Welcome? Not sure what you mean. I maintain a similarly opinionated Twitter feed. It’s also to be clear not my responsibility. This whole “nobody could have known” is as asinine as it was predictable.
You just made generic anti-crypto recommendations, some of which look good in hindsight. That’s not the same as identifying the specific mechanism that proved to be Luna’s downfall; it’s more like being a permabear who predicted 8 of the last 3 stock market crashes. You can likewise claim to have “told you so” about Dai’s collapse, with equally good epistemic grounding.
For the reason I just gave: it would mean that others could say “I told you so” about Dai/Compound etc not crashing. If it’s still not clear, imagine I was always saying the stock market is a scam and would collapse. Do I get credit for predicting Netflix’s recent tumble? Even if it happened for completely unrelated reasons to the mechanisms of collapse I was warning about?
It’s fine to be risk-averse and avoid crypto as a rule; that’s not the same thing as knowing Luna couldn’t work long-term.
> it would mean that others could say “I told you so” about Dai/Compound etc not crashing.
No, they really cant. Like, I have no idea what DAI/Compound are, and trivial googling didn't answer. A random counterexample doesn't disprove every famous and/or high market cap coin crashing.
To use your market example, if you kept saying tech stocks are overpriced we would judge it based on the performance of the NASDAQ. You wouldn't be able to say "well, Apple still convinces people to give them all their money and they're still doing well so you were wrong."
Besides, it's not enough for the greater fools to continue to exist. There needs to be a credible mechanism for wealth to actually be created.
> It’s fine to be risk-averse and avoid crypto as a rule
Being risk-averse and avoiding crypto are different things. I don't touch crypto because I think it's a scam
>No, they really cant. Like, I have no idea what DAI/Compound are, and trivial googling didn't answer.
Well ... yeah, that kinda highlights the problem. If you don't know what something is, and are unwilling to learn, and have a hard time with google[1], then no, you don't get to claim vindication as having wisely made an appropriate inference based on valid evidence. Hence my point.
To fill you in: articbull's comments were vague enough to apply equally well to lending out the stablecoin DAI no the Compound platform, which did not crash or have to suspend withdrawals at any point.
Also, you have no idea, but you knew to switch Dai to all caps? :-p I think you're switching modes.
>A random counterexample doesn't disprove every famous and/or high market cap coin crashing.
>To use your market example, if you kept saying tech stocks are overpriced we would judge it based on the performance of the NASDAQ. You wouldn't be able to say "well, Apple still convinces people to give them all their money and they're still doing well so you were wrong."
Okay, and if you had been saying to avoid tech stocks for the past ten years, then you wouldn't be able to claim credit for the few times it does fall back, esp if it was up o average (hence my point about predicting 8 of the last three crashes).
You definitely wouldn't be able to claim credit for "having warned" someone about a specific stock's fumble (like Netflix's unforced errors), if "tech bad" is all you were basing it on, which is what arcticbull was doing when claiming to have to have warned about Luna in his comments merely because of a general anti-crypto stance.
>I don't touch crypto because I think it's a scam
The point is that that's not the same as differential insight into which specific ones are scams and why. If some aren't scams, that makes you wrong about them, and inability to differentiate means you can't claim to have had deep insight even when some do turn out to be scams.
IOW, you can be right for the wrong reasons, and if so, you can't claim that as vindication.
[1] Also, really? "dai cryptocurrency" and "compound cryptocurrency" both take you directly to explanations of what they are. On google, the latter pops up a "what is compound..." question which, when expanded, explains that it's a protocol for lending and borrowing.
> you have no idea, but you knew to switch Dai to all caps
I wasn't unable to find anything about DAI/Compound. Google turned up results. I couldn't find succinct enough information to see why it would be uniquely different.
> If you don't know what something is, and are unwilling to learn
I don't have to read 1,000 pages on crystal focusing power with amethyst to dismiss it. At some point the burden is on you to explain simply enough why everything else sucks but this is different for me to continue.
All you needed from that reference was that it was another stablecoin and platform that was on solid grounding and didn’t collapse, which was implicit from the original context. It wasn’t a huge leap or research burden.
Don’t lose sight of the main point: arcticbull was claiming he “told you so”. He obviously didn’t. If you’re ready to accept that there’s a big difference between the two cryptocurrencies that needs research to understand, then you accept that he had no good faith basis to claim to “have told you so” in his comment history, because he didn’t do the research either.
People are so smug when they say “I told you so.” It really bothers me. On every negative story about crypto, so many people comment “hur dur financial regulation dur”. But that’s so easy to say after the fact. If these people really could foresee these events happening, then they could have made a lot of money by taking short positions. That would be a lot more impressive to me than taking cheap opportunities to feel inferior at others’ expense by saying “I told you so” after the fact. As far as I’m concerned, you don’t say anything unless you put your money where your mouth is. Anyone can give advice from the sidelines. Show some conviction.
Disclaimer: the only crypto I’ve ever owned was $50 of eth I mined on my GPU.
"Markets can stay irrational longer than you can stay solvent" - Keynes. Why does only taking short position qualify one to speak on this issue. You could be right but get wiped out in the short term when the mania drives these shitcoins to 10-20 times their fair value.
I was told a very long time ago to never sell something short because you have the risk of unlimited loss.
But another drawback, from what I read, is that selling something short is taking out a loan, and if something is obviously a very lucrative short, then the interest will usually cancel it out.
Free lunches exist, but if it seems really obvious, don't get your hopes up.
No. What you’ve described would apply to short selling but not all short positions. If you buy a put on Ethereum (the right to sell at a specific price by a certain date), then you are short Ethereum because you benefit from price declines. Your losses are limited to what you paid for the put. You just need to have the cash for it and you can do so on LedgerX/FTX.
There are ~18000 cryptos, and out of all those, maybe two worth owning. Do I need to go open short positions on 17998 assets before I can tell people "don't buy shitcoins"?
The type of crypto the world ends up with will absolutely not be BTC or ETH. It will be closer to Zcash with zero-knowledge proofs, and will like only be used for things like international exchanges, escrow, new types of trusts (contracts are quite brilliant), or transfers between banks. People will use it the same way the used to use Moneygram, or the way they pay a thousand dollars for an escrow agent. I also believe every bank and country and possibly corporations will have their own blockchains. I have a strong gut feeling I'll never be buying a sandwich with crypto in my lifetime.
Wait until the point of sale terminals support Lightning. It’s coming. International trade requires transparency in a zero trust environment.
I do like privacy tech and coins but no, I think we are far off acceptance. The risk of zk schemes is way too great for anything beyond science right now.
That assumes you are able to hold a short position for the indefinitely long irrational period in which the bubble can grow unpredictably large and your gains increasingly negative. It’s therefore also irrational to take a short position.
The sensible thing to do was to stay away - and I think it’s perfectly fine for people who did so to smugly say ‘I told you so,’ presuming they did indeed do that.
People that are anti crypto are of strong conviction. I am sure they wish they could have their Michael Burry moment — if only it wasn’t for the damn volatility.
I made 18k betting Trump would lose the presidency with Polymarket. I literally took money from the world’s biggest morons. Feel pretty good about that.
In 2020, a lot of swing states were close, and there was a big shift towards Trump in election results vs. polls. He might have won had he not gotten covid.
You never know how long they’re going to be able to prop up the scams. Additionally, many of the big exchanges, being unregulated, are alleged to (either directly, or through large players they’re associated with) manipulate the market and trade against customers. Front running, etc.
Put up a large short position, and soon enough there will be a pump and dump to liquidate it. And if you do make money, have you noticed that these exchanges often go down for “maintenance” when big price movements are happening? There’s no guarantee you’ll be able to close out a position when you need to.
I have been consistently wrong about when various scams have exploded, both thinking that they would explode earlier than they did and that it would take longer. If I'd tried to short the crypto crashes so far I probably would have lost money overall even with just the ones where I was correct about them going to zero.
With a lot more research I perhaps could be net positive, but I don't actually want to spend a lot more time digging into something that I consider stupid bullshit.
It is the opposite of impressive, to me: Crypto is deeply troubled and unethical, but betting against it by shorting the market and gleefully taking advantage of someone losing their shirt is worse.
Basically if I can lose your respect by not fucking people over, I don't want your respect. How's that for conviction?
Even if you know something will fall it's not necessarily rational to take a short position. You also have to correctly guess when it will fall. Otherwise you will lose money on premiums or get wiped out by margin calls.
HN was almost always negative about the crypto currency hype. Even when shitcoins were at ATH. So, no. The criticism is not after the fact.
> If these people really could foresee these events happening, then they could have made a lot of money by taking short positions.
Markets can stay irrational longer than you can stay solvent has been a cliche for almost a century. That is to say nothing of the absurd cost of taking a short position and the counterparty risk of dealing with unregulated exchanges.
> As far as I’m concerned, you don’t say anything unless you put your money where your mouth is.
The motivation for a lot of us was to prevent our less sophisticated friends and family from blowing up their savings. The idea that one shouldn't be critical of obvious scams unless one has a financial interest in them is not a particularly well thought out take.
First, shorting is expensive.
Second, people have jobs and bills and don't need their money tied up in some short position.
Third, just cause you think something is gonna collapse doesn't mean you know when it will collapse.
I think certain assets are shit (crypto or otherwise). I'm not going to short them all, and I still reserve the right to say I think they are shit. I'm not a professional trader.
There is ample evidence before of people predicting pretty much everything that happened (with the exception of the bizarre transfer devices that evolved out of staking, tethering, contracts, etc.).
I think smugness is 100% warranted, especially given the intensity of the attacks from the other side.
Even your smugness with, "Well, if you're so smart why didn't you short and make a mint," is just sour grapes. Because shorting crypto required even more effed up investments into highly sketchy exchanges. There was really nothing to short in the traditional investment sense.
Maybe most people already have a job which they spend time and get money in return, so why would they spend even more of their free time in pursuit of a little bit more money? Life is more than money anyways
Most people have the attitude towards crypto that it is an over-hyped technology that is just sucking-up people's time and attention and so the best thing to do is to ignore it and hope it goes away as soon as possible so as to free-up people's time and attention towards more worthwhile things.
People don't take short positions against highly volatile assets like crypto because sometimes the market can remain irrational longer than you can remain solvent. The risk of a short position greatly outweighs the benefit even if you are right and if you use instruments that reduce the risk they are very timing sensitive.
Was it always going to zero? Yes. Could I tell you when that was going to happen? Nope. Therefore no short opportunity other than going for a momentum trade.
Most of the people saying "I told you so" have held the exact same line of reasoning on the way up, at the peak and on the way down. The only people that have decided things are different are the people selling crypto, i.e the people that bought and and yes, "We told them so".
People have showed conviction by staying away and investing in companies/assets that actually generate returns.
Taking a short position in illiquid assets likely to go to zero would be almost as stupid as going long. You are also highly likely to lose your money as most schemes to short use some other ‘stablecoin’ and you’d have to be able to time the bubble. That’s not a sensible position and just as risky as being long.
Why insert the hur dur?
Mentioning financial regulation in the context of unregulated get rich quick schemes is totally appropriate and people have been warning about these scams for a long time.
Yep, just two months ago there was the announcement about Curve creating the prestigious 4pool of four stablecoins, which included TerraUSD and excluded DAI, sparking a rivalry, in which a DAI founder called the former a Ponzi.
Oh, no. They had feeder funds. Stablegain [1] was feeding money into them:
You can now earn up to 15% APY interest on your cash with Stablegains. This is 30x higher than in your traditional bank.
You can deposit and withdraw using your preferred methods (ACH, wire transfer, USDC) with the help of our partner Circle.
There are no long-term lock-up periods. Earn passive income every day
We take care of all technical aspects of accessing digital lending markets for you. You can simply sit back and watch your earnings grow.
The interest rate you get accrues every day.
The biggest scam Stablegains pulled was to advertise taking USDC (most trusted stablecoin, backed by real, audited reserves), as to imply they were providing USDC lending yield, when in reality they converted your money to UST funny money.
> Until March 2020, the attestations said USDC was backed by dollars, held in government-backed US depository institutions. After that, they said the reserves were held at institutions and in “approved investments”, but did not give precise details about what those investments were. By June, it changed the wording on its website from “backed by US dollars” to “backed by fully reserved assets”.
This is what is happening to an extent, however the reserve requirements do not allow undercollaterization so you can’t print more value than you put in. A large slice of DAI is USDC.
The thing I never understood was why they didn't just invest in treasuries. Yield on the US 10-year is currently north of 3.3%, closer to 2% for a while. That's under inflation, but if you're a small start-up holding 100s of millions or billions of other people's money, that's enough to hit screw-it money in a few years without the constant fear of things going terribly wrong.
> holding 100s of millions or billions of other people's money, that's enough to hit screw-it money in a few years without the constant fear of things going terribly wrong.
so, you can have that honest 2% per year for several years or you can just take it all almost immediately. History as well as crypto today is pretty clear about what humans prefer. Absent the "take it all immediately" option people do though go for the 2% option. So if you see that they can go for such an option and yet haven't - i.e. they think they have a much better option than to earn easy 2% off somebody's billions (what can be better than that?) - that is a clear sign what option they really chose :)
Circle also does monthly attestations - independent, signed reviews by third party accountants - on USDC holdings. Those are available here: https://www.circle.com/en/usdc#transparency
I looked and the April '22 attestation seemed fine.
Even the FT article seems to walk back its claims about changes in the attestations as worrying, seems like their source actually is more concerned about digital currencies in general:
> “The problem to me isn’t the specifics of any one attestation, it’s the fundamental workings of these kinds of systems,” said Grey.
In my experience in interfacing with unsophisticated investors, they aren’t aware of the risk.
Should they do more due diligence? Likely. Should there be regulation to protect the unsophisticated? Also likely. Speedrunning securities regulations, as one does.
Agree that if we’re going to have regulations to protect unsophisticated investors from obscured risk, these nonsense “yield farming” ventures should be at the top of the list.
It is heartbreaking to hear about people’s crypto losses. I was on a plane the other day next to a young lady invested (gambling really) only in crypto, Tesla, and 0DTE options (!!!). While not a financial advisor, and with appropriate disclaimers, I provided them with an Amazon gift link for your basic books about index investing and personal finance, as well as real broker recommendations (versus Robinhood).
The knowledge gap is real and incredibly worrisome, and this is real money these folks are losing. You don’t know what you don’t know.
Trouble is the yield farming stuff is all distributed and outside the ability of any given legal system to ban. Education may be better. Of course you can ban say US based entities from promoting them.
I have a friend who lost about $5k in the Terra crash. So not a lot, but he'd rather have $5k than zero. And when he was telling me about it before putting money in he was talking about the 15% thing and that it seemed like easy money, and I said something like "well unless the whole thing just goes to zero". And you could tell he just didn't see that as a possibility. Like he's not completely blind, he knew he could lose money, although mainly he was thinking about them not paying 15% and him being able to withdraw at any time. But he hadn't given any thought to the whole thing just collapsing.
You can easily get (far more than) 15% return over a long period basically risk free by buying the S&P500, so it appears that you are the one who is out of touch with reality.
I probably should have clarified that I meant yearly gains, I can see how that can be confusing to read for someone that doesn't spend time on these topics.
And the expected returns going forward from here are meh. Stocks are expensive because they were valued in a 1% interest rate environment and given current inflation that probably won't last.
If your friend only had $5k in total and threw them all in Terra then I guess the lesson he got in the crash is way more valuable than any savings he might have kept. He would have lost them anyway on the next shitcoin.
This was my main lesson. I lost some money on Terra/Luna - thankfully much less than $5k, but still enough to sting. Looking back, I can see that I really had no idea what I was getting myself into and it was mostly just FOMO.
Obviously I'd rather still have the money I lost, but in a sense I feel lucky. If Luna had waited an extra six months to collapse I would have become confident enough to put more money in, i.e. I'd have ended up losing even more. And I'll definitely be putting much, much more thought into any kind of crypto "investments" I make in future. The money I lost was a small price to pay for the lesson I've learned.
yes, I had similar lessons years ago with options, forex etc. (ok, yes... I needed more than one lesson :D)
However, since I am a person that likes to "risk" their well-earned money, I think it's good that I have burnt my fingers early when I had less money. Now I have learnt that at the very least I should not put all my money into one bag. That's the biggest lesson: Split your investments. Split your accounts even. It doesn't rescue all your investments in a downturn but at least you'll likely never lose more than 50%.
> There are people hit by this who didn't even know they had exposure.
Does it matter?
What's the difference between "I invested in Terra, and I have no idea what that means, and I lost it all" and "I invested in Stablegains, and I have no idea what that means, and I lost it all"?
The Internet crosses national borders, which is kind of cool but also means that anyone in any country can pseudonymously attack people in their home country without any of the normal defenses of borders and local law enforcement / judiciary.
It's actually kind of crazy how physical borders are so heavily patrolled, yet virtual borders have no protection. IMO ISPs and web browsers should be injecting warnings in your packets and UI whenever they transmit data to or from a foreign jurisdiction.
It's starting to come out that all the crypto lenders were exposed to each other. Celsius was also a feeder to Anchor but they may have pulled out early enough to avoid most of the losses. Three Arrows Capital may have also been in Anchor.
I'm struggling to understand what the added advantage was of depositing on Stablegains, with 15% APY over Anchor with 19% APY, with both having equal risks.
I mean Stablegains sound like grifters who thought they could make easy money (siphoning 3%-4%) by slapping a new UI and marketing the heck out of it.
I occasionally get asked by relatives and friends of what to invest in. Now I'm no expert but I guess in the valley of the blind the one-eyed man is king.
Thing is what I tell them seems to bore them because, well, it's boring. My advice is basically this:
Put your money in a broad index fund and don't look at it for 10 years.
In giving this advice you start to realize it's not what people want to hear. It's not that they want to get rich quick. They just want to make a lot of money really fast. It's completely different.
Crypto-skeptics such as myself could clearly see that the vast majority of Crypto Andys were motivated by nothing more than greed. There's no fundamental belief in blockchain technology. There's no correcting the (alleged) fundamental flaws in the traditional financial system. In fact, there's an awful lot of ignorance of why the financial system is the way it is and little motivation to learn (IME). It's just greed.
So when I see these people get wiped out, I feel bad because that must suck and it's probably not the right time to say "I told you so" (or even "I informed you thusly") but I hope at some point people take ownership for their foolish decisions and do better next time.
Perhaps they knew what they were doing just as startup investors take a calculated risk that their doggy social networking site might not be the next big thing?
In my experience, it doesn't seem to be the chance of big returns, but rather the gut feeling of actively "doing something" to invest, vs. a very passive simple strategy of dollar cost averaging a low-fee broad index ETF. I think particularly in popular American culture, we often feel like it's more moral to actively make every penny, and have an aversion to passively earning money. Landlords are demonized, etc.
Yeah, this is bang on the money. And of course the financial institutions who make more money in fees when people are active vs. passively holding an index for decades, do what they can with marketing to support this idea.
You would be surprised at the number of generally math-savvy (at least “enough”) people who have an irrational fear of “what if it goes down?” and fritter away decades of substantial growth (with each foregone decade skipping roughlh modeled as a missed doubling).
Savings accounts and similar are the appropriate place to put cash you’re saving for a specific purpose or for emergency funds. You don’t want to invest something you will or could need access to in the short term.
People don't refer to gold, or buying a house a "saving" either, but they definitely see it as safe haven values, and not as their money being "actively" invested (even as they do bear risks and are fiscally categorized as investments).
For people I talked to, beating inflation was their base goal.
"savings" implies that you can withdraw it at any time without loss, which definitely isn't the case with index fund investments. You should only "withdraw" in times of high market prices.
people see investments as something that returns 10x - so i say rather than calling index investing "savings", we should call the 10x type investments "speculation" or gambling.
> It's not that they want to get rich quick. They just want to make a lot of money really fast.
In their defence, I feel like this is fuelled by media FUD as well as FOMO from the ever-widening wealth gap.
A combination of inflation and unaffordable housing along with stagnant wages means that even with everyone in the family working jobs, you can’t even afford a yearly vacation.
If the wealthy elites don’t realise that this isn’t sustainable, I’m not sure where we will be in a few years…
Exactly, people aren’t always stupid, they’re desperate. Investing in index funds at ~6% average return (or thereabouts) does nothing meaningful for people who are priced out by the 10-15% y/y gains on housing, or are living paycheck to paycheck due to inflation.
Its not so hard to see why people feel their only option is riskier bets.
>does nothing meaningful for people who are priced out by the 10-15% y/y gains on housing
Housing never had gains that high. Looking at the rise from the last trough (ie. 2009 to today) works out to 5.3% annualized nationwide[1]. Meanwhile the Vanguard Total Stock Market Index Fund returned 12.4% in the same time period. If you look around at a few different metros, there are many cities that return higher (eg. 7.5% for LA[2]), but none are anywhere close to returns for the index fund. The best I found was arizona[3] with 9.1%.
This is the key that is overlooked a lot. Taking /biz as an example, the sentiment is rife that crypto is their one and only shot to make it out of the hole. Couple that with the "how much do you make" threads that show a lot of them earn somewhere in the $15-$30 per hour range and you can see why these moonshots are (in their view) their only hope.
If the most they can scrape together is $5k of capital, then it needs to 10x to provide them with a meaningful change.
I agree, which is why everyone who lives off an income rather than assets (which is ~99.5% of us) should be a leftist and support labor organization as that is the only thing that'll actually improve their material conditions.
And I mean leftist in the actual sense, not a feckless liberal in the US Democratic Party sense who still ultimately exist to defend the capital-owning class.
The so-called Great Resignation and worker shortage was really the first increase in real wages many had seen in 40 years. And what's happened since? Massive inflation, particularly of essentials like housing. That's not an accident. The system is designed such that a budget shortfall is built into your existence. A workforce that is living paycheck-to-paycheck and barely hanging on is a compliant workforce. They're definitely showing up to work and not making trouble. That's the point.
Working people of any race, gender, sexual orientation or age have way more in common with each other than they do with the capital-owning class who routinely create wedge issues to avoid any sort of class solidarity.
>I agree, which is why everyone who lives off an income rather than assets (which is ~99.5% of us)
I think you're greatly underestimating how many people can "live off [...] assets". This page shows household net worth by percentile[1]. Based off that, you can probably live off investments starting at around the 90th percentile ($61k annual income with 5% withdraw rate), if you live modestly in a low CoL state. Once you get around the 95th percentile you can probably live comfortably in a high CoL state ($129k/year, translates to 87th percentile in california), and by the time you get to the 99th percentile, you can probably live as well as dual earner households with high paying careers ($555k).
> Based off that, you can probably live off investments starting at around the 90th percentile ($61k annual income with 5% withdraw rate), if you live modestly in a low CoL state.
I don't understand how that math works. Could you break it down for me?
The theory goes that a 4.5% draw rate from your capital will ensure your capital is preserved (relative to inflation average of 2.5%) for ever provided it grows at 7% a year in the long run. This is an achievable long term capital growth rate.
If you can live of $61k a year then you will need 61,000 / 0.045 = $1,355,555 of investments to deliver $61k a year without degrading the value of the capital relative to inflation.
I guess the 90th percentile refers to the fact that 10% of people in the US have this amount invested or more.
> I guess the 90th percentile refers to the fact that 10% of people in the US have this amount invested or more.
I think the 10% number is referring to something a bit different. The stats referenced are net worth, which in most cases is significantly composed of someone’s house & other property which doesn’t easily provide a passive income and 401ks which aren’t accessible. I’d be surprised if the number of people who have $1.3M in normal investments is greater than 1%.
> I think you're greatly underestimating how many people can "live off [...] assets"
1% of households are worth >$11m? Is that really true? I have trouble believing that but it could be true.
Either way, all it does is change it so that 95% of people should be leftists.
Also FWIW living off those assets at the lower percentiles that you mention doesn't factor in inflation, which is currently more than the 5% returns you mentioned. And a real return of 5% is a somewhat more aggressive strategy. It's more likely (and suggested) that at a certain point portfolios should become defensive as a amssive drop is way more impactful than a large positive gain.
It's also worth noting that these net worth figures include your net house value. You're not making a return on that money. In fact it's costing you money. Sure you could not own, get a return on that money instead and rent instead but that opens you up to other risks (eg as we're seeing now with massive rent hikes).
In my experience, it seems that a lot of people have an un-stated gut feeling that "doing something" must out-perform passive dollar cost averaging a broad low-fee index ETF.
If we came up with some obfuscated mathematical dance that, if un-obfuscated, were obviously dollar cost averaging in a broad-based low-fee index ETF, I think it would be more popular.
Edit: There are also lots of investment strategies where people are short tail-risk and don't realize it or properly account for it. For instance, my dad is a pretty smart guy (practicing medical doctor who never got his undergrad degree because he crushed the MCATs and got into med school after 3 years of undergrad, back in the 1970s when med school was less competitive) but he's convinced that his gut-feeling covered calls out-perform a simple buy-and-hold (on a non-risk-adjusted basis). I don't doubt it's possible to out-perform on a risk-adjusted basis, and maybe even on a non-adjusted basis with careful enough analysis, but he's never performed any analysis on the opportunity cost that he has given up over the years. Without any attempts to model or otherwise estimate opportunity costs, I doubt it's likely he's actually out-performing. He sees that most days, he's out-performing, and in the rare cases where his calls get allocated, he just tells himself "well, at least the long stock position did very well". He's short the tail risk, but essentially largely ignores that part because it's hidden by the gains in his simultaneous long position. He feels good because he's doing extra work, and most days he's out-performing, so the gut feeling is that he's out-performing the market on a non-risk-adjusted basis.
Heh, I think that idea has a lot of promise. Casinos might offer some guidance here given how good they are at making games with fairly straightforward negative odds seem enticing.
We need some sort of responsible investing vehicle that includes gamification, intermittent reinforcement, and a tiny chance for a huge payoff.
Well, with vanilla options, you'd need a basket of options to both reasonably closely replicate performance of a broad index (the "responsible vehicle" part) and also a small percentage of the time hitting a big pay-out. Presumably, you'd want mostly short-duration at-the-money calls on a low-fee broad-index ETF (so they often end up owning the ETF), and a small number of deep out-of-the money puts and calls on volatile micro-cap single names to get that sweet sweet irregular reinforcement dopamine hit.
I don't think investing in short-term at-the-money options would be a good strategy because you'd lose a lot to premiums. It'd be better package long positions on the low-fee ETFs mixed with some deep otm options as an investment vehicle. Love the concept!
I think perhaps micro-managing layered limit orders to try to squeeze the last penny out of multi-kilobuck index ETF purchases might be the right way to gamify responsible investing, though that does have the danger of soaking up hours during the workday, so there are negative consequences.
Maybe they way to go is lump-sum investing into some bond ETFs with gamified rebalancing into an age-appropriate mix of bond ETFs and broad equity index ETFs, following some pattern similar to value averaging for the rebalance, rather than cost averaging. It shouldn't actually be too hard to get something that has the right balance of feeling like real work, being relatively difficult to screw up (or the most common errors having little long-term effect), and out-performing dollar cost averaging.
This isn't investment advice, and even if it were, you shouldn't take investment advice from internet randos.
>Edit: There are also lots of investment strategies where people are short tail-risk and don't realize it or properly account for it. For instance, my dad is a pretty smart guy (practicing medical doctor who never got his undergrad degree because he crushed the MCATs and got into med school after 3 years of undergrad, back in the 1970s when med school was less competitive) but he's convinced that his gut-feeling covered calls out-perform a simple buy-and-hold (on a non-risk-adjusted basis).
Not saying the strategy outperforms, but he should be aware that there are ETFs now covering the covered-call strategy - XYLD, RYLD, QYLD - which automate most of that at reasonable cost.
Less competitive? I know a doctor who got his MD in 1952 as a 21 year old (18 months college), another who got it in the 70s as a 24 year (3 years college), and 2 who just graduated this year at 26 and 29 (4 years college each).
Listening to the stories, med school got progressively easier (1950: tons of WW2 vets on GI bill--older and deadly serious, only 1/3 made it through. 1970s: 2/3 made it through, most dropped first year. 2018: 95% made it through because the schools radically changed from weeding out to hyper-supportive)
Isn't it still the case that nearly all med schools in the US are capacity constrained anyway? There's no sense in pandering for extra students you can't take on anyway, especially if it harms your program's reputation. More likely, they realized some aspects of med school nearly amounted to hazing, with little demonstrated educational benefit. (Again getting back to American culture's tendency to conflate difficult with beneficial.)
Yes, the supply is capped by residency spots available.
They reason they became hyper-supportive is because admissions have become insanely brutal, most poor performers have been screened out before they even apply. The marginal benefits of making the program even harder likely amounts to nothing more than hazing.
It’s simply politically untenable to kick out students during the program, given the already artificially constrained supply of newly minted physicians and regional shortages of talent.
Maybe Dad was just being modest when he told me that he couldn't have gotten into med school without an undergrad degree these days. Also note that I was talking about competitiveness of admissions, not competitiveness of the classes. You seem to mostly be commenting on the competitiveness of the classes.
I once read an article describing this basically as "farming" vs "trapping" tactics. For a farmer, there is basically always more work to do (weeding, sowing, harvesting, maintaining tools and buildings, looking after animals etc etc etc) and often more work directly results in more profit. Trapping on the other hand is not like that. Once you have set your traps, you must now sit still and wait. Checking every 5 minutes if an animal has walked into the trap yet is actually counterproductive.
The premise of the article was that investing is more like trapping than like farming. Since most of us come from societies with a long history of farming and the resulting cultural norms have permeated through said societies, many people feel like they "must do something" to tend to their investment crops properly.
I'll add my own speculation that in many western societies the industrialization and class warfare rhetoric has created a meme that "only work deserves compensation", implying that supplying capital is an unworthy state of existence. (See for example the many posts on HN decrying every single landlord as a parasite on society) If you want to invest but also want to hold on to your identity as a wholesome "middle class" American (definitely not one of those nefarious "elites" you keep reading about in the news!), just sticking your money in an index fund and doing nothing else may feel dangerously capitalist. Fiddling with it gives you some emotional satisfaction back by "working" on the investments.
That's an interesting premise, but as someone who does regular trapping for exotic pests, actual trapping is very much work.
You do your rounds (a lot of walking), pull out dead animals and carry them with you, re-bait your traps, repair traps as required, dump the dead animals, and repeat over and over again.
I guess there are other forms of trapping - more like hunting, a one off exercise to get that <whatever> - but I would hazard most professional trappers would see it as very much like work.
