and vowed to improve its due diligence process for future investments, said people familiar with the matter.

[GJM]

More from WSJ:

Crypto Speculation Is All But Over. Its Systemic Troubles Aren’t.

The decline in bitcoin looks a lot like the decline in other super-speculative assets. But more failures of crypto firms could push it lower still.

James Mackintosh
Nov. 22, 2022 at 12:09 pm ET

The simplest approach is to look at the fall in prices. From its November peak bitcoin is down 77% against the dollar, a horrible drop. Just from the first troubles in crypto back in May—before Sam Bankman-Fried‘s FTX stepped in to calm things down—bitcoin has almost halved. And since the run on FTX began with a CoinDesk story about its interlinked hedge fund earlier this month, leading to its bankruptcy, the price is down more than 20%.

There’s no way to say for sure how much confidence in the crypto ecosystem was knocked by the cascading wave of failures. But at the extreme, the 77% fall in price isn’t that far from the 85% fall in U.S. bank stocks from peak to trough in the 2007-2009 financial crisis. Bitcoin’s better than the banks, too, since it can’t itself go bust, even if the exchanges that enable trading of it appear to be falling like dominoes (and unlike banks, don’t have the Federal Reserve to save them). Take this view, and perhaps much of the loss of confidence in the system is already priced in.

There is further evidence for that from the withdrawal of speculators. Some of the crypto hedge funds had no choice but to stop trading, because their money is locked up in failed exchanges. Others have chosen to take less risk, which means less real money to support the value of crypto.

The evidence is, first, that there’s less demand to borrow crypto assets, because speculators no longer want to take on extra risk. The interest that can be earned by lending out tether, a “stablecoin” tied to the value of the dollar, has dropped to just 2-3%—less than can be earned on risk-free dollars themselves. There is pretty much no demand to borrow bitcoin, with lending rates on Aave and Compound, two decentralized finance platforms for matching borrowers and lenders, close to zero.

Second, spreads on popular arbitrage trades have widened out dramatically. These are trades that flourish when investors want to take risk, because the gains are easy to calculate—examples include profiting from the gap in prices for the very same crypto on different exchanges, or buying stock-market-listed firms that hold crypto at a discount. These and other arbitrage trades are out of favor, because they need lots of leverage and involve the risk of the counterparty, the exchange or the listed firm, failing.

Third, the amount of stablecoins outstanding has plunged as borrowing is repaid. There are just $65 billion of tether outstanding, from a peak of $83 billion in May.

Yet, much of the fall in prices this year had nothing to do with the crisis in crypto. From the peak to the first set of blowups in May prices collapsed as the 2020-21 bubble deflated. Treat crypto as what it really is—a gambling token dressed up as an investment asset—and it is clear that bitcoin dropped exactly in line with other similar highly-speculative bets.

From the peak, bitcoin deflated closely in line with the deflation of the ARK Innovation ETF, which had also attracted a lot of speculative private investor interest for its bets on lossmaking do-or-die technology stocks.

The close link to ARK Innovation even continued during the blowups of crypto in May, when the TerraUSD algorithmic stablecoin collapsed. Lender BlockFi and broker Voyager Digital hit trouble, and Mr. Bankman-Fried stepped in (though Voyager still went bankrupt). Only when Mr. Bankman-Fried’s FTX itself failed this month did bitcoin and ARK Innovation diverge.

There is a tiny bit of logic connecting the ARK ETF and bitcoin, as the ETF holds shares in listed crypto broker Coinbase. But it has far bigger bets on cloud computing, gene therapy, e-commerce and Tesla than on the blockchain. The true link is the reliance for value on major tech breakthroughs and adoption—and since a year ago, the shared drop in that value.

If we take only the additional drop in bitcoin since it diverged from ARK Innovation, it means the systemic crisis in crypto has led to a fall of a bit more than 20%. That doesn’t sound like much.

As backup to this view, both ARK and bitcoin have also traded this year very much like a triple-leveraged version of the S&P 500. Indeed, when the FTX problems began bitcoin and the ProShares Ultrapro 3x-leveraged ETF had been down almost exactly the same amount, 56% and 58% respectively. Again, the link between the two broke only when FTX ran into trouble.

With Genesis Global Capital teetering on the edge—“We have no plans to file bankruptcy imminently,” a spokesman said on Monday—the systemic troubles in crypto don’t seem to be over.

But for true believers, systemic problems are just something that crypto has to live with, because part of the point of a trustless blockchain is that it is not government-issued money—and so doesn’t get government-backed rescues, either.

“It’s crypto being crypto,” said Omid Malekan, who teaches blockchain and crypto courses at Columbia Business School and counts himself a believer. “The people who came in because of the hype, the FOMO [fear of missing out], the rising prices and didn’t have a fundamental understanding of what’s going on have all blown up.”

If they’ve really gone, maybe the bubble itself is fully deflated. But prices will still fall further if more crypto firms fail, as seems likely. As Mr. Malekan says, no one should buy crypto unless they are happy to see prices fall by half in the short run. They easily could.

Write to James Mackintosh at james.mackintosh@wsj.com

[Darth_Uno]

WSJ and CNBC just generates revenue from clicks and fearmongering. I don't know the last time they produced anything useful.

At least they kept this part in:

But for true believers, systemic problems are just something that crypto has to live with, because part of the point of a trustless blockchain is that it is not government-issued money—and so doesn’t get government-backed rescues, either.

“It’s crypto being crypto,” said Omid Malekan, who teaches blockchain and crypto courses at Columbia Business School and counts himself a believer. “The people who came in because of the hype, the FOMO [fear of missing out], the rising prices and didn’t have a fundamental understanding of what’s going on have all blown up.”

If you (not you @GJM, "you" generally) think a 60/40 stock/bond mix is the way to go...crypto's just not for you. That's fine, and your investments will almost certainly be fine. There's also people that will go 100% into cryptos and make a staggering fortune, and plenty of people that guess wrong and lose 100%. Look up LUNA, if you didn't see that whole debacle.

If you (again, generic "you") just don't like, trust or understand Bitcoin or other cryptos, then just buy more SPY. That's the Glock of investing, and never a bad choice.