I don’t have any, and I hope you don’t, either, since crypto is going ka-boom.
Bitcoin tumbled below $24,000 on Monday, hitting its lowest level since December 2020, as investors dump crypto amid a broader sell-off in risk assets.
Meanwhile, a crypto lending company called Celsius has paused withdrawals for its customers, sparking fears of contagion into the broader market.
The world’s largest cryptocurrency bitcoin dropped below the $24,000 mark, according to CoinDesk data, and traded around $23,575 at 7:45 a.m. on Wall Street.
Over the weekend and into Monday morning, more than $200 billion had been wiped off the entire cryptocurrency market. The cryptocurrency market capitalization fell below $1 trillion on Monday for the first time since February 2021, according to data from CoinMarketCap.
$200 billion gone? That’s gotta sting.
There’s a major wackaloon running for political leadership here in Canada, and one of his wacky ideas (among many) is to create a national crypto currency for our country – possibly to replace the CAD someday? Here’s hoping that this crash puts a dent in his chances of ever becoming Prime Minister.
The trick with a ponzi scheme is to be one of the people who gets to the lifeboats first. Plenty of money was made on bitcoin.
I’m one of the lucky ones — I received a couple of BTC donations circa 2011 that amounted to maybe $20 at the time. I have never put any of my own money in.
About 3 years ago when the first spike happened, I gave 0.02 BTC to an online acquaintance — about $700, I think — because she knew how to convert it to cash, and I didn’t yet, and the marginal value to her was much higher than it was to me at the time.
When BTC spiked over 2020-21, I pulled out somewhere in the neighborhood of $1k-$2k at various times. I also transferred most of it to other coins (some of which pay interest, but the amounts are a drop in the bucket compared to “market volatility”).
That left me with what was well over $1k only a couple of months ago, and is now under $200 (though I did pull out a couple of hundred, on the way down, to pay a coder friend for helping me with some stuff).
All that said.. crypto trading is kind of the exact opposite of a good way to allocate resources — but it would be, since it’s essentially capitalism distilled to its most parasitic form.
Isn’t there a grifter running El Salvador that is promoting Bitcoin? The Republicans must be envious.
Even worse, this populist is of arabic origin. It must smart to be beaten in the political game by a (REDACTED).
This game is supposed to be reserved for WASPs!
My Bitcoin and other cryptocurrencies are doing reasonably well.
Since I have never owned any, my net gain/loss is zero.
This is because I never quite understood Bitcoin.
What is it good for that can’t be done with US dollars?
The main uses seem to be for money laundering and evading taxes.
Neither are on my list of things that need to be done.
The other thing that bothered me about Bitcoin, was how its value was determined.
There was no real mechanism to set its value.
That meant the value wandered, very volatile and going way up and then crashing in ways that weren’t predictable.
A currency whose value could be anything at any time for any reason just didn’t seem all that useful.
At least with US dollars, I know what they will buy from one day to the next.
Raven #5 — well it used to be really good for buying illegal stuff, and fair-to-moderate for getting caught buying illegal stuff.
But it’s beginning to look like it’s no good for the first one any more.
In reality, it was never there to begin with… As David Gerard keeps pointing out, these numbers are entirely imaginary, because there’s no way to convert even a small proportion of the total number of tokens in existence into actual money without cratering the price all the way to zero.
That money never actually existed, it’s just magical fairies gone. If one person buys bitcoin for $50k, every single bitcoin in existence gets re-evaluated as being worth $50k. “Only” $50k (yes, that’s a good chunk of change) changed hands but hundreds of billions of dollars were created. Similarly if one person sells for $10k, every bitcoin gets re-evaluated as being worth only $10k.
The same is true of shares in companies, or property values.
When the money starts to really exist though is if you then take a loan out secured by your property. The lender will give you low interest rates if your property has a decent value, because in the worst case they can sell the property and get their cash back. If your property value crashes, and you don’t pay the loan, the lender is in a pickle — unless they wrote the contract to say that if the property value crashes you have to pay it back immediately in which case you are in a pickle.
The bitcoin bubble was weird though. Once I found myself on a phone consult with a 23yo founder of a clothing company, who funded the startup out of her $30mn bitcoin fortune (she got out at the top) she had been bored one day and dabbled in setting up a bitcoin miner, then forgot about it… I really don’t think there is such a thing as “easy money” but I was blown away.
Another guy I knew realized one night that domain names would have value and bought a few hundred. His innovation was buying the domain names for Japanese and Chinese words like “hotel” and “travel.” He spent 45 minutes doing that, and a couple hundred bucks. Some of the domains sold for more than $1mn. In terms of work:reward that’s the highest income I’ve ever heard of. Basically zero risk zero effort and he cleared close to $50mn.
Bubbles are always weird like that. A few people make out well.
Bitcoin and similar cryptocurrencies are just financial instruments, like orange juice, oil or gold. They can be day-traded up or down to make money. Like today. There was a clear technical signal to sell if it falls below 28000.
What you can not do with BTC is invest long-term, because as others above have pointed out, it’s not backed 1:1 by real money. That’s why these exchanges always have “technical difficulties” when lots of people try to cash out. Sure, some folks got lucky because they somehow got their hands on some coin in 2012-16, but that’s not really investing. The poor schmucks who bought at 45000 or above look pretty stupid today.
By the way, cryptos have been tracking general market risk sentiment pretty well in the last few years, especially the S&P500. So part of this meltdown is also due to the inflation-related general market crash. The S&P is today in bear market territory, the Nasdaq is down 3.75% on the day right now. So crypto is somewhat sinking with risk and the broader market sentiment.
For that matter, my conventional stock investments aren’t doing great. To put it in perspective, most of my sudden losses are of inexplicable gains over the past year. Easy come, easy go.
Crypto “investing” is like playing the lottery. I have heard my younger coworkers talk about it, though they’re smart enough to know better. I also think they’re doing it mostly for amusement, not as their primary investment. I worry a great deal about those who are. Nobody gets rich quick except by luck.
rorschach: basically, interest rates are going to go up so cash becomes worth more, rather than chasing returns by investing in other stuff.
The sooner these cryptocurrencies die the better: I gather that the blockchains are using the energy consumption of a small country (Denmark?) already.
Does investment sense correlate with intelligence? Newton lost heavily in the South Sea Bubble but Darwin was, apparently, a very shrewd investor with his family’s money.
If only this would discourage the true believers. Unfortunately, they’ll just keep HODLing, and criticizing the paper hands for spreading FUD, telling them to have fun being poor. I have a friend who is still encouraging buying crypto, and just holding onto it, because it’ll go to the moon someday. Like everything else blockchain-related that’ll all be fixed and wonderful and useful and valuable…someday. Soon. Any day now.
@14, “interest rates are going to go up so cash becomes worth more, rather than chasing returns by investing in other stuff.”
This is very simplified. It may apply to the attractiveness of holding USD compared to stocks, but the big picture with carry trades is the interest differential between countries and their currencies. It took one throw-away comment from Kuroda/BOJ today to reverse USDJPY gains, and other Yen crosses followed suit.
To be clear, I don’t pretend to understand all this complex stuff with yields, bonds etc. This is a hobby for me.
Hmm… my Zillow value is also down a bit, which is new. It ought to be crashing with the barrage of news stories about how “Nobody lives in the Bay Area anymore. It got too crowded.” (and the tech workers got too young and snarky, and the hard working captains of industry aren’t having it anymore). I’m used to this cycle. It’s the one that crowns Austin, TX as the new Silicon Valley every 5 years since the 1980s at least. Granted, with remote work, things really are different now.
If Stanford University announces they are moving operations to Texas or Florida, I may start to get worried.
#13 ‘Crypto “investing” is like playing the lottery.’
I saw this quote somewhere (I do not remember who from): “Crypto investing is like playing the lottery, but where the prizes are just more lottery tickets. And the only way you can collect is by finding someone else to buy your lottery tickets.”
@Idontknowwhyibother #19: I like that description! Weird thing is, it seems (at least for a while, as in years) that it all “worked” – no shortage of people lining up to buy all those tickets.
If you look at the s&p 500 for the last 20 years, we haven’t even got a blip, yet.
Might I suggest investing in tulips? That’s what all the cool kids are doing these days. :)
Gee who saw that coming. It’s almost like a bunch of ones and zeros on a computer aren’t worth much. I mean it costs microwatt hours of electricity to write those to a hard drive. The equivalent of “printing” actual money. I’ve been waiting for this collapse for years. I know a bubble when I see one. Everyone is bailing and converting to actual money as fast as possible. We are witnessing a bubble burst from the outside and I can’t stop laughing.
So there was a run on cryptocurrency without FDIC insurance. Ha! Yes, it is indeed a Ponzi scheme. It collapsed when they ran out of new investors. Reminds me of the story about Joseph Kennedy deciding to short the market when a shoeshine boy talked about buying stocks. Apocryphal, probably, but it makes a valid point.
@24 You bring up a good point. I forgot about the FDIC. That’s the difference between hard currency and play money.
There was a recent post about how Kickstarter was making noises about using “blockchain” to do . . . something. They were not being clear what that something was, so someone who has “a lot of experience with rubbernecking flops, scams, and general drama in the blockchain community” wrote an explainer about how blockchain could not help Kickstarter do anything better (and could well make things worse)(and, hopefully, blockchain will not be used to do anything):
https://www.comicsbeat.com/opinion-kickstarter-wont-explain-their-blockchain-protocol-so-i-will/
OT
The Young Turks just had a podcast about the Jan 6th hearings.
Cenk Uygur was completely shocked by the unexpected competence displayed by the committe.
If only Democrats could have a fraction of this competence in other situations…
https://youtu.be/zjOP1EDkbnY
Everything is going kaboom, it’s called inflation and it’s getting close to rampant due to supply chain disruption in a supply system that embraced just in time ordering/just in time delivery, which is hypersensitive to supply chain disruptions due to a lack of built in buffers.
For shit’s sake, we’re still short on infant formula and tampons! Can one get supplies more disrupted at a more basic level than that, well, other than bread, egg and meat shortages that we suffered early on in the pandemic?
Just in time supply works great when everything is stable, when anything destabilizes, it has its own build-in mushroom cloud. I said that on day one of my Six Sigma training, over a decade and change ago. And why I still oppose it, it can’t handle emergencies.
It’s like having an airplane with only normal law allowed in flight, anything stops normal law flight stops flight entirely and the only option remaining is crash law.
@5 and @6 Sadly, for a lot of good people, everyone forgets that, due to the BS views of many banks, it also became the defacto method of paying for things that are entirely legal, like online porn, which wasn’t “big name”, way too many sites that do things like cam girls, etc., and also paying sex workers, all things that are 100% legal, but the last one of which you can still get charged for “buying” for some reason, and all of which major banks, most credit card companies, and online transaction systems like Paypal refuse to process funds for.
These are ones that I semi-know about, due to a level of social advocacy, but I imagine there are probably other “fringe” cases, where the things being bought either are not, or shouldn’t be, illegal, but there is no other means to buy, since all major credit processing companies refuse to work with, and the courts let them get by with it (including freezing assets, which the banks don’t legally have any right to do, without cops or feds, and a warrant to do so, but do all the time anyway, and, again, the courts refuse to stop, or hold them accountable for, because its stuff that the “authorities” can’t go after themselves, but some desperately wish they could – not being, you know, illegal).
Reminds me of Grand Casino’s tagline/disclaimer at the end of their commercials: “Please Play Responsibly.”
It should be “Please Gamble Responsibly.” A real conundrum.
Kagehi@29–
This wasn’t the attitude of banks. Banks are willing to do business with anyone, even illegally, if they think they can get away with it. Banks have happily provided credit lines to international terrorist organisations, allowed dictators to move national money into personal offshore accounts, propped up Ponzi schemes and prime mortgage fraud, and in several cases have signed up customers to services without the customers’ knowledge — all brazenly illegal and immoral. What made the banks drop porn/sexwork payments was pressure from conservative agitators. The banks decided the money they were making was not worth the political hassle. It’s craven, yes, but it’s not like the CEOs of banks were saying “I’m appalled that we are providing financial services to camgirls, we need to stop!”
Wasn’t the whole point of Bitcoin and its ilk to be a replacement for fiat money? At least I vaguely recall it being sold as that, not an investment scheme for people to get filthy rich off of. As much as inflation has been rising, could you imagine having to pay for things with something as wildly volatile as crypto? One week you might have enough to buy a new car, a couple of weeks later the same amount might buy you a sandwich.
As it turns out, an unregulated currency isn’t a good thing.
Oh, I forgot to mention there is one good thing about cryptocurrency. I don’t know if anyone here follows the movie director Lexi Alexander on Twitter but she talks about how Bitcoin is the only way she can get money over to help family in Palestine and Lebanon. I just wish it worked better as currency, because that’s a use I can get behind.
@Tabby
I’m always skeptical of claims like “crypto is the only way to get money into/out of [dystopia]” for the simple reason that they are obviously false.
Think for a moment about how this would work. I have a friend in Dystopia that I want to send funds to. I use my $CAD to buy some magical internet money ($Token) on an exchange that I can send my real dollars to. I use the magical internet money network to transfer ownership of those tokens to my friend. Fantastic. Now my friend in Dystopia either has to find some local merchant willing to exchange bread for ownership of $Tokens, who presumably has some way to exchange them for things that They need; or my friend has to find a local currency exchange willing to give actual money in exchange for $tokens. In either case, there is clearly a path for actual value to get into/out of Dystopia, and the Magical Internet Money with its high transaction fees and flocks of grifters is simply an inefficient side channel.
@28
Exactly. Turns out, money is only good when it is being spent. If you have nothing to spend it on, if you don’t have any capacity to create things, then all that money you have is absolutely useless. “How much is a cup of water worth?” story all over again. About a king lost in a desert who is ready to give half of his kingdom for a cup of water and the second half for a piece of bread. Real cup of water beats imaginary things like kingdoms every day of the week, if the need is great enough.
Doctorow writes about it here: https://pluralistic.net/2022/06/01/factories-to-condos-pipeline/#stuff-not-money
Judging by the scare-quotes, you may know this, but these days money is mostly created by private banks, which lend money that is not backed by real-world assets. National banks also do this, lending to their governments in the same way.
@KG
Technically correct, the best kind of correct.
There are two types of money emissions, the one by central bank and the credit emission by commercial banks. When government doesn’t want to fund something for whatever reason, the public needs to get money somehow. They go and take loans from commercial banks. And pay the interest to corporations behind them. Easy money. :)
Update: BTC knocking on the door at 20000. There is a long-term level at 19511, if that does not hold it’s hard to see a technical support level apart from the psychologically relevant round numbers 15000 and 10000. Lots of margin calls if that eventuates. The whales will be mostly ok, but the Robinhood retail crowd that got in long at 45000 will get fried.