I agree that the actual "setting up traps" is work, but so is choosing investments (even if that is usually shunted off to an index fund these days).
My gist was more that in both investing and trapping there is a point where the positions are set up and there just isn't anything that you can do to make the process go faster. Not being able to make it go faster by putting in additional work seems to be psychologically difficult to cope with for many people.
I feel this is slightly wrong. I’ve observed the kinds of people most likely to lose their money in this way don’t want to put in additional “work”. They want (hope for) additional “woo”.
There's a meaningful difference between putting <10% of your portfolio into a speculative investment versus 100%. If your speculative investments moon anyways, 10% * a large number = still a large number, and you didn't bet the farm. It's a good way to fulfill one's desire to be an active investor, while largely acknowledging most of us won't beat the S&P-- I know the active portion of my own portfolio (no crypto) has underperformed the index.
One of my experiences is that nobody tells you what to do next. They don't know.
If your speculative investment moons then your portfolio has risen to 95-99% speculative investment. At least thats a consistent case in crypto or a super quick and awesome private equity exit, both of which have multiple thousands of percentage gains.
So the people following that kind of risk allocation advice might already be starting from that second state. Rebalancing is an option, but its lame when everything has such high correlations to each other. And rebalancing when? Anytime the speculative investment goes over 10% of the portfolio? After you let it ride and its price got stable for a few days? Waiting a year or more for lower tax treatment on the rebalancing sells?
Yes, there are people who rebalance when that happens. I'm not one of those people (I probably should be, but I'm not), but there are people who definitely do rebalance their portfolios whenever it gets out of whack.
>Put your money in a broad index fund and don't look at it for 10 years.
That might be a dead strategy in 2022. After the 2008 crisis the fed discovered a miraculous economic cure: slowly print money and throw it into the economy, so people keep transacting with each other, and the GDP (and stocks) keep growing.
Turns out, most of this growth was on paper - fads, speculative investments, overvalued stocks. Now that the geopolitical shock has disrupted the endless stream of cheap stuff made elsewhere, turns out there's an abundance of dollars and shortage of everything else. There might be a rather non-trivial correction ahead of us.
Existing long-term bonds take a hit. Because if today you can get a 6% bond maturing in 2030, nobody will buy your 3% bond unless you price it down accordingly.
But if you keep getting them in 1-year increments as long as you expect the rates to rise, you just keep cashing out at maturity and reinvesting at the yield rate of the day.
Kinda, but a lot of them are about manufacturing more cheap stuff in China. Most technological advances not involving that are about skirting the regulations/antitrust laws (AirBnB, Uber, Google Ads) or using dark patterns to manipulate attention (Meta).
You are distracted by clickbait news and ignoring important advances made since 2008, a few examples which is just scratching the surface because there is a ton I am personally not even aware of:
* Greatly reduced cost of solar panels and batteries
* Things like uber/doordash made taxis / takeout way more efficient
* Transitioning to electric vehicles. In 2008 I'd pay $50/week for fuel, now I pay $10/week to travel the same distance in my electric car. Not to mention savings in oil changes/maintenance
* mRNA vaccines nonexistent in 2008
* Significant progress towards autonomous vehicles, if that comes to fruition on a large scale it will transform our society
This is spot on. What worked in the last 10, 20 or 30 years isn’t guaranteed to continue to work. Market cycles, if it does cycle, is closer to 100 years than mere decades. ETFs, 60/40, 4%, etc. have become a cult mantra that blinds investors to critically consider alternative realities.
You do know the Fed has been raising rates all year, and have signaled they will keep doing it through the end of this year, right?
Or are you suggesting on a long enough timeline it's just going to go right back to zero again? If so, then yeah you might be right there.
At least the US never got down to negative interest rates, like they've had in europe for the past eight years. I can't imagine having money being taken away for parking it in a 'savings account' (of course inflation is practically the same thing, but negative interest rates still seem worse to me, especially since they also have high inflation over there right now).
Slightly different perspective here - there is an abundance of debt that spends like dollars. Government debt and some pension debt is nearly unserviceable in some States and countries, so there will be a dollar short squeeze in attempt to get dollars to pay the debt. Yep, seems counter-intuitive at first glance that the USD short squeeze will increase the dollar appetite.
Why you think someone trades the same stock 10 times per day? (i.e day trader). Isn't that greed? The advantage of crypto/defi done right is that at least you have some transparency and your positions won't be put on hold or liquidated arbitrary by someone like it happened on LME case or GME
> Put your money in a broad index fund and don't look at it for 10 years.
You should check on their investments accounts on a regular basis.
If your bank or brokerage makes an error, there is likely a limited period of time during which it can be fixed.
Also, if you do not have activity on your bank or investment accounts for a period of time, the contents may be escheated by a state and investments may be sold automatically.
Planet Money had an episode about escheatment a couple of years ago: https://www.npr.org/transcripts/799345159 They mention that Delaware, where the person's broker was incorporated escheats investments after three years.
Ask most people today and they’ll tell you Internet stocks were overvalued in 1998. But then you take their IRR since then and you realize you could open a hedge fund and be a billionaire just by buying the ones that were big enough to get time magazine covers, even if you bought at the absolute peak (there are literal billionaires who did basically just this!)
So now you have this thing that feels a lot like the internet, especially to lay people, and it’s not totally unreasonable for them to think “this could happen again.”
It’s just that crypto is way stupider than the internet and is unlikely to have a similar impact, so they’re probably wrong.
Yes, but that’s not what the comment I’m replying to said. There seems to be some pervasive belief that absolutely no one ever beats the S&P500 index in the long run, which is obviously nonsense.
If I spent the last 20 years allocating 90% of my savings to SPY, and the remaining 10% in a large-cap tech focussed index, I’ve outperformed SPY. Is that dumb luck or is it a pretty trivial implementation of a sensible investment thesis?
There’s nothing magical about some committee-curated collection of 500 US-only equities which means it outperforms every other option ipso facto.
If you were talking about a normal person actively managing a portfolio I’d be more inclined to agree.
By definition, 50% of capital outperforms the SP500, which is an average.
What the Buffett bet was all about is that you don’t know WHO will outperform, and with fees being a net-drag, a basket of hedge funds will on average underperform due to the average of them being, average, and then negative due to fees.
Median is obviously not mean. I never mentioned median anywhere. Where is the median of market return relevant here?
Yes, volatility matters and is why people generally prefer to get the lower volatility average market return. But that’s not very relevant to many peoples claims on here that SP500 outperforms most capital, which is obviously incorrect.
Not OP but I think the 50% of cases above or below only applies if you refer to the median (https://en.wikipedia.org/wiki/Median). If you refer to the average, or mean, the distribution could be different.
But I’ve never mentioned median. I’m stating that by definition, 50% of $ outperforms SP500. Sure that could be skewed, with a median underperforming, where in the extreme 1 participant has $20T outperforming and the other 1,000 collectively have $20T underperforming. But on average your $ has a 50/50 chance of under or over performing total market (and thus basically SP500) by throwing darts at a board.
But you mentioned average (mean). You can have the same average but different median, and only if you would talk about median it would be guaranteed that 50% of the cases are above and 50% under.
In the case you mentioned, with an average, there might be extreme outliers that make the average different from the median, thus rendering the assertion that 50% of the cases are above the average and 50% under false.
No point dropping such a useless comment without elaborating. This is effectively gatekeeping and I wouldn't be surprised if it's against HN guidelines
Wealth concentration happens when the long term return on capital exceeds the growth rate of the economy according to Thomas Piketty.
The wealth obviously concentrates with those, that have the most assets and least amount of spending in relation to their total income.
When you think about this, this system is inherently injust if r<g is true, which is the reason why politicians and economists are addicted to growth. Capital must dictate the growth rate of the economy instead of people dictating the growth rate that they want.
Now, under this perspective you have found the secret cheat code on how to get richer automatically. There obvious problems for every day people. Exponential growth is really slow in the beginning so most people never get to the point where their money is growing as much as a get rich quick scheme would promise every single year.
The other problem is that they are human beings that need food and shelter which means living expenses are a big portion of their income meaning they don't have much to invest in the first place. It would be better if you didn't have to pay capital gains to the rich.
However, if you are going for that living off other people's work strategy, you should be aware that the road is long and the rewards are only reaped at the end. Oh, and everyone will hate you.
Were you able to read the whole book? I was really enthralled by the main points and graphs made near the beginning but was wondering if there were further insights because its a bit of a slog.
> There's no fundamental belief in blockchain technology.
For skeptics, sure. But there are many investors who hold crypto precisely because they believe in the technology.
> Put your money in a broad index fund and don't look at it for 10 years.
This is a good safe and low risk bet. It doesn’t invalidate an investment thesis based on crypto currencies and blockchain tech. Crypto is higher risk and higher maintenance, potentially higher returns, and better suited to those who want to manage their own portfolios.
But the technology doesn't actually work for anything useful (besides tax evasion). Cryptocurrency is a zero-sum ponzi scheme; for someone to win, others have to lose. With stocks, there are on average more winners than losers because new value is being created.
Is it really a good way to evade taxes? Each transaction is recorded publicly on-chain forever. User would have to be very careful with their on-chain privacy and very determined to skirt the legal system. The average crypto user will begrudgingly pay their crypto taxes to avoid having to live the life of a criminal, and would happily welcome more frictionless ways of having taxes recorded and collected on-chain.
> Cryptocurrency is a zero-sum ponzi scheme
This is repeated a lot on HN but it is easy to refute. A user can purchase $1000 of DAI and send this to another person in the world within 30-60 seconds, without the beneficiary needing to set up a USD bank account or disclose private data to a third party. The beneficiary can decide to hold this asset or exchange it to another asset such as fiat, gold, ETH, food. These are not zero-sum games - they are more comparable to a PayPal exchange than a zero-sum game.
> With stocks, there are on average more winners than losers because new value is being created.
This is questionable. Many stocks are overpriced far beyond their intrinsic value. The expectation that they will continue to go up forever and provide returns depends on people continuing to buy them at higher and higher prices, just like crypto. Some investors do not feel that NFLX and META will continue to go up in value forever, as the price already exceeds their value.
And when you own stock, you cannot do much except hodl and sell. When you own ETH, you can hodl and sell, but also use the token to send transactions to the network and interact with smart contracts.
> A user can purchase $1000 of DAI and send this to another person in the world within 30-60 seconds, without the beneficiary needing to set up a USD bank account or disclose private data to a third party.
Your “refutation” is leaving out some key details:
1. You do in fact have to deal with legal requirements - it’s a requirement for converting into useful money and tax evasion has serious consequences in most of the world.
2. Replacing Western Union has some appeals but it’s not enough to justify the returns which blockchain salespeople have been claiming, especially when the established player can cut margins easily and blockchain users need a fairly large just to compensate for currency conversion and increased risk.
The Ponzi claims aren’t because someone is claiming that they can beat PayPal’s overhead by 2% — it’s from all of the people claiming double or triple digit returns which are obviously unsustainable, and hand waving questions away claiming that you should just buy now before the price goes up.
> And when you own stock, you cannot do much except hodl and sell
My dividend income suggests you might be leaving something out here too.
20% returns as you see in Terra is probably ponzi-like, but ETH protocol is not promising free yield for doing nothing, or doubling or tripling your investments.
> You do in fact have to deal with legal requirements - it’s a requirement for converting into useful money and tax evasion has serious consequences in most of the world.
I never said otherwise. Buyer can purchase the DAI on a KYC exchange that is regulated by their government. The beneficiary can report taxes on income and capital gains as they do with other assets.
> Replacing Western Union has some appeals but it’s not enough to justify the returns which blockchain salespeople have been claiming, especially when the established player can cut margins easily and blockchain users need a fairly large just to compensate for currency conversion and increased risk.
This is now a subjective argument about what you feel is better or more valuable. To some people, reducing commission for global transfers to 0%, with 30-60s finality and better privacy features is all desirable and valuable.
> My dividend income suggests you might be leaving something out here too.
Not very compelling when you compare dividend income over the last 5 or 10 year period between crypto and stocks. The point is that just having an asset that generates yield based on speculative investments is not that useful, and it’s the sort of zero-sum game that everybody is mocking Terra and crypto for.
> 20% returns as you see in Terra is probably ponzi-like, but ETH protocol is not promising free yield for doing nothing, or doubling or tripling your investments.
The protocol isn't promising anything. The people promoting it are, however.
> > You do in fact have to deal with legal requirements - it’s a requirement for converting into useful money and tax evasion has serious consequences in most of the world.
> I never said otherwise. Buyer can purchase the DAI on a KYC exchange that is regulated by their government. The beneficiary can report taxes on income and capital gains as they do with other assets.
Here's what you said: “without the beneficiary needing to set up a USD bank account or disclose private data to a third party.” How is that true if you're not breaking KYC?
> > Replacing Western Union has some appeals but it’s not enough to justify the returns which blockchain salespeople have been claiming, especially when the established player can cut margins easily and blockchain users need a fairly large just to compensate for currency conversion and increased risk.
> This is now a subjective argument about what you feel is better or more valuable. To some people, reducing commission for global transfers to 0%, with 30-60s finality and better privacy features is all desirable and valuable.
It's an economic fact, not a subjective argument. If you're just cutting out a middleman, you're not going to be able to make a greater return than the middleman is currently taking. You could argue that this will unlock some kind of previous unviable economic activity which will dramatically increase volume, but that's a separate argument and needs some data supporting the idea that it's probable at a level which would provide the promised returns.
> reducing commission for global transfers to 0%,
You surely meant 0% plus the transaction and currency conversion fees on both ends, right?
> The protocol isn't promising anything. The people promoting it are, however.
Anchor's whitepaper and protocol promises ridiculous yield on USD pegged assets, and it is the basis for the entire Terra/Luna crash.[1] Nobody designing the ETH protocol is claiming that it provides USD pegged yield or will double or triple your investment. The closest thing written into the protocol is a return on the native ETH token for block producers - miners or stakers - receiving block rewards from the protocol and tips from user transactions.
Ignore the laser eye Michael Saylor's of the world who make ridiculous claims about these protocols that are unsubstantiated - try to look at the protocol design and spec.
> Here's what you said: “without the beneficiary needing to set up a USD bank account or disclose private data to a third party.” How is that true if you're not breaking KYC?
The sender sets up an account, the receiver only needs a 24 word seed phrase to receive the tokens. Maybe the receiver will need to declare this as a gift or income depending on context and their country's tax laws, sharing details with their government, but they are not having to share details to PayPal or another private company that would typically facilitate an international transaction like this.
> You surely meant 0% plus the transaction and currency conversion fees on both ends, right?
Depending on the use case, there may not be a fiat exchange. Another user might be happy to receive 1000 DAI, in which case there is no centralized exchange needed.
The transaction fees can be minimal through L2 - in cents - and are different than commissions and take-rates of processors like Western Union or PayPal. In ETH, most of the fee is burned, reducing total supply and providing value to the entire network. Another part of the fee is a tip to the block producers, which in a permissionless system can be any entity with enough capital at stake. Finally the fee is a fixed amount, not a percentage of total value being sent. Transaction fees are not perfect - a fee-free permissionless network is not possible - but some will find it preferable and more fairly distributed worldwide compared to how private payment processors currently extract rent.
