“Once crypto banks obtain deposits from investors, these firms borrow, lend, and trade with themselves. They do not interact with firms connected to the real economy.”
That's the reality. The only reason prices went up is because the "whales" build up this domino bonanza sucking in real people's money in the process.
Since no sane person would invest in crypto in the short to medium term, I don't see how the industry will recover from that.
Personally, I believe the only way is to "earn" for doing stuff on the internet. Yet, the experience is that earning in a highly volatile currency is not the incentive many people think it is.
I’ll admit that I bought a lottery ticket for the first time ever when the US Powerball was over $1B.
I don’t think people entirely buy lottery tickets expecting to win and doing the rational thing of calculating expectation values and taking calculated risks after weighing opportunity costs. They just want to daydream and paying a few dollars for a ticket makes that more exciting.
I'm not sure why you are bring down voted. Your point is valid, people buy tickets for reasons other than "I expect to win".
We buy raffle tickets, not because we expect to win, but because we support the cause.
Gambling can be entertainment. If I spend all night in a casino, end up $50 down, but had a fun night, how is that different to a ballgame, or show, or whatever. [1]
In the same way people buy lottery tickets not because they _expect_ to win, but because its entertaining to _think about winning_, and the ticket is the price of admission. [2]
[1] clearly there's a difference between losing entertainment money, and rent money. And gambling is not a good hobby for most people.
[2] actually _winning_ the lottery has massive relationship downsides, which one can clearly ignore while daydreaming. Losing all your friends, an almost inevitable consequence, seems like a bad thing...
The difference is in your reaction to loss. If people spend a few dollars on the lottery, most people are not going to be upset when they lose.
Of course, they're are always people who spend everything they have on gambling, but most people agree that a lottery is something you expect to lose.
When people invest, they don't expect to lose. Of course course, there is always the risk of losing, but the difference between a lottery and an investment is that there is an expectation of loss in the former case.
No, because there's no real expectation to win when you buy a lottery ticket.
There were enough cryptocurrencies that got pumped enough that people who bought into crypto felt that they had a good chance at succeeding. Also, there's been an insane amount of delusional fanboyism surrounding crypto that would be seen as completely insane if we're talking about gambling.
But getting rich still requires risking a lot of one's capital on some exchange that could go under any second, buying a coin that could get rugpulled any second.
A lottery ticket costs no more than a few dollars. Even if you buy a bunch of tickets to improve your odds, that's still a few hundred dollars tops.
Everyone who buys a ticket believes they have a chance of winning, though in reality they do not.
What I mean is to say, it is a more honest/accurate statement that "you have zero chance of winning when you buy a lottery ticket" is more true than claiming they have a chance, (even if it is literally true) due to how our mind biases work.
I wouldn’t characterize lottery tickets as insane, necessarily. If the ticket is a small enough amount of money that it won’t make a qualitative difference in your life, and the reward might… I dunno, I have trouble criticizing that decision. The expected value might be negative, but if it doesn’t produce a quality of life change, why care?
Spending enough money on lottery tickets to produce a quality of life change would, on the other hand, be a bad idea.
That's the point, I guess. Stock markets would be efficient if players were rational. But we humans are not. We trade for all kinds of reasons and at the weirdest times.
I do think that in this case the most important factor is that the crypto market is small and isolated when compared to the rest of the economy. And most of the serious investors are all thinking it looks like a scam so approaching cautiously.
However we would also be remiss not to observe that the reason a collapse in something like the stock market is so painful is because central banks and governments manoeuvre to artificially flush the system with huge amounts of credit. That means that a crash takes out not only current earnings, but forces a big re-evaluation of what is possible in the future too as huge amounts of leverage start to unwind. Then the cavalry arrives to bail everyone out and preserve value-destructive systems.
The central banks aren't going to ride in to save the crypto markets, so people are going to be more cautious about levering up. We expect the falls to be sharper, more decisive and over more quickly with less lingering pain.
<< (a) trying to prosecute the con men (helps no one, is just a punishment)
I take issue with this statement. I accept that there are limited resources and there is a question of how to use those resources wisely. However, there is a reason beyond simple question of karma/balance for a society to ensure that sufficiently egregious crime is punished. I absolutely disagree that it helps no one as it very well may stem a tide of future con-men, which is not without a toll.
Now compare that to option c ( other policy change ), which, in current gridlock setup seems somewhat unlikely.
That said, I accept that there are other considerations at play here.
Yeah, but you already have a police/justice system, right? From the perspective of a politician, the decision (a) is more about "prioritize the police/justice system to do its work on these cases". The justice will have to drop something else they are doing to work on this, and that something else might be beneficial in preventing the future crime in the same way you're arguing. (If you mean make sure systemic changes are made to the prioritization, that's another variant of the (b) option.)
But to be honest, I am not sure retributive punishment really prevents crime all that well. U.S. has a lot of laws against fraud, and has a pretty good track record in investigating and punishing as far as different governments do, and fraudsters still appear. I think in most cases, people aren't rational about committing a crime, they often self-delude themselves somehow that whatever they are doing is morally acceptable. I think there was an interview with the FTX CEO, who answered the interviewer's question with incredulous "the way you describe what we do, it indeed looks like a fraud". So I think some people have the ability NOT to see their pyramid scheme as a pyramid scheme.
On the other hand, people who will rationally consider whether to do a crime or not, should not necessarily think that because someone got away with a crime, they will get away with it too. You might as well think that the police/justice will be better prepared to a similar crime now.
Your comment is dumb. That’s the bulk of it. She’s a Congresswoman. Judging her on what she didn’t say is nonsense. It’s not particularly related to her. Why would she comment on it? Do you need her to make a press conference to confirm it was bad?
I literally have not heard a single word about her since all the Conservatives were whining about her during the 2016 elections, and then whining about her now in the above comments.
For anyone wondering, the purpose of crypto is not to be a store of value, but to be a currency. If you don't want to speculate on its price you buy BTC that day, you transfer that BTC to purchase whatever good you want. The seller can do the same, converting his BTC to something else or for cash as soon as he makes a sale.
To clarify:
1) It is a lot better if Bitcoin is used by a relative minority of people and flies under the radar. In places where it's really needed it's penetration will be a lot higher. We see that in Venezuela and in many places in Latin America with high inflation.
2) Centralized exchanges using a centralized digital coin with no backing != crypto
3) Most crypto != crypto. Bitcoin surely is.
4) Speculating on its price is an unintended side-effect.
5) The purpose of crypto is to remove the middleman.
> For anyone wondering, the purpose of crypto is not to be a store of value, but to be a currency.
I have zero skin in the game and I couldn’t care less if btc goes to zero or 1 million. But btc seems to be terrible even as a currency with terrible transaction processing times and overheads.
It's worse than fiat, but that isn't an alternative if you're a North Korean hacker, a ransomware artist, or an international drug dealer. Crypto does well at facilitating these use cases.
If cash is banned and a central bank gets the funny idea of setting the short term negative interest rate to -5% permanently, then corruption would disappear because the return on money obtained via corruption is no longer guaranteed to be positive unless it helps the economy more than the initial corruption damaged it. A few years later cash with demurrage fees would be implemented.
This is all right. But bitcoin or any other cryptocoin is a shitty currency because of their volatility. If all BTC users lived in crypto island and fiat speculation over crypto was some curious ritual that only non islanders indulged in, without affecting the balance or transfer of the coins then crypto would stand a chance of becoming a currency in crypto island. In the real world there is no chance of this happening. Mainly because BTC and almost every other crypto are closed systems and don't incorporate ways to interact with other systems (even other blockchains). Their's is an all or nothing world, and it will inevitably be nothing.
Satoshi only solved one part of the puzzle with bitcoin. But the problem is much larger and crypto-land is beset with untalented frauds.
Sounds like you have no idea of what you're talking about.
Crypto for cash, peer-to-peer, without an exchange. I personally know lots of people doing it, every single day. No way to map one BTC wallet to an individual. Those unpaid taxes do not exist.
Sounds like you didn’t read what I wrote. You can trade crypto P2P blindfolded in underground basements to your heart’s delight, but Uncle Sam will demand his cut eventually once you use that wealth for anything material in the real world.
I bid you best of luck with the IRS. Those unpaid taxes do indeed exist and I’d suggest you talk to a lawyer if what you wrote is what you truly believe.
>Uncle Sam will demand his cut eventually once you use that wealth for anything material in the real world.
I don't know. It really comes down to what Alice and Bob agree to in the exchange, that's the beauty of it. Purchasing property using property is kind of pushing it
That's not how it works lmao. You can't just trade your house for $0 to your friend and agree that there's no tax to be assessed. The government has its own opinion on the fair market value that they use.
Otherwise EVERYTHING would be "valued" at $0 right before it's sold and then people would "gift" the sale amount to dodge taxes. The IRS isn't dumb.
It's absolutely how it works. The fact that you live in an authoritarian country that requires a threshold of $600 to report payments is unnatural. It's like saying that the CCP has its own opinion on whether you should be able to go out of your house at any given time, or if you should be locked in for X more weeks due to "covid" or any other bullshit excuse. Or, that Canada govt has its own opinion on whether your bank account should be freezed based on what protests you attend to, and so on.
Here's the thing: abstractions (or "man-made horrors horrors beyond your comprehension") are feeble. With a big enough catastrophe, natural or not, the IRS along with any US intitution will cease to exist.
The article says nothing about the economy doing great, and even leaves the possibility of real bank collapse on the table. I don't know where you got the impression that 'doing X a favor' means 'X is doing great'. Last I checked... you don't help out things that are doing great.
My thoughts exactly. We have yet to feel what's actually coming to the global economy next year, and crypto may rise again. After all, everyone was expecting a horrible bear market and correction in crypto this year, but between FTX, Terra and other situations it just came sooner than expected.
> The density of connections between these players is nicely illustrated with a sprawling diagram in an October report by the Financial Stability Oversight Council ( https://home.treasury.gov/system/files/261/FSOC-Digital-Asse... ) , which brings together federal financial regulators.
> To historians, this litany of contagion and collapse is reminiscent of the free banking era from 1837 to 1863 when banks issued their own bank notes, fraud proliferated, and runs, suspensions of withdrawals, and panics occurred regularly. Yet while those crises routinely walloped business activity, crypto’s has largely passed the economy by.
Crypto is trying to reestablish the banking system of the 1800s with all the fraud, bank runs, banks creating their own currency, and the like... and then realizing why all the regulations that are in place are in place.
> Crypto is trying to reestablish the banking system of the 1800s with all the fraud, bank runs, banks creating their own currency, and the like... and then realizing why all the regulations that are in place are in place.
What it's really doing is proving that those regulations aren't necessary, because it's possible to have a crypto crash without affecting the general economy.
Because the benefit of those regulations is so that ordinary people can have a safe place to keep their money. But that works even if it applies only to savings banks and not to crypto, because that gives risk-averse people the safe place to hold their deposits even while a fast-moving unregulated system exists alongside it.
> it's possible to have a crypto crash without affecting the general economy.
This is only true because the only people (to within a rounding error) using cryptocurrencies are speculators, scam artists, and their victims.
If cryptocurrency ever became what its proponents suggest—a mainstream currency in general use—then these crashes would affect regular people and the general economy just as the ones mentioned in the 1800s did.
Not so. The crashes only significantly affect people holding significant amounts of the currency, i.e. speculators. Ordinary people continue to hold the bulk of their assets in US dollars in banks (or shares of the S&P 500 or real estate or some other non-crypto thing).
Meanwhile it could enable technologies like P2P social media where distributed hosts get paid in crypto for providing network services without needing a centralized payments intermediary and various other things.
I'm...not sure I understand the contradiction here?
You appear to be stating that cryptocurrencies could hypothetically exist and Do Things beyond fraud and speculation without many mainstream people using or caring about them.
While this is (again, hypothetically) true, I don't think it refutes my claim that the only reason cryptocurrency crashes don't affect the general economy is because most people don't use them (and the few uses they do have are almost entirely negatives). Indeed; I think what it does is posit a world where most people don't use cryptocurrencies...and crashes could still affect the general economy, through the medium of the (hypothetical) non-scammy, non-speculative uses of cryptocurrencies. Because unless you're proposing a system where people just keep trading around the same tokens, which have absolutely no ability to pay rent, buy food, or otherwise improve their lives outside of these very niche "P2P social media" areas, you're not talking about a currency. You're talking about some kind of a "social media score".
The amount of "significance" isn't a question of the portion of the total "market cap" for the cryptocurrency but rather the portion of the personal holdings.
There are a lot of people who have put a few thousand dollars that they couldn't really afford to lose on the promise that this was the future of money and that they needed to get in on the ground level.
> ‘A lot of us feel cheated’
William, a construction site manager from California, was woken by a text from friends about potential trouble at FTX in the early hours of 8 November. At the time, the 40-year-old had about $85,000 of fiat currencies on the exchange, plus three bitcoins worth about $55,000 and about $10k in other altcoins - a significant chunk of his assets.
Bitcoin and other crypto currencies are not the domain of the millionaires and billionaires. Yes, these people are speculators - but they're ordinary people with incomes much closer to the median than likely you or I.
> Yes, these people are speculators - but they're ordinary people with incomes much closer to the median than likely you or I.
That doesn't make them not speculators. Speculation comes with risk.
If schools are teaching ordinary people to put a significant fraction of their net worth into speculative investments, the solution is better schools, not banning things.
Crypto is neither good nor bad. Convincing unsophisticated people to take money that has empirical value in the current economy and invest that in a token that means absolutely nothing and entitles you to no money that means anything useful or has any empirical value.... that is perhaps not criminal, but very anti-social behavior.
If there were a real government demanding payment of taxes in bitcoin, then it would have value. Until then, it does not. El Salvador does not count because El Salvador is inconsequential, and either way they have no army. Also, it's obviously a political stunt by their young and hip president.
There are literally hundreds of currencies that were demanded for tax payments that have ended up with zero value eventually. That is not sufficient to make a valuable currency. What is necessary (in my opinion) is using the currency broadly for payments (not only taxes), and having a monetary policy that does not use excessive debt or inflation.
It's purported benefits (exchanging money through boundaries either legally or financially created) outweigh its drawbacks carbon footprint/gpu market manipulation. Those who disagree weigh the benefits higher than the drawbacks and those who agree weight the drawbacks higher than the benefits. Systemically it serves as a transaction/computational system built almost entirely on the inability to manage negative externalizes.
Forget the economy. It's just been really enjoyable to watch all the online crypto cultists shed their robes and huddle quietly into support groups. ;)
At this point, it looks like it will be less connected. The WSJ is saying that it's a good thing it all collapsed before it contaminated the entire economy and we had a mortgage-derivative sized collapse. Without the advantage that, since real houses were involved, the market eventually came back.
Think of some stablecoin being used on the scale of Treasury bills, and then going to 0.
I can offer some semi-credible information here ( I did not personally verify those, but the source is legitimate partially since it is crypto averse; plus ledgers are by design public, but one can have reasonable doubts about it ). Based on a fairly recent seminar, it would appear that crypto today averages approximately 100b in transactions daily and note that it is not that far away from US ACH payments ( 146b in 2021)[1] although there is a valid criticism here that we should be comparing apples to apples ( one currency to one currency[2] and not just payment type, but that data is harder for me to find ). Not bad for a payment type that is so consistently vilified. It should be noted that most of it appears to be int BTC.
This is primarily why I think crypto is here to stay in one form or the other unless either majority of the population is convinced its worthless ( as a speculative or money transfer tool ) for one reason or there is another reason to kill it ( if I had to guess, I would bet on environmental since it seems to have most sway now ).
I don't care about the economy. It is something made up to justify all sorts of evils. Who cares if it helped or hurted it. The economy is easily manipulated by the wealthy from job numbers to inflation. What matters is how is it impacting the bottom-half. Telling a large percentage of the population that the economy is booming when they can't even afford basic needs does nothing for them.
It's impossible to care about 'the economy' because it doesn't exist. It's grist to economics' lit-crit, and as such there are as many imagined 'economies' as there are critics, but none maps on to natural kinds. One day there might be a science of some of the phenomena currently scrutinised by economists. It will be a branch of the ecological sciences.
I honestly don't. My first degree was in philosophy, but it wasn't an area I focused on. I'd be surprised if no-one has done something on the topic more rigorous than fly-by internet comments by the likes of me - some of the heterodox economists perhaps? Or eco-philosophers?
It's long been clear to me that the theoretical end of the economics spectrum doesn't supervene over real physical systems. It's a technically fancy adumbration of fictions (money etc). Historically-informed political economy is, of course, a different matter.
You are right the "economy" is too much of an abstraction to throw around as a single word. Still people do need jobs. But more than that they need equal rights and democracy, and literacy and a safety-net. The slave-economy of South was doing great as well. Everybody had a job. But what kind of job.
I thought the reason they wanted to secede was to allow them keep their slaves. No? Why would they want to keep their slaves so much so that they would go to war over that? I assume it was because slavery was good for THEIR (meaning the slave-owning class) economy.
If as you say "Slave labor could not compete with free labor" then why didn't they (the slave-owning class) switch to free labor ASAP?