You keep missing important points of ops argument. maybe on purpose?
e.g. You claimed receivers would not need to 'disclose private data to a third party' but as op pointed out the receiver cannot get the DAI into the normal financial system without KYC.
Only if they need to exchange to fiat, as I said previously.
> Depending on the use case, there may not be a fiat exchange. Another user might be happy to receive 1000 DAI, in which case there is no centralized exchange needed.
It’s true though, if you want to use the traditional financial system you are basically stuck uploading your photo ID to a private company’s website and hoping they won’t leak it. In many cases users are forced into this - paying taxes. We can only hope this won’t always be the case.
I think you can allocate 1 to 5% of your investment money into more risky bets. I did with crypto and was lucky enough to do very well. If I lost my 1%, that was part of the game. The benefit/risk at the time was worth it.
But even there, the most boring strategy works best: hold on to it for several years and sell a part when it becomes too big.
I tried timing the market on stocks and crypto, but it basically can't compete with just holding it.
The biggest problem is of course that you hear these stories how some people made a crazy amount of money, and then "why didn't you know about it?". But you never hear about the people who made nothing.
Im sorry but a high horse for betting on the slave traders vs betting on crypto. NUP. Money breeds money. the whales (1%ers) on index funds are doing it investing in the companies that are destroying the world. Displacing millions of people a year, causing corruption and famine, funneling offshore into tax havens.
Crypto has a LONG way to go before it gutters into the dirty tactics of the stock market.
My current advice would be put, all money in bitcoin and don't look at it till the beginning on 2025. Then put a sale offer for 6x the price for what you bought for to get a conservative return on your investment.
Than wait few years for the next crypto crash and when you read heading "Bitcoin is dead" it's time to buy again.
As the cost of energy rises, the energy to mine crypto rises, while the value of crypto keeps decreasing, I wonder if there's an inflection point where e.g. bitcoin just implodes and vanished because mining is losing money?
Bitcoin mining difficulty adjusts to the available mining power.
When price of Bitcoin drops. Some miners quit because it's no longer profitable for them. The ones that remain get more of mined Bitcoin for themselves so profitability of their operation increases. Difficulty of mining increases so that blocks are still mined roughly at constant rate.
Network can operate regardless of how many or how few Bitcoin miners operate.
And many of us thought they should have been allowed to fail. Profits privatized, losses socialized.
Banks are far from innocent, but let's not forget that crypto has been almost all scams (Im giving thr benefit of the doubt that there may be a legit one out there somewhere).
They wanted decentralized, unregulated finance until the shit hit the proverbial fan.
People invested for insane returns and were surprised pikachu face that they could possibly lose money.
I've still got friends right now screaming 'get in while it's cheap!'
edit to add- this is becoming the hot potato many of us saw Wallstreet pull before.
Retail bank accounts are FDIC-insured. It was capped at $100k per account before 2008 (it's currently $250k), but spreading $177,000 across two accounts isn't a huge burden.
Now for the Ukrainian, betting whether crypto or the hryvnia is more stable is an actual dilemma.
> Keith Baldwin, a 44-year-old surgeon who lives outside New Bedford, Mass., saved $177,000 during the past decade. Last year he took his savings and bought USD Coin, putting it in a crypto account that paid a 9% annual yield.
A surgeon saved 177k over 10 years? Something else might be going on here.
He also bought a mansion and a few cars and divorced and gambled a lot in Vegas and online casinos and hot stock tips?
What's amazing is that this person put his name in the WSJ as a gullible fool who can now be targeted by spearphishing scams (including that Crypto Recovery scam that has was even spamming HN recently) and shunned by his peers and potential clients.
Especially for the surgeon, why would you volunteer to be interviewed for this? Unless you actually have $2M net worth and it's a big troll, you're not going to show your friends you were in the WSJ. You want your patients to know?
My surgeon brother told me that many older surgeons can't "afford" to retire, often because they lost loads of money in investment schemes (and probably coupled with an unwillingness to accept a cutback in lifestyle).
You probably lose a lot of basic savvy when you're insulated from "the real world" for decade after decade (undergrad, medical training, residency, surgical training, high paid private consultancy, etc).
Being a surgeon isn’t equivalent to wise with money. Many Ponzi schemes have preyed on high income individuals and doctors of all sorts seem to be popular targets.
I think that's a tactic that Madoff and others used explicitly. Targeting people that think they are smarter than the rest. So lawyers, surgeons, engineers, management types, SWEs, etc. The social shame and cognitive dissonance of the obvious fraud leads to them to continue investing to 'save face' and to continue to think themselves smarter than the rest of us.
"Is it an obvious fraud? No, I'm too smart to fall for that. Therefore, I'll double down, again"
You can see it all over crypto today.
The fun part is that until a higher authority like the government steps in, we're going to have a lot of these schemes online for a long time. Herbalife and the MLMs use the tactic, crypto is just another; the future is ripe for people that use Madoff's tactics.
(Also, there must be a specific name for this tactic, and I would love to know what that it. But google isn't really coming up with anything for me. If you know, please comment and let me know? Thanks!)
It also feels like a surgeon should have known better. Not because this is something he studied, but he's obviously halfway intelligent, so he has less of an excuse for not knowing better.
Ok I’ve never tried to look into TerraUSD or other stablecoins before.
So I have $100. I use that to buy $100 worth of Terra because it’s pegged to USD.
Then I can.. sell it for $100? What’s the point?
If they promise returns where are they supposed to come from? If my coins are pegged to USD how do they appreciate? Or is the idea they just give me more for holding?
But if the coins are pegged where do they get the money for the new coins they’re giving me?
If they don’t promise returns why would anyone invest in a stablecoin? If they give me more how is that not explicitly a pyramid scheme?
I can at least see the argument for BTC based on past appreciation. This I don’t get.
>If my coins are pegged to USD how do they appreciate?
Staking rewards. It's marketed as a necessary feature of PoS cryptocurrencies, but it isn't really necessary if the cryptocurrency is actually centralized anyways. Centralized cryptocurrencies like USDT just use it to entice buyers with rewards for just holding it, creating inflation at the cost of everyone else.
This is a major reason against Proof-of-Stake: if you don't reward stakers, then they will be incentivized to abuse their powers and double spend. If you do reward stakers, it creates a ponzi-like incentive structure like this.
UST staking had nothing to do with PoS though. The Terra blockchain's native cryptocurrency was LUNA. There was a relationship to LUNA, in that $1 worth of luna burnt would mint $0.999 UST, and vice versa (1 UST burnt would mint $0.999 of LUNA).
UST was appealing because you could supply it in Anchor protocol, which was a money market. Anchor advertised nearly 20% APY on your supply, so it was appealing to convert your fiat to UST and then supply it to Anchor like a high interest savings account.
UST was not able to be staked in a Proof-of-Stake system. UST was lent (to borrowers) via lending protocols, and in return the lenders earned interest. This interest was subsidized by Luna to encourage usage of the UST stablecoin.
USDT also doesn't incentivize holders of the token. Centralized or decentralized platforms may offer incentives for depositing token though, but this isn't done by Tether itself.
Stablecoins are useful, because they let you set prices on the blockchain that aren't denominated in BTC or ETH or another currency that fluctuates wildly. A good stablecoin is pretty boring in terms of gains/profits, but can generate a modest stream of fees.
Terra had a sister coin called Luna which it planned to use to keep Terra stable. Luna had the price dynamics of ETH or BTC, where it's value depended solely on the whims of the market. The whole thing was a perpetual motion machine that failed very predictably. Matt Levine has some good coverage.
> The whole thing was a perpetual motion machine that failed very predictably.
At the very least, similarly structured algorithmic stablecoin schemes should be identified as a species of scam and made illegal. Knowingly trying to pull this kind of thing on people who are going to be left holding the bag and wondering when their Luna2 airdrop is going to show up in some piece of tech that they don't understand... it takes malice.
Having not looked into it, and just pulling this out of my rear, presumably the assumption would be that if it has low correlation to other cryptocurrencies, then it improves the stability of the basket of backing cryptocurrencies. Even if the correlation is high, anything less correlated than +- 1.0 helps the diversified basket.
The mechanism was that 1 UST (the stablecoin) is redeemable for USD$1.00 worth of LUNA (the volatile coin), at whatever the LUNA/USD exchange rate is at that point in time, and vice versa. So in theory, if LUNA was trading for $10.00 then you could exchange 1 UST for 0.1 LUNA, then sell that 0.1 LUNA on an exchange to get USD$1.00. It works in the other direction too. Arbitrage maintains that peg.
Of course, the flaw in this whole arrangement, is that if LUNA is in a death spiral and money is only really flowing out of UST/LUNA, then the peg is not maintained.
The reporting is skipping some steps. You'd buy UST then deposit it into a "separate" bankish thing called Anchor which would pay you 20% APR. The interest was supposed to come from Anchor loaning out your UST at a higher rate. This would be sustainable in theory, but they were actually paying interest out of their marketing budget to bootstrap the Terra/Luna/Anchor "ecosystem".
So I take my coin, pegged to the dollar, and lend it Anchor for a 20% return.
Anchor lends it out to someone else at >20% APR because that other person is… brain dead? Who would accept that?
But again, where do the new Terra coins come from? If Anchor pays me in more stable coins, they had to buy USD to be allowed to mint them right?
Does that mean I bought Terra with USD to allow Anchor (which is Terra?) to sell my Terra to get USD to lend out at usurious rates to make USD to buy Terra to make up what they sold if mine and pay my returns?
Is that right?
How does anyone take any of this at face value? Why not just take USD to lend USD to get USD to return USD?
I’m ignoring answers like money laundering and avoiding KYC and other financial regs. If we assume everything is truly on the up-and-up how does this ever make any sense?
And again who borrows money, probably denominated in some crypto, at >20%? Isn’t that kind of the crux of the whole system? You’d need those people for this to work?
I understand, though disagree with, many pro-BTC arguments. I even understand the pro-NFT arguments. This… I can’t think of any plausible argument from my current understanding.
My understanding (probably incomplete) is that a lot of the loans were short-term "flash loans". Being that the term was quite short, they're more akin to payday loans. If you were to compute the loan on an APY basis it would be usurious, but since it's only for a short period the total amount paid is small.
Collect many of those short-term high-interest loans into a single bucket, and you have a longer-term high interest facility. Like being an LP in a credit fund. So there is a fairly high fundamental yield. Not 20%, but maybe 6%.
Second, as the GP mentions, they were also using their marketing budget to pay an unsustainably high yield to excite and entice investors. So on to the 6%, add another 4% of VC money.
Finally, they were underestimating the risk of the underlying loans defaulting, thereby causing them to overestimate the APY on the pool. That brought them to a place where they thought they could pay 20% instead of 10%.
There might be more to it than that but that's what I understand.
Anchor lends it out to someone else at >20% APR because that other person is… brain dead?
They're probably crypto speculators looking to lever up. If crypto could double in one year then borrowing at 25% isn't crazy.
where do the new Terra coins come from? If Anchor pays me in more stable coins, they had to buy USD to be allowed to mint them right?
Terra was pegged to $1 but it wasn't backed by USD. Terra was backed by Luna and it was possible to convert Luna to Terra without any USD being involved. People called this out as unsafe in 2021.
Why not just take USD to lend USD to get USD to return USD?
I'm not sure regulators would allow anyone to do this kind of lending in the real banking system.
I’m ignoring answers like money laundering and avoiding KYC and other financial regs.
Don't ignore it. The purpose of a lot of DeFi is to allow people to do things that regulations don't allow.
And again who borrows money, probably denominated in some crypto, at >20%? ... You’d need those people for this to work?
AFAIK Anchor never had enough borrowers to sustain itself. I suspect the long-term plan was to draw in deposits with the 20% rate as a teaser, then lower rates over time and hope depositors stayed due to inertia. Other lenders like BlockFi and Crypto.com offer have also lowered their rates multiple times over the past 18 months.
I'm not trying to defend Terra/Luna/Anchor here; it was always doomed and it failed. But it wasn't obviously doomed; only a few people did the math that showed the danger. If you only look at the surface it looks like it works.
I think the issue at play with UST is that they juiced the returns with their own money to attract holders hoping that due to market cap alone their stable coin would eventually gain adoption on the exchanges and be embraced by traders.
The reality is that these juiced returns were not sustainable and in the end made it even harder for them to defend the peg of their poorly designed pegging mechanism.
You can't compare the returns in the crypto space to the banking sector. At the moment leverage on an exchange (Binance) costs 7.3% PA at the moment. The exchange also takes a fixed percentage of your trade as a fee. This is why locking up stable coins on Binance nets you more interest than the average savings account. A bank can't or won't lend you money against crypto.
Another scenario is someone who holds say Bitcoin. They have a decent income and want to buy a new car. If they think Bitcoin will appreciate in value instead of selling Bitcoin to buy a new car (which will trigger a capital gains taxable event) they can just borrow against their Bitcoin. The cash or stablecoin for the loan has to come from somewhere. Like I said above banks won't accept Bitcoin for a secured loan.
the biggest utility is moving money across borders. Not sure about TerraUSD but USDT is very valuable in a lot of countries like Dubai and others. It is the heaven for money laundering or avoiding tax and the demand and transaction volume is hugeee. For example, in south east asia , all the casinos, digital frauds, drug sales are using USDT as a way to move money or transact.
It's frequently touted as such, but don't you generally need some supply-demand parity across the borders?
E.g., there's likely high demand for USDT to move money out of Russia, given the currency control and Visa/MC restrictions. But if you're currently in Russia sitting on a massive pile of USDT, you probably don't want a massive ruble exposure either, and hodl'ing that USDT seems like a fairly solid strategy for the time-being?
There might be some supply-demand parity but price will take care of it. It is just like any currency exchange or border transfer but without the regulations and tax. Eg. USD is more widely preferred than Thai baht but there is a still a large market for exchanges and money transfer.
It says in the article that buying Terra was the way to get access to Anchor Protocol which sounds like a textbook pyramid scheme. I think the stablecoin branding gave this facade of being foolproof while it was an absolute scam.
> Then I can.. sell it for $100? What’s the point?
You can trade your stablecoins against other cryptocurrencies that they are paired against on exchanges or you can loan your stablecoins to a platform for a profit so they can lend it out to others for a profit. Banks do the same thing. When you deposit money into a bank account you are essentially lending the bank money. We call it a deposit but it's not like the bank is actually holding 100% of everyone's deposits.
> If they promise returns where are they supposed to come from? If my coins are pegged to USD how do they appreciate? Or is the idea they just give me more for holding?
A low risk way of generating a return would be the platform lends out the coins you have locked as a secured loan for a profit.
The high risk way of generating a return would be the platform you have your stable coins locked up on finds another lending platform generating a higher return than they are promising and they invest your locked up funds there.
> But if the coins are pegged where do they get the money for the new coins they’re giving me?
They are created out of thin air. Basically they have to incentivise people to use their coins while keeping enough funds on hand to mop up any excess liquidity on exchanges when the price of their stable coin breaks peg. Governments do the same thing with national currencies. They incentivise you to use national currency by naming it legal tender and enacting capital controls as we have seen recently in Russia, Turkey and Lebanon.
If they don’t promise returns why would anyone invest in a stablecoin?
In some countries trading from crypto to crypto is not a taxable event unlike trading crypto to dollars. Stablecoins were embraced by exchanges too so it really is a lot easier to trade crypto for crypto than it is to trade currency for crypto or vice versa. Essentially people don't invest in stable coins for the most part. They use them because they have a greater utility than actual dollars.
That said buyer beware! Cryptocurrency is a largely unregulated space and regulations exist for a reason!
Blockchain technology is heavily underrated. With this dip, it scared away all of the scammers, paper handers, and generally people that did not contribute to this space. This is the time where innovation will thrive rather than "get rich quick schemes".
I distrust anyone who lumps together all of crypto and blockchain and then bashes it based on the worst apples. If cryptopunks and the latest NFT scammers are treated like they were the same, then that is at best uninformed, more probably intellectually dishonest and at worst propaganda.
This is good. Hopefully all of those scammers and grifters who "invested" in cryptocurrency will end up bankrupt. I have zero empathy for their problems. Hopefully their misfortune will serve as an object lesson in the importance of making good choices.
Coming from relative poverty, I can say that, counterintuitively, a lot of people way down on the socioeconomic ladder would rather gamble on a moonshot to riches rather than invest in an index fund.
One large part of this is simply lack of education.
The other part is the realization that if making close to minimum wage, investing in an index fund would still take quite a very long time to go up significantly.
Give the choice of waiting 40 years for not a huge payoff or gambling your 5K-10K of savings for a potential 10x return in a year or two, it's easy to rationalize the latter.
Of course, now I'm fortunate enough to be a well paid SW. The marginal utility of every dollar above 75K is low in the present, so I can put all that in investment funds.
Too true. This is why lottery tickets are called 'poor people savings'.
It's especially bad in Mexican communities. I've seen so many buy them, scratch them at the counter, and go back for more. Sometimes they don't even play the 'game' they just scratch the barcode and scan them.
No method, just hope. You can see the fever in the eyes sometimes, no different than casino slot pullers, or a drug addict getting a fix.
Some of my family members (on the mexican side) spend insane amounts, $20/card and lost constantly. Easily spending thousands but all they seem to remember are the times they won $20-200.
I've thought about this a lot, and think a better idea would be for people to pool money together, and using a program to choose several winners a day. once you've won you can't again for X days. once you've paid so much without a win you're guaranteed $x or something.
I think it's along the lines of what insurance was supposed to be in theory. Without admin costs and some random people leeching money from the top (C-suites) maybe it'd work better.
I think you're thinking of a ROSCA [0], e.g., from Poor Economics [1],
> In Africa, the most popular instruments are rotating savings and credit associations (ROSCAs) - more commonly known as "merry-go-rounds" in English-speaking Africa and as tontines in Francophone countries. ROSCA members meet at regular intervals, and all deposit the same amount of money into a common pot at every meeting. Each time, on a rotating basis, one member gets the whole pot.
> Give the choice of waiting 40 years for not a huge payoff or gambling your 5K-10K of savings for a potential 10x return in a year or two, it's easy to rationalize the latter.
Indeed. For someone who can save $25/month, if they invest it on an index fund for 40 years, assuming 8% average/year, by the end they have about 87K. Adjusted for inflation 40 years from today, that's won't be much money.
So if you all have left is $25/mo, it's almost more rational to buy lottery tickets with it. Sure you'll almost certainly never win but the investing won't get you much either.
Half a billion dollars pulled out today, all at once. Almost four billion in the last week. The market cap for USDT has dropped from US$84 billion to US$63 billion in the last month and a half.
Looks like we're going to find out soon what assets really back Tether.
Great, then you should cite evidence of declining liquidity if you want to support the thesis of Tether being about to blow up.
FWIW, I agree Tether is flaky and worth avoiding (to the point of having a short), I just cringe at attempts to cite market cap as a meaningful figure on its own.
That's because market cap is one of the few numbers that can be computed from the outside. If they issued audited financial statements quarterly, we'd know more.
Yes, there is their rather vague backing report.[1]
You can also look at how closely it maintains the peg, and whether it’s at a premium as much as it’s at a discount. (By which Tether does poorly.)
It’s misleading to look at the market cap with the implication that it’s fluctuations are due to loss of value per unit (the usual cause for non-stablecoins).
You might as well say that your bank lost $500 when you made a $500 withdrawal (while neglecting to mention the deletion of $500 in liabilities).
I can explain my thinking about why I put money into anchor.
I never expected it to last long and had a clear date set in my calendar when I would cash out, but to me it sounded like their decision to pump VC money into rewards. Lots of companies do that, see PayPay in Japan which used to give you 20% cashback on EVERY PURCHASE you made, with every 10th purchase in the system getting a 100% caschback, just so they can grow faster than others. It was bonkers and burned so much money, but now they are the dominant payment app in Japan.
So for me, put money in, ride some of that 20% while VC money is still around, then bail.
I also regularly monitored the reserve dashboard how much reward money was left, the ongoing proposals, and how the APR was supposed to change month by month until it reaches a fully self-sustainable rate. In fact, when reserves for anchor dry out, it was supposed to automatically reduce the rate to the sustainable rate which was like 4-5% or something.
I also put money into UST on Binance to reduce my exposure to onchain Terra, because I trusted Binance more than I trusted the protocols.
Well, long-story-short, about a week before my cash-out date Terra collapsed and I lost 90% of my investment. That was a lot of money for me and it will take a long long time to re-save that.
There's nothing at all wrong with crypto if you understand it is a ponzi scheme and nothing more.
With that understanding, you now know how to play the game - which is to say you MUST get out before the ponzi collapses.
Your job as investor/gambler is to get in while the house of cards is starting to be built, and to get out before the Jenga tower collapses - and it definitely will.
If however you play crypto and tell yourself how it's changing society, crypto has real value, the blockchain will change the world and all that sort of garbage, then you'll lose because you don't understand the fundamental system at play, which is the ponzi mechanism, with nothing at all underpinning the "investment'.
If you truly understand it is a ponzi scheme then it's quite exciting - an open, legal, consensual, highly organised globally distributed ponzi scheme - that's something entirely new.
Interesting take. I mostly agree, but I do think there is legitimate value in the foundation. Every time the ponzi collapses, the next jenga tower has a slightly higher foundation
Do you think that with the collapse of every ponzi scheme that the next ponzi scheme is somehow less ... scheme-y? I'm not even sure what that really means, but it seems to me that ponzi schemes, by definition, always go to 0 in the long run. There are no foundations, just greed and misery.
The ponzis are being built by people on top of slowly evolving layers of useful technology. Of course the actual building isn't tied to the hype cycles, but from the perspective of most people it's just ponzis swelling and bursting.
There is real innovation happening though, fuelling the FOMO every time another bubble forms.
Curious, but what's your take on what this foundation is, functionally speaking? Is it indeed a decentralized financial alternative that will address the current woes of tradfi? Or is it something else? Or is it, again in your opinion, sort of a blank canvas, and just SOME foundation that's being emerging, and eventually people will be building on top of it?
The foundation is a decentralized way to transfer value, without intermediaries.
The actual value-additive innovation right now is happening around financial primitives being rebuilt in a decentralized manner, using smart contracts. Everything from the virtual machine to the language capabilities (and restrictions) to the "legos" used to build decentralized applications are constantly evolving.
The constant hacks are also a form of hardening that's happening. New kinds of attacks are regularly discovered, and then exploited or responsibly disclosed, and then protocols start to guard against them, and the entities building the "legos" (I'm mainly talking about OpenZeppelin) upgrade any pieces that need to be upgraded.
How can Bitcoin be a ponzi scheme if it doesn't generate returns for the investors?
I have bought and sold Bitcoin on an exchange and the anonymous person on the other end of the trade did not make any promises of returns.
By your definition is Uber stock a ponzi scheme? It too does not provide a return and relies on buying pressure to increase it's price so people can reap the rewards of their so called "investment".
I would argue that a better mental model of the crypto space is a decentralised globally distributed digital casino.
"Ponzi scheme" has become completely divorced from its original meaning. It's supposed to refer to a specific type of scam where you pay "investors" using the money you received from previous investors, but nowadays it's basically just used now to mean "anything crypto-related in which people might lose or have lost their money."
When I see people use it in this context I think it just shows a lack of understanding.
To be fair I probably wouldn't disagree if someone said UST was a actual Ponzi scheme. Holding UST had no real utility compared to the alternatives. The only incentive to hold UST was the 20% APY. Deliberate or not it was a classic ponzi scheme.
I think people refer to some cryptos as a ponzi scheme in the way that for a lot of coins the only reason that they have a value is that lots of people own them. So the strategy there is to buy low, try to convince or just hope that others will buy it as well, which drives the price up, then sell it when the price is up.
In that description the people on the top of the pyramid are just the early buyers or founders, and the later you buy a specific coin, the lower on the pyramid you are. When early whales start selling of their bag, you as a late-joiner will be left holding your own bag.
This of course does not necessarily apply to the minority of cryptocurrencies which have an actual use-case other than just existing.
It's a "ponzi scheme" in the sense that you need to buy in early, find suckers to join the scheme after you, and only make a profit because the suckers you pulled in are pulling suckers in turn. If you don't get too greedy, you eliminate your position while it's profitable.
> In the coming days, investors burned by the crash may receive funds in a new cryptocurrency, partly compensating their losses. Mr. Kwon and his fellow developers have said they are creating the new cryptocurrency as part of a reboot of the Terra blockchain network.
Great. Whatever few cents are left will now be lost to this new scam from "Mr. Kwon".
Lots of noise in the crypto space and the HN comments are always bad.
BTC and ETH are the interesting and worth putting a small percentage of your holdings into (BTC [0] as an international store of value that has benefits over gold, ETH as the core programmable token that backs anything that stores stuff on chain to manage decentralized state). Vitalik is earnest and his writing is pretty great. Everything else I'd probably avoid (except to play with). ZCash's privacy protections are pretty cool. Outside of that risk is extremely high. Lots of bad actors, but also a pretty cool new technology with a new capability for self-custody. If someone tells you you can make 20% risk free returns, they're lying to you.
I feel bad for people that lose everything making dumb bets. It's why all the institutional investor rules exist. It's why there are restrictions on trading with leverage. Still, it's annoying that I'm prevented from making bets (or investing in startups) because of people like this. I understand the purpose of the regulations and clearly there's a need, but it's still annoying.
Probably any price for now, but psychologically easier when it’s down.
If BTC does become a real international settlement layer then it’ll be worth a lot. It’s basically an asymmetric bet on that (which is why small % is good enough).
Similar for ETH being the default for programmable token.
I used to think Vitalik was earnest as well. I was an ETH believer up until a few years ago. My distrust in him was the crack that in the end spread and became a distrust in ETH.
I'll just provide 2 sources for this, fossuser, and then you can judge for yourself. Cause I just feel bad if someone else trusts someone I know to be intellectually dishonest at times.
Monero is far better than ZCash privacy wise since it's privacy by default. It really is the closest to money, which was Bitcoin's original purpose, not the silly store of value only that just translates to a purely speculative asset.
They are both volatile and unpredictable, any investment could easily be wiped out in a day or week, and there is the added challenge of having to maintain and secure one’s own keys and use privacy preserving tools and techniques.
But if you are OK with all that, ETH and BTC are fine investments for those seeking to self-manage a high risk high reward portfolio, and ofc. for only a small percentage of net wealth
but I would argue against BTC on the grounds of PoW energy waste - keeping your portfolio greener - and the fact that ETH is able to achieve the same international digital-gold-like properties but with better cryptographic tech, interoperability and privacy features. It is hard to see the long term 10 years BTC thesis - maybe only scenario where it continues to surpass ETH is if PoS proves to be an untenable consensus mechanism.
BTC is simpler and more static which I think is an advantage for long term store of value. PoW also has advantages on that front too. I think the environmental concerns are generally overblown and don’t matter.
Which ETH? As far as I understand the currency keeps forking and rewinding every now and then because whatever safety features it provides to "smart" contracts are widely insufficient and the resulting buggy mess falls over the moment a sufficiently motivated script kiddy so much as sneezes into its general direction.
Programmable money is a useful feature and ETH has won that space. It doesn’t mean it’s not high risk or easy.
The one hard fork was fine imo - it’s probably good to have an extreme case community fallback when there’s serious abuse. BTC is the counter to that and why I think it’s good as a store of value long term (rather than just holding ETH).
Why do media still frame the TerraUSD story as unique? A similar story awaits all of crypto. Sure, the particulars will vary a bit, but at the end of the day the assumptions that underlie their perceived “value” will crumble just as easily.
I think we really need to start talking about the broader "why" of why crypto. There's a good reason that we're seeing /r/antiwork and people throwing their last pennies into crypto. People have seen that those with assets got rich and those that work get poorer. There's no point aspiring to a better life through work. In reality what has happened is inflation that we don't measure. Assets are inflated by easy money but the government thinks this is apparently a good thing. Now inflation in the broader economy is coming, and the government response is going to be push us into a recession. So in the boom times the rich get richer, and during the bust the poor get poorer. This is not a sustainable economic settlement.
I've been working real hard for the past 10+ years and I have very little to show for it yet.
In the meantime a couple of friends who never worked got rich(er) just because they bought a few thousands $ (money borrowed...from their family) worth of crypto at the right moment.
What is this bullshit? Why am I even busting my ass trying to create value, when I could just buy shitcoins and become a millionaire?
I don't think this is healthy for any society. I don't even want to get rich with a fucking lottery. I want to earn it, to provide something to others and get something in return. No, I don't consider "making a market more efficient with my investments" as providing value. It's just speculation.
I would argue that crytpo is not pure lottery. It's a risky investment. As every assets, crypto can be over-valued or under-valued.
As someone from China, where central government limit foregin currency exchange, Bitcoin is a god-given tech. I'm not arguing for its value and i don't mean to persuade anyone. This is my opinion. I believe in its value. And guess what? I miss the crypto train too. And I have zero crypto investments. Because I don't want to take unncessary finantial risk when I cannot. I didn't borrow to bet on Bitcoin. In fact, I didn't bet at all. I didn't envy those who bet and win. Because there 100 losers for each winner.
Hard working provides higher expected return than betting.
Wise investmens and hard working provide higher expected return than hard-working alone.
> I would argue that crytpo is not pure lottery. It's a risky investment.
Unless you have funds to throw on it and you become rich without ever moving a finger. I mean yeah, congrats for your ability to "see" the future, but I struggle to understand how you created any value, how there's anything more than luck and income inequality to support a case for your new wealth to be legit. You're just extracting value from whoever came after you, in what is a classic Ponzi scheme.
If you already had capital to begin with, you never even really "risked" on it. If you have $10 milions and you risk $1 milion, that is in no way a risk comparable to someone who owns $1k and risks $100.
> As someone from China, where central government limit foregin currency exchange, Bitcoin is a god-given tech.
Why? Most usage of crypto I see is either tax eavsion or on the black markets. Drugs, weapons, fake ids and much much worse. China is doing well and the rest of the world is considering limitations on crypto as well.
> Wise investmens and hard working provide higher expected return than hard-working alone.
I agree on this, but fuck this world where you can get richer than people who work without doing any hard work.
> China is doing well and the rest of the world is considering limitations on crypto as well.
Well, it depends on how you view the condition. I believe that a citizen should be able to change any local curreny to foreign currency. If citizens are not allowed to do that, they are exploited by the governemnt, who can simple print money to finance its corrupted operation. And that's what happen in china.
I don't care about the price of bitcoin. I care about the ability of moving my money wherever I want.
It's a risky investment in the exact same way a lottery ticket is a risky investment: unless a particular lightning bolt of luck strikes you, it stands to reason that no underlying value is being created to return to your investment, _particularly_ for the shitcoins. They're just "toss a few thousand dollars at the dartboard and see what pumps" pure luck. As evidenced by the falling knives people are trying to catch right now.
I have long-suspected that a significant part of the hate for crypto from tech-literate people is resentment for not figuring out the success of something they were equipped to have seen earlier. And here is a little snippet of it at work.
> If your friend only had $5k in total and threw them all in Terra then I guess the lesson he got in the crash is way more valuable than any savings he might have kept. He would have lost them anyway on the next shitcoin.
So if they lose money, they deserve it.
> In the meantime a couple of friends who never worked got rich just because they bought a few thousands $ (money borrowed...from their family) worth of crypto at the right moment.
> What is this bullshit? Why am I even busting my ass trying to create value, when I could just buy shitcoins and become a millionaire?
I didn't say that. Just that it was bound to happen sooner or later. It's clear though that as with any other Ponzi scheme, there are people who join early and profit and people who join late and give all their savings to the early comers. OP's friend is one of the late comers. My friends are early comers.
> If they win money, they don't deserve it.
Again, never said this. I'm just saying that it's a lottery and that it's crazy to have masses of people betting their future livelihoods on this Ponzi scheme.
By the way yes, I don't think you really "earned" your wealth if you got it on the lottery or from your parents. Sue me. Or better, get to work and earn your wealth.
> resentment
No resentment. Just pity for people who think they earned and deserve all they have, when in fact they've just born in the right family, in the right place, at the right time.
> I guess we should just send the money to you.
Keep your lottery money. As I pretty clearly stated, I want to earn mine with actual work.
From what I can tell Bitcoin is irredeemably flawed. No, I am not jealous for missing the train. I don't have money to fling into a shitcoin even if I was brainwashed enough to believe that this is how one should structure society.
I am honestly disappointed that the only cryptocurrency that is worth using is dead. If anything, if I wanted to get into crypto I would have to create my own cryptocurrency which is inherently anti speculative and encourages people to work and trade instead of rent seeking. However, even if I were to do that, I would run into two problems. I don't need a decentralized cryptocurrency for this, a normal bank would be good enough, the only point would be to bypass regulations. Because taxes are payable in a different currency than my own, there would be a constant drain of people selling the currency for dollars to pay taxes for example.
Since cryptocurrency is inherently unusable as a medium of exchange, it is a complete failure.
Every week, there is someone whose lottery ticket wins millions or tens of millions of dollars. It's not fair, but such is life - some people are just more lucky than others. The smartest thing you can do about it is to not dwell on it too much, other people's extraordinary luck does not affect your life in any way anyway.
That also applies to crypto - at any given point in time, plenty of people are investing in crazy speculative schemes. A minority of them win big, while a majority loses some or most of their money. The crypto crowd who bough 10 years ago just happened to select the right lottery ticket, while other people who at that time invested in equally far-fetched ideas (AR startups, synthetic meat, whatever crazy fad that died in the early stages before even reaching mainstream media) lost their money.
Unfortunately it is. For most of human history the rich got richer and the poor just stayed poor. It's truly sad to say, but people will suffer along at a subsistence level pretty much indefinitely.
Without a wartime boom or the threat of an organized Left to force concessions, which were the two major drivers of wealth moving to the lower 90% in the 20th century as far as I can tell, we will continue on our current path.
Concise and well said. Only one thing to add, war time booms are a bit of a myth. For example, where was the post Iraq War boom?
It is a real thing. You have to blow up your industrial competitors to achieve a worthwhile and meaningful postwar boom.
The difference today is that even if we blew up China, companies still wouldn’t invest here. They just go to India or Vietnam.
We do need more unions in this country. Because our historically low union membership was not enough to stop outsourcing. My hometown‘s manufacturing was strong and has been gutted. It was an anti-union town. And no, the companies did not reward that. It just made it easier for them to go to Malaysia.
Indeed. I wartime booms are a thing of the past. I guess the reason is that mobilizations are smaller as a function of the total economy and/or the economy is a permanent wartime economy given that the USA is almost always at war somewhere.
> We do need more unions in this country
Agreed, but I don't think that would allow us to repeat the gains of the last century. Capital make big concessions to the working class in Europe and the US in the 20th century because there was a very real threat of a revolution lead by the organized Left.
but I don't think that would allow us to repeat the gains of the last century.
Agreed. Partially due to increased globalization. We've been globalized since colonial times, but instant communication was the real game-changer. There's no turning back now. No matter how many populist movements rise up around the world as a last gasp against it. It's hard work to achieve collective bargaining, easy to overthrow a government in a coup. People are clearly choosing the latter in the USA, but they won't like the loss of democratic freedom in the end.
What unions in the US can achieve is dignity for workers. They won't get the share of wealth they once had, but they can be treated with more respect, more time off to enjoy themselves and their family and friends. Essentially we could achieve a western European quality of life, at best.
There's nothing wrong with that. The way people live over there with less income, but overall better quality of life is the best-case scenario for the US going forward. While they have some serious security risks, I'm envious that they have already sorted these things out while the US still has struggle ahead economic side. And we may fail, and simply become another Brazil, rather than like Germany. I think Rio de Janeiro style slums are more likely in our future, rather than Berlin. Our people and leaders just don't have the culture and stick-to-it to achieve that reality, in my opinion.
The working class here is too easily divided by the asset holding class. Just tell them unions are bad, or focus on minority issues, whether it be LGBTQ or racial minority strife and you have a distraction for 1 to 3 generations' lifespans. Right now, given the lack of focus on the working class and corporate focus on general social justice issues, we're kissing away the next 100 years that need to be put towards all working class people. Money and job security are what people need, no matter who you are.
I don't see a true working class revolution begin in the US until 2060 or so. It may take all the way out to 2100. There's just too many people that would otherwise be working on this, that are extremely focused on gender and racial studies. No money is going to come out of that for anyone. Corporations and the capitalist class know it.
You'll know you have achieved enlightened corporations when they are publicly promoting collective bargaining. They're flying rainbows instead, keeping the money, and everyone on both sides is feeling good.
While that's a pessimistic take, the good news is that the propaganda that unions drove out US enterprise is demonstrably false. That has been revealed to have been a total scam and I think everyone sees it at this point. You lose nothing at all when you have collective bargaining rights, it's all upside. As long as the business is solvent, the boss may be angry at merely one Lamborghini rather than five though. Or just wealth for him to retire at 45, rather than generational wealth for the next 3 generations being available.
Worker-owned enterprise also needs to happen. There's just no rational reason why for proven business models, like 7-Eleven out of Japan, needs to run half of our convenience stores when those could be owned and operated by the employees. With better pay and customer service as a result. I'm fine with venture capital and risk-reward for unproven business models, but many of these large corporations are parasites like 7-Eleven. We have to kick these corporations out and retake our local economy. No reason to allow them to have end-to-end control all the way, and it will encourage some local suppliers to pop up as fellow cooperatives see eye to eye and work together.
> those with assets got rich and those that work get poorer
I think this is the take-away of the modern world economy.
If you can somehow get enough money to join the asset-holding class you have a chance, otherwise you have no chance. And even if you can, you're fighting a serious uphill battle against the people who got there earlier and got to that sweet free number-go-up zone while you were still toiling.
Right now a friend of mine is trying to buy a modest house in the Bay Area (not SF) -- and he's worried that the $1.5M he can afford is not going to be enough (for things listed at $1.3M) because people with generational wealth, or people who won the tech lottery, are going to come in with $1.6M cash offers.
It's not that insane yet in most of the world but I see no reason to believe this is not the direction.
So, if you don't have a path from work-work into assets, what are you supposed to do?
I’ve been saying for years that we should reduce taxes on work and increase taxes on assets and consumption. At the current level of taxation, accumulating wealth through work is out of the grasp of 95% of the population (at least in the UK, where they’d earn less than 90K).
It is not the first bubble and it will be not the last.
It is easy to blame the government, but don't to take the responsibilities by themselves.
There are many people who warned about the crypto bubble and the ponzi scheme over the years. But the crypto-bro's told a different story.
Many people expected that the bubble bust earlier. Some people where over that and stated that crypto is here to stay as long as there are people who can convince others to pour money in, yeah, like a ponzi scheme.
Crypto-bro's told the blue sky's, because it is decentralized and no government is able to regulate it. Now the government is blamed.
You may could blame the government, if it is regulated by the government. But it isn't. The crypto-bro's worked hard that it should not be regulated. So, you can't blame the government.
it seems to be a key rule of the world that the rich get richer and poor get poorer, not even in an economic sense, in terms of everything in life, the world imo tends to lean toward this model.
We've known that the whole crypto scene in general is a fraudulent, cynical ploy to get rich at other people's expense. Any conversation with anyone involved in the industry quickly reveals that their goal is to get rich from asset speculation. And that means for them to win, someone else must lose.
The thing that the article describes is an inevitable consequence of this process. This story will play out again and again - gullible people getting their lives ruined by "investing" in crypto because they believed a bunch of blatant lies about it.
This is fraud. There needs to be consequences, and the liars going to jail for deliberately destroying other people's lives.
> Any conversation with anyone involved in the industry quickly reveals that their goal is to get rich from asset speculation.
Do you really think if you ask Charles Hoskinson (creator of Cardano) this, then this will become clear? If so why bother with so much peer-reviewed academic research? Is that all part of the scam?
Similar question about Vitalik
> This is fraud. There needs to be consequences, and the liars going to jail for deliberately destroying other people's lives.
I guess you haven't kept up on the news of how the South Korean government are dealing with Do Kwon and co.
they have all profited by destroying other people's lives. It's possible that they didn't know that's where the money was coming from. But unlikely, because they're smart people and they have extensive knowledge of this industry.
Where did they think the money was coming from, if not ultimately gullible individuals whose lives are being ruined by this?
Okay so if I ask them it won't become clear? You seem to have changed this from "they will make it clear they are scammers" to "I think they are scammers"
Also, there is a lot of VC money in Cardano and Ethereum
and that VC money is chasing a return, which is coming from gullible people.
I think there's a lot of hand-waving and bullshit before we get to the "yes, this is ultimately funded by speculators, and a lot of those speculators are uninformed people putting their life savings at risk". But that's where the conversations I've had with crypto people end up.
We need to regulate stablecoins, and we need to regulate Web3 entities like regular companies.
And I believe regulations are coming. Regulations don't conjure out of thin air - but tend to be the result of people or governments getting screwed over.
The whole point of crypto is that it's not regulated. As soon as the regulators take real action on crypto, the entire promise of crypto will vanish in a puff of smoke.
I'm not saying that's a bad thing, but I struggle to envision what a tightly-regulated crypto market would look like that wouldn't defy the entire point of crypto.
Indeed, regulation in the anti-thesis of crypto, and what crypto enthusiasts detest - but if crypto has any plans of going mainstream, regulations will have to be in place.
I think that regulations would come in the form of how so-called stablecoins and their owner companies can operate, how other companies (exchanges, etc.) can operate, and so on.
Take stablecoins - one might regulate these with hard requirements of how many % of their backing are in extremely liquid assets. Take tether - the idea is that it should be backed 1-to-1 with USD. Of course, that is not the case, at all. The owners have said that it's not backed at such ratio.
With extremely opaque stablecoins, you really have no idea what they're backed by. Imagine if stablecoin xyz said "We're 99.99% backed by [some currency]!" but then it turns out that they're backed 5% by said currency, and the rest has been put on the stock market - because the owners figured they could get filthy rich by betting all that money on low-risk stocks. Works until it doesn't work, and then people do a run on the coin.
So, regular audits, full transparency, hard regulations around what they can or can't do. That alone will probably flush out the majority of fly-by-night scams.
I think it is understood that most people are in it for huge and quick gains. Some crytpo fundamentalists will say that they're in it "for the tech", but I would be very, very surprised if that was the case for majority of crypto holders. So you are right - a regulated crypto space will probably drive out many of the speculators and gamblers, but I think that's OK. In the end there's a need for cheap and efficient cross-boarder payments, without having massive companies as middle-men. But to achieve true mainstream adaption, that will come at costs. The wild-west days are closing up.
who are they going to sell those bitcoin to at that raised value?
who are those people going to sell them to at a greater value?
the only "value" it has is that someone believes that they can sell it for more.
eventually that stops being true and someone loses all the money that everyone else gained. It's zero-sum, it has to be, because the bitcoin itself produces nothing of value.
So we can establish that Terra's ridiculously high 20% yield was only sustainable so long as investors continued to put massive amounts of money into the protocol, but if a de-peg ever occurred it would create a death spiral that would send it nearly to zero and collapse the entire system. Let this be a signpost for future investors to avoid high yield promises and assume it comes with extreme risk.
But the comments here are wrongly equating Terra to the rest of crypto such as ETH, and assuming everything will collapse just the same. The value of ETH is not that the price will go up or provide predictable yield - its primary use is as a gas token in order to interact with the network, like trading any token or depositing value in a smart contract. The price of this fuel can go up and down, but the asset will always remain in demand for as long as people still wish to continue to do these things on the network.
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[ 3.0 ms ] story [ 312 ms ] threadhttps://hn.algolia.com/?dateRange=all&page=0&prefix=false&qu...
You just made generic anti-crypto recommendations, some of which look good in hindsight. That’s not the same as identifying the specific mechanism that proved to be Luna’s downfall; it’s more like being a permabear who predicted 8 of the last 3 stock market crashes. You can likewise claim to have “told you so” about Dai’s collapse, with equally good epistemic grounding.
It’s fine to be risk-averse and avoid crypto as a rule; that’s not the same thing as knowing Luna couldn’t work long-term.
No, they really cant. Like, I have no idea what DAI/Compound are, and trivial googling didn't answer. A random counterexample doesn't disprove every famous and/or high market cap coin crashing.
To use your market example, if you kept saying tech stocks are overpriced we would judge it based on the performance of the NASDAQ. You wouldn't be able to say "well, Apple still convinces people to give them all their money and they're still doing well so you were wrong."
Besides, it's not enough for the greater fools to continue to exist. There needs to be a credible mechanism for wealth to actually be created.
> It’s fine to be risk-averse and avoid crypto as a rule
Being risk-averse and avoiding crypto are different things. I don't touch crypto because I think it's a scam
Well ... yeah, that kinda highlights the problem. If you don't know what something is, and are unwilling to learn, and have a hard time with google[1], then no, you don't get to claim vindication as having wisely made an appropriate inference based on valid evidence. Hence my point.
To fill you in: articbull's comments were vague enough to apply equally well to lending out the stablecoin DAI no the Compound platform, which did not crash or have to suspend withdrawals at any point.
Also, you have no idea, but you knew to switch Dai to all caps? :-p I think you're switching modes.
>A random counterexample doesn't disprove every famous and/or high market cap coin crashing.
>To use your market example, if you kept saying tech stocks are overpriced we would judge it based on the performance of the NASDAQ. You wouldn't be able to say "well, Apple still convinces people to give them all their money and they're still doing well so you were wrong."
Okay, and if you had been saying to avoid tech stocks for the past ten years, then you wouldn't be able to claim credit for the few times it does fall back, esp if it was up o average (hence my point about predicting 8 of the last three crashes).
You definitely wouldn't be able to claim credit for "having warned" someone about a specific stock's fumble (like Netflix's unforced errors), if "tech bad" is all you were basing it on, which is what arcticbull was doing when claiming to have to have warned about Luna in his comments merely because of a general anti-crypto stance.
>I don't touch crypto because I think it's a scam
The point is that that's not the same as differential insight into which specific ones are scams and why. If some aren't scams, that makes you wrong about them, and inability to differentiate means you can't claim to have had deep insight even when some do turn out to be scams.
IOW, you can be right for the wrong reasons, and if so, you can't claim that as vindication.
[1] Also, really? "dai cryptocurrency" and "compound cryptocurrency" both take you directly to explanations of what they are. On google, the latter pops up a "what is compound..." question which, when expanded, explains that it's a protocol for lending and borrowing.
I wasn't unable to find anything about DAI/Compound. Google turned up results. I couldn't find succinct enough information to see why it would be uniquely different.
> If you don't know what something is, and are unwilling to learn
I don't have to read 1,000 pages on crystal focusing power with amethyst to dismiss it. At some point the burden is on you to explain simply enough why everything else sucks but this is different for me to continue.
> All you needed from that reference was that it was another stablecoin and platform that was on solid grounding and didn’t collapse,
Disclaimer: the only crypto I’ve ever owned was $50 of eth I mined on my GPU.
But another drawback, from what I read, is that selling something short is taking out a loan, and if something is obviously a very lucrative short, then the interest will usually cancel it out.
Free lunches exist, but if it seems really obvious, don't get your hopes up.
* Have unlimited downside
* Are more difficult to get your hands on
It's not really reasonable to expect everyone bearish on crypto to also take uncapped risks.
Staying away and warning your friends/family about the scammy nature of many coins is a perfectly reasonable response.
I do like privacy tech and coins but no, I think we are far off acceptance. The risk of zk schemes is way too great for anything beyond science right now.
The sensible thing to do was to stay away - and I think it’s perfectly fine for people who did so to smugly say ‘I told you so,’ presuming they did indeed do that.
Put up a large short position, and soon enough there will be a pump and dump to liquidate it. And if you do make money, have you noticed that these exchanges often go down for “maintenance” when big price movements are happening? There’s no guarantee you’ll be able to close out a position when you need to.
The only way to win is not to play.
With a lot more research I perhaps could be net positive, but I don't actually want to spend a lot more time digging into something that I consider stupid bullshit.
Some, many here, have consciously objected to speculating on crypto valuation.
>unless you put your money where your mouth is
What about your pocket? That’s not an acceptable alternative?
Basically if I can lose your respect by not fucking people over, I don't want your respect. How's that for conviction?
Yes, there are good traders out there. But it doesn’t appear that the ones that short are anti-crypto.
HN was almost always negative about the crypto currency hype. Even when shitcoins were at ATH. So, no. The criticism is not after the fact.
> If these people really could foresee these events happening, then they could have made a lot of money by taking short positions.
Markets can stay irrational longer than you can stay solvent has been a cliche for almost a century. That is to say nothing of the absurd cost of taking a short position and the counterparty risk of dealing with unregulated exchanges.
> As far as I’m concerned, you don’t say anything unless you put your money where your mouth is.
The motivation for a lot of us was to prevent our less sophisticated friends and family from blowing up their savings. The idea that one shouldn't be critical of obvious scams unless one has a financial interest in them is not a particularly well thought out take.
Sam Altman personally invested in Worldcoin.
You are posting on a forum of an incubator that supports crypto. The irony.
It doesn’t make pet rocks an important or useful product. Just something people can make money on.
Isn’t it kind of strange to be hanging on a VC funded forum that supports crypto?
This doesn’t necessarily indicate anything other than that they believed the business could make money.
They also invest in traditional banking startups. Even that isn’t necessarily a contradiction with crypto investments.
First, shorting is expensive. Second, people have jobs and bills and don't need their money tied up in some short position. Third, just cause you think something is gonna collapse doesn't mean you know when it will collapse.
I think certain assets are shit (crypto or otherwise). I'm not going to short them all, and I still reserve the right to say I think they are shit. I'm not a professional trader.
I think smugness is 100% warranted, especially given the intensity of the attacks from the other side.
Even your smugness with, "Well, if you're so smart why didn't you short and make a mint," is just sour grapes. Because shorting crypto required even more effed up investments into highly sketchy exchanges. There was really nothing to short in the traditional investment sense.
This is the guy at the helm in the face of criticism that the whole thing could implode: https://www.twitter.com/stablekwon/status/146489797779372851...
Anyone exhibiting or associating with that level of hubris drove up the smugness of skeptics when it imploded.
Was it always going to zero? Yes. Could I tell you when that was going to happen? Nope. Therefore no short opportunity other than going for a momentum trade.
Most of the people saying "I told you so" have held the exact same line of reasoning on the way up, at the peak and on the way down. The only people that have decided things are different are the people selling crypto, i.e the people that bought and and yes, "We told them so".
Taking a short position in illiquid assets likely to go to zero would be almost as stupid as going long. You are also highly likely to lose your money as most schemes to short use some other ‘stablecoin’ and you’d have to be able to time the bubble. That’s not a sensible position and just as risky as being long.
Why insert the hur dur?
Mentioning financial regulation in the context of unregulated get rich quick schemes is totally appropriate and people have been warning about these scams for a long time.
Let me stop you right there. Terra was a barely 2 year old shitcoin. I don't think you know what "blue-chip" means.
https://cointelegraph.com/news/novogratz-says-luna-tattoo-is...
https://old.reddit.com/r/CryptoCurrency/comments/tv1ejs/batt...
>was touted as
To quote another HN comment:
>I mean, we did tell 'em.
/s
/shrug
/eye roll
https://static.wikia.nocookie.net/2007scape/images/7/74/Head...
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There are people hit by this who didn't even know they had exposure.
[1] https://web.archive.org/web/20220513142801/https://www.stabl...
> Until March 2020, the attestations said USDC was backed by dollars, held in government-backed US depository institutions. After that, they said the reserves were held at institutions and in “approved investments”, but did not give precise details about what those investments were. By June, it changed the wording on its website from “backed by US dollars” to “backed by fully reserved assets”.
so, you can have that honest 2% per year for several years or you can just take it all almost immediately. History as well as crypto today is pretty clear about what humans prefer. Absent the "take it all immediately" option people do though go for the 2% option. So if you see that they can go for such an option and yet haven't - i.e. they think they have a much better option than to earn easy 2% off somebody's billions (what can be better than that?) - that is a clear sign what option they really chose :)
USDC has been audited yearly since 2018 as part of Circle's financial statements, with years 2020 and 2021 publicly available with the SEC: https://www.circle.com/blog/how-to-build-trust-usdc-audits-a...
Circle also does monthly attestations - independent, signed reviews by third party accountants - on USDC holdings. Those are available here: https://www.circle.com/en/usdc#transparency
I looked and the April '22 attestation seemed fine.
Even the FT article seems to walk back its claims about changes in the attestations as worrying, seems like their source actually is more concerned about digital currencies in general:
> “The problem to me isn’t the specifics of any one attestation, it’s the fundamental workings of these kinds of systems,” said Grey.
Should they do more due diligence? Likely. Should there be regulation to protect the unsophisticated? Also likely. Speedrunning securities regulations, as one does.
The knowledge gap is real and incredibly worrisome, and this is real money these folks are losing. You don’t know what you don’t know.
Just the fact that anybody can think that you can get 15% "risk free" over long periods of time means that they are out of touch with reality.
Not to mention people thinking they will get 10x on their investments, without ludicrous amount of risk.
EDIT: How am I wrong?
Obviously I'd rather still have the money I lost, but in a sense I feel lucky. If Luna had waited an extra six months to collapse I would have become confident enough to put more money in, i.e. I'd have ended up losing even more. And I'll definitely be putting much, much more thought into any kind of crypto "investments" I make in future. The money I lost was a small price to pay for the lesson I've learned.
Does it matter?
What's the difference between "I invested in Terra, and I have no idea what that means, and I lost it all" and "I invested in Stablegains, and I have no idea what that means, and I lost it all"?
The Internet crosses national borders, which is kind of cool but also means that anyone in any country can pseudonymously attack people in their home country without any of the normal defenses of borders and local law enforcement / judiciary.
It's actually kind of crazy how physical borders are so heavily patrolled, yet virtual borders have no protection. IMO ISPs and web browsers should be injecting warnings in your packets and UI whenever they transmit data to or from a foreign jurisdiction.
Reminds me of CZ's wild attempt to make clear that if Binance was effected, it was totally not his fault or even his business to know about it.
https://web3isgoinggreat.com/?id=cz-admits-binance-held-luna...
Though it's not clear that it's fraud more so than selling imaginary internet money like bitcoins for cash is.
I mean Stablegains sound like grifters who thought they could make easy money (siphoning 3%-4%) by slapping a new UI and marketing the heck out of it.
Thing is what I tell them seems to bore them because, well, it's boring. My advice is basically this:
Put your money in a broad index fund and don't look at it for 10 years.
In giving this advice you start to realize it's not what people want to hear. It's not that they want to get rich quick. They just want to make a lot of money really fast. It's completely different.
Crypto-skeptics such as myself could clearly see that the vast majority of Crypto Andys were motivated by nothing more than greed. There's no fundamental belief in blockchain technology. There's no correcting the (alleged) fundamental flaws in the traditional financial system. In fact, there's an awful lot of ignorance of why the financial system is the way it is and little motivation to learn (IME). It's just greed.
So when I see these people get wiped out, I feel bad because that must suck and it's probably not the right time to say "I told you so" (or even "I informed you thusly") but I hope at some point people take ownership for their foolish decisions and do better next time.
Is there a YC partner that has never invested in a crypto company? I would love to know.
For people I talked to, beating inflation was their base goal.
people see investments as something that returns 10x - so i say rather than calling index investing "savings", we should call the 10x type investments "speculation" or gambling.
In their defence, I feel like this is fuelled by media FUD as well as FOMO from the ever-widening wealth gap.
A combination of inflation and unaffordable housing along with stagnant wages means that even with everyone in the family working jobs, you can’t even afford a yearly vacation.
If the wealthy elites don’t realise that this isn’t sustainable, I’m not sure where we will be in a few years…
Its not so hard to see why people feel their only option is riskier bets.
Housing never had gains that high. Looking at the rise from the last trough (ie. 2009 to today) works out to 5.3% annualized nationwide[1]. Meanwhile the Vanguard Total Stock Market Index Fund returned 12.4% in the same time period. If you look around at a few different metros, there are many cities that return higher (eg. 7.5% for LA[2]), but none are anywhere close to returns for the index fund. The best I found was arizona[3] with 9.1%.
[1] https://fred.stlouisfed.org/series/CSUSHPINSA
[2] https://fred.stlouisfed.org/series/LXXRSA
[3] https://fred.stlouisfed.org/series/PHXRSA
If the most they can scrape together is $5k of capital, then it needs to 10x to provide them with a meaningful change.
And I mean leftist in the actual sense, not a feckless liberal in the US Democratic Party sense who still ultimately exist to defend the capital-owning class.
The so-called Great Resignation and worker shortage was really the first increase in real wages many had seen in 40 years. And what's happened since? Massive inflation, particularly of essentials like housing. That's not an accident. The system is designed such that a budget shortfall is built into your existence. A workforce that is living paycheck-to-paycheck and barely hanging on is a compliant workforce. They're definitely showing up to work and not making trouble. That's the point.
Working people of any race, gender, sexual orientation or age have way more in common with each other than they do with the capital-owning class who routinely create wedge issues to avoid any sort of class solidarity.
But people don't want to hear that either.
I think you're greatly underestimating how many people can "live off [...] assets". This page shows household net worth by percentile[1]. Based off that, you can probably live off investments starting at around the 90th percentile ($61k annual income with 5% withdraw rate), if you live modestly in a low CoL state. Once you get around the 95th percentile you can probably live comfortably in a high CoL state ($129k/year, translates to 87th percentile in california), and by the time you get to the 99th percentile, you can probably live as well as dual earner households with high paying careers ($555k).
[1] https://dqydj.com/average-median-top-net-worth-percentiles/
[2] https://dqydj.com/income-percentile-by-state-calculator/
I don't understand how that math works. Could you break it down for me?
If you can live of $61k a year then you will need 61,000 / 0.045 = $1,355,555 of investments to deliver $61k a year without degrading the value of the capital relative to inflation.
I guess the 90th percentile refers to the fact that 10% of people in the US have this amount invested or more.
I think the 10% number is referring to something a bit different. The stats referenced are net worth, which in most cases is significantly composed of someone’s house & other property which doesn’t easily provide a passive income and 401ks which aren’t accessible. I’d be surprised if the number of people who have $1.3M in normal investments is greater than 1%.
1% of households are worth >$11m? Is that really true? I have trouble believing that but it could be true.
Either way, all it does is change it so that 95% of people should be leftists.
Also FWIW living off those assets at the lower percentiles that you mention doesn't factor in inflation, which is currently more than the 5% returns you mentioned. And a real return of 5% is a somewhat more aggressive strategy. It's more likely (and suggested) that at a certain point portfolios should become defensive as a amssive drop is way more impactful than a large positive gain.
It's also worth noting that these net worth figures include your net house value. You're not making a return on that money. In fact it's costing you money. Sure you could not own, get a return on that money instead and rent instead but that opens you up to other risks (eg as we're seeing now with massive rent hikes).
If we came up with some obfuscated mathematical dance that, if un-obfuscated, were obviously dollar cost averaging in a broad-based low-fee index ETF, I think it would be more popular.
Edit: There are also lots of investment strategies where people are short tail-risk and don't realize it or properly account for it. For instance, my dad is a pretty smart guy (practicing medical doctor who never got his undergrad degree because he crushed the MCATs and got into med school after 3 years of undergrad, back in the 1970s when med school was less competitive) but he's convinced that his gut-feeling covered calls out-perform a simple buy-and-hold (on a non-risk-adjusted basis). I don't doubt it's possible to out-perform on a risk-adjusted basis, and maybe even on a non-adjusted basis with careful enough analysis, but he's never performed any analysis on the opportunity cost that he has given up over the years. Without any attempts to model or otherwise estimate opportunity costs, I doubt it's likely he's actually out-performing. He sees that most days, he's out-performing, and in the rare cases where his calls get allocated, he just tells himself "well, at least the long stock position did very well". He's short the tail risk, but essentially largely ignores that part because it's hidden by the gains in his simultaneous long position. He feels good because he's doing extra work, and most days he's out-performing, so the gut feeling is that he's out-performing the market on a non-risk-adjusted basis.
We need some sort of responsible investing vehicle that includes gamification, intermittent reinforcement, and a tiny chance for a huge payoff.
You’re basically describing options.
Well, with vanilla options, you'd need a basket of options to both reasonably closely replicate performance of a broad index (the "responsible vehicle" part) and also a small percentage of the time hitting a big pay-out. Presumably, you'd want mostly short-duration at-the-money calls on a low-fee broad-index ETF (so they often end up owning the ETF), and a small number of deep out-of-the money puts and calls on volatile micro-cap single names to get that sweet sweet irregular reinforcement dopamine hit.
This is not investment advice.
Maybe they way to go is lump-sum investing into some bond ETFs with gamified rebalancing into an age-appropriate mix of bond ETFs and broad equity index ETFs, following some pattern similar to value averaging for the rebalance, rather than cost averaging. It shouldn't actually be too hard to get something that has the right balance of feeling like real work, being relatively difficult to screw up (or the most common errors having little long-term effect), and out-performing dollar cost averaging.
This isn't investment advice, and even if it were, you shouldn't take investment advice from internet randos.
The problem is, when dealing with a zero (or negative) sum game, having a few big winners means you have lots of little losers, or a few big ones.
Nice to see that's still around
https://old.reddit.com/r/thetagang/wiki/index
Listening to the stories, med school got progressively easier (1950: tons of WW2 vets on GI bill--older and deadly serious, only 1/3 made it through. 1970s: 2/3 made it through, most dropped first year. 2018: 95% made it through because the schools radically changed from weeding out to hyper-supportive)
They reason they became hyper-supportive is because admissions have become insanely brutal, most poor performers have been screened out before they even apply. The marginal benefits of making the program even harder likely amounts to nothing more than hazing.
It’s simply politically untenable to kick out students during the program, given the already artificially constrained supply of newly minted physicians and regional shortages of talent.
The premise of the article was that investing is more like trapping than like farming. Since most of us come from societies with a long history of farming and the resulting cultural norms have permeated through said societies, many people feel like they "must do something" to tend to their investment crops properly.
I'll add my own speculation that in many western societies the industrialization and class warfare rhetoric has created a meme that "only work deserves compensation", implying that supplying capital is an unworthy state of existence. (See for example the many posts on HN decrying every single landlord as a parasite on society) If you want to invest but also want to hold on to your identity as a wholesome "middle class" American (definitely not one of those nefarious "elites" you keep reading about in the news!), just sticking your money in an index fund and doing nothing else may feel dangerously capitalist. Fiddling with it gives you some emotional satisfaction back by "working" on the investments.
You do your rounds (a lot of walking), pull out dead animals and carry them with you, re-bait your traps, repair traps as required, dump the dead animals, and repeat over and over again.
I guess there are other forms of trapping - more like hunting, a one off exercise to get that <whatever> - but I would hazard most professional trappers would see it as very much like work.
My gist was more that in both investing and trapping there is a point where the positions are set up and there just isn't anything that you can do to make the process go faster. Not being able to make it go faster by putting in additional work seems to be psychologically difficult to cope with for many people.
I feel this is slightly wrong. I’ve observed the kinds of people most likely to lose their money in this way don’t want to put in additional “work”. They want (hope for) additional “woo”.
If your speculative investment moons then your portfolio has risen to 95-99% speculative investment. At least thats a consistent case in crypto or a super quick and awesome private equity exit, both of which have multiple thousands of percentage gains.
So the people following that kind of risk allocation advice might already be starting from that second state. Rebalancing is an option, but its lame when everything has such high correlations to each other. And rebalancing when? Anytime the speculative investment goes over 10% of the portfolio? After you let it ride and its price got stable for a few days? Waiting a year or more for lower tax treatment on the rebalancing sells?
That might be a dead strategy in 2022. After the 2008 crisis the fed discovered a miraculous economic cure: slowly print money and throw it into the economy, so people keep transacting with each other, and the GDP (and stocks) keep growing.
Turns out, most of this growth was on paper - fads, speculative investments, overvalued stocks. Now that the geopolitical shock has disrupted the endless stream of cheap stuff made elsewhere, turns out there's an abundance of dollars and shortage of everything else. There might be a rather non-trivial correction ahead of us.
If you want to actually hedge your investments, use a collar.
https://www.investopedia.com/articles/active-trading/011515/...
But if you keep getting them in 1-year increments as long as you expect the rates to rise, you just keep cashing out at maturity and reinvesting at the yield rate of the day.
* Greatly reduced cost of solar panels and batteries * Things like uber/doordash made taxis / takeout way more efficient * Transitioning to electric vehicles. In 2008 I'd pay $50/week for fuel, now I pay $10/week to travel the same distance in my electric car. Not to mention savings in oil changes/maintenance * mRNA vaccines nonexistent in 2008 * Significant progress towards autonomous vehicles, if that comes to fruition on a large scale it will transform our society
Or are you suggesting on a long enough timeline it's just going to go right back to zero again? If so, then yeah you might be right there.
At least the US never got down to negative interest rates, like they've had in europe for the past eight years. I can't imagine having money being taken away for parking it in a 'savings account' (of course inflation is practically the same thing, but negative interest rates still seem worse to me, especially since they also have high inflation over there right now).
Slightly different perspective here - there is an abundance of debt that spends like dollars. Government debt and some pension debt is nearly unserviceable in some States and countries, so there will be a dollar short squeeze in attempt to get dollars to pay the debt. Yep, seems counter-intuitive at first glance that the USD short squeeze will increase the dollar appetite.
I put a tiny amount of my savings in a pharma ETF last year and got destroyed almost as much as crypto. I hope it recovers soon.
You should check on their investments accounts on a regular basis.
If your bank or brokerage makes an error, there is likely a limited period of time during which it can be fixed.
Also, if you do not have activity on your bank or investment accounts for a period of time, the contents may be escheated by a state and investments may be sold automatically.
Planet Money had an episode about escheatment a couple of years ago: https://www.npr.org/transcripts/799345159 They mention that Delaware, where the person's broker was incorporated escheats investments after three years.
Ask most people today and they’ll tell you Internet stocks were overvalued in 1998. But then you take their IRR since then and you realize you could open a hedge fund and be a billionaire just by buying the ones that were big enough to get time magazine covers, even if you bought at the absolute peak (there are literal billionaires who did basically just this!)
So now you have this thing that feels a lot like the internet, especially to lay people, and it’s not totally unreasonable for them to think “this could happen again.”
It’s just that crypto is way stupider than the internet and is unlikely to have a similar impact, so they’re probably wrong.
If you bought CSCO at its peak in 2000, you're still underwater today 22 years later.
There’s nothing magical about some committee-curated collection of 500 US-only equities which means it outperforms every other option ipso facto.
If you were talking about a normal person actively managing a portfolio I’d be more inclined to agree.
What the Buffett bet was all about is that you don’t know WHO will outperform, and with fees being a net-drag, a basket of hedge funds will on average underperform due to the average of them being, average, and then negative due to fees.
Also volatility matters, like a lot.
Yes, volatility matters and is why people generally prefer to get the lower volatility average market return. But that’s not very relevant to many peoples claims on here that SP500 outperforms most capital, which is obviously incorrect.
In the case you mentioned, with an average, there might be extreme outliers that make the average different from the median, thus rendering the assertion that 50% of the cases are above the average and 50% under false.
The wealth obviously concentrates with those, that have the most assets and least amount of spending in relation to their total income.
When you think about this, this system is inherently injust if r<g is true, which is the reason why politicians and economists are addicted to growth. Capital must dictate the growth rate of the economy instead of people dictating the growth rate that they want.
Now, under this perspective you have found the secret cheat code on how to get richer automatically. There obvious problems for every day people. Exponential growth is really slow in the beginning so most people never get to the point where their money is growing as much as a get rich quick scheme would promise every single year.
The other problem is that they are human beings that need food and shelter which means living expenses are a big portion of their income meaning they don't have much to invest in the first place. It would be better if you didn't have to pay capital gains to the rich.
However, if you are going for that living off other people's work strategy, you should be aware that the road is long and the rewards are only reaped at the end. Oh, and everyone will hate you.
Were you able to read the whole book? I was really enthralled by the main points and graphs made near the beginning but was wondering if there were further insights because its a bit of a slog.
For skeptics, sure. But there are many investors who hold crypto precisely because they believe in the technology.
> Put your money in a broad index fund and don't look at it for 10 years.
This is a good safe and low risk bet. It doesn’t invalidate an investment thesis based on crypto currencies and blockchain tech. Crypto is higher risk and higher maintenance, potentially higher returns, and better suited to those who want to manage their own portfolios.
> Cryptocurrency is a zero-sum ponzi scheme
This is repeated a lot on HN but it is easy to refute. A user can purchase $1000 of DAI and send this to another person in the world within 30-60 seconds, without the beneficiary needing to set up a USD bank account or disclose private data to a third party. The beneficiary can decide to hold this asset or exchange it to another asset such as fiat, gold, ETH, food. These are not zero-sum games - they are more comparable to a PayPal exchange than a zero-sum game.
> With stocks, there are on average more winners than losers because new value is being created.
This is questionable. Many stocks are overpriced far beyond their intrinsic value. The expectation that they will continue to go up forever and provide returns depends on people continuing to buy them at higher and higher prices, just like crypto. Some investors do not feel that NFLX and META will continue to go up in value forever, as the price already exceeds their value.
And when you own stock, you cannot do much except hodl and sell. When you own ETH, you can hodl and sell, but also use the token to send transactions to the network and interact with smart contracts.
Your “refutation” is leaving out some key details:
1. You do in fact have to deal with legal requirements - it’s a requirement for converting into useful money and tax evasion has serious consequences in most of the world.
2. Replacing Western Union has some appeals but it’s not enough to justify the returns which blockchain salespeople have been claiming, especially when the established player can cut margins easily and blockchain users need a fairly large just to compensate for currency conversion and increased risk.
The Ponzi claims aren’t because someone is claiming that they can beat PayPal’s overhead by 2% — it’s from all of the people claiming double or triple digit returns which are obviously unsustainable, and hand waving questions away claiming that you should just buy now before the price goes up.
> And when you own stock, you cannot do much except hodl and sell
My dividend income suggests you might be leaving something out here too.
> You do in fact have to deal with legal requirements - it’s a requirement for converting into useful money and tax evasion has serious consequences in most of the world.
I never said otherwise. Buyer can purchase the DAI on a KYC exchange that is regulated by their government. The beneficiary can report taxes on income and capital gains as they do with other assets.
> Replacing Western Union has some appeals but it’s not enough to justify the returns which blockchain salespeople have been claiming, especially when the established player can cut margins easily and blockchain users need a fairly large just to compensate for currency conversion and increased risk.
This is now a subjective argument about what you feel is better or more valuable. To some people, reducing commission for global transfers to 0%, with 30-60s finality and better privacy features is all desirable and valuable.
> My dividend income suggests you might be leaving something out here too.
Not very compelling when you compare dividend income over the last 5 or 10 year period between crypto and stocks. The point is that just having an asset that generates yield based on speculative investments is not that useful, and it’s the sort of zero-sum game that everybody is mocking Terra and crypto for.
The protocol isn't promising anything. The people promoting it are, however.
> > You do in fact have to deal with legal requirements - it’s a requirement for converting into useful money and tax evasion has serious consequences in most of the world.
> I never said otherwise. Buyer can purchase the DAI on a KYC exchange that is regulated by their government. The beneficiary can report taxes on income and capital gains as they do with other assets.
Here's what you said: “without the beneficiary needing to set up a USD bank account or disclose private data to a third party.” How is that true if you're not breaking KYC?
> > Replacing Western Union has some appeals but it’s not enough to justify the returns which blockchain salespeople have been claiming, especially when the established player can cut margins easily and blockchain users need a fairly large just to compensate for currency conversion and increased risk.
> This is now a subjective argument about what you feel is better or more valuable. To some people, reducing commission for global transfers to 0%, with 30-60s finality and better privacy features is all desirable and valuable.
It's an economic fact, not a subjective argument. If you're just cutting out a middleman, you're not going to be able to make a greater return than the middleman is currently taking. You could argue that this will unlock some kind of previous unviable economic activity which will dramatically increase volume, but that's a separate argument and needs some data supporting the idea that it's probable at a level which would provide the promised returns.
> reducing commission for global transfers to 0%,
You surely meant 0% plus the transaction and currency conversion fees on both ends, right?
Anchor's whitepaper and protocol promises ridiculous yield on USD pegged assets, and it is the basis for the entire Terra/Luna crash.[1] Nobody designing the ETH protocol is claiming that it provides USD pegged yield or will double or triple your investment. The closest thing written into the protocol is a return on the native ETH token for block producers - miners or stakers - receiving block rewards from the protocol and tips from user transactions.
Ignore the laser eye Michael Saylor's of the world who make ridiculous claims about these protocols that are unsubstantiated - try to look at the protocol design and spec.
> Here's what you said: “without the beneficiary needing to set up a USD bank account or disclose private data to a third party.” How is that true if you're not breaking KYC?
The sender sets up an account, the receiver only needs a 24 word seed phrase to receive the tokens. Maybe the receiver will need to declare this as a gift or income depending on context and their country's tax laws, sharing details with their government, but they are not having to share details to PayPal or another private company that would typically facilitate an international transaction like this.
> You surely meant 0% plus the transaction and currency conversion fees on both ends, right?
Depending on the use case, there may not be a fiat exchange. Another user might be happy to receive 1000 DAI, in which case there is no centralized exchange needed.
The transaction fees can be minimal through L2 - in cents - and are different than commissions and take-rates of processors like Western Union or PayPal. In ETH, most of the fee is burned, reducing total supply and providing value to the entire network. Another part of the fee is a tip to the block producers, which in a permissionless system can be any entity with enough capital at stake. Finally the fee is a fixed amount, not a percentage of total value being sent. Transaction fees are not perfect - a fee-free permissionless network is not possible - but some will find it preferable and more fairly distributed worldwide compared to how private payment processors currently extract rent.
[1] https://www.anchorprotocol.com/docs/anchor-v1.1.pdf
e.g. You claimed receivers would not need to 'disclose private data to a third party' but as op pointed out the receiver cannot get the DAI into the normal financial system without KYC.
> Depending on the use case, there may not be a fiat exchange. Another user might be happy to receive 1000 DAI, in which case there is no centralized exchange needed.
It’s true though, if you want to use the traditional financial system you are basically stuck uploading your photo ID to a private company’s website and hoping they won’t leak it. In many cases users are forced into this - paying taxes. We can only hope this won’t always be the case.
But even there, the most boring strategy works best: hold on to it for several years and sell a part when it becomes too big.
I tried timing the market on stocks and crypto, but it basically can't compete with just holding it.
The biggest problem is of course that you hear these stories how some people made a crazy amount of money, and then "why didn't you know about it?". But you never hear about the people who made nothing.
Crypto has a LONG way to go before it gutters into the dirty tactics of the stock market.
Than wait few years for the next crypto crash and when you read heading "Bitcoin is dead" it's time to buy again.
https://mobile.twitter.com/cz_binance/status/153864715281303...
Unless you believe, that this time it'll be different.
When price of Bitcoin drops. Some miners quit because it's no longer profitable for them. The ones that remain get more of mined Bitcoin for themselves so profitability of their operation increases. Difficulty of mining increases so that blocks are still mined roughly at constant rate.
Network can operate regardless of how many or how few Bitcoin miners operate.
[1] https://www.investopedia.com/articles/economics/09/financial....
Banks are far from innocent, but let's not forget that crypto has been almost all scams (Im giving thr benefit of the doubt that there may be a legit one out there somewhere).
They wanted decentralized, unregulated finance until the shit hit the proverbial fan.
People invested for insane returns and were surprised pikachu face that they could possibly lose money.
I've still got friends right now screaming 'get in while it's cheap!'
edit to add- this is becoming the hot potato many of us saw Wallstreet pull before.
who is gonna hold it when the music ends?
I want them to be allowed to fail. As I learn more I’m not so sure.
Now for the Ukrainian, betting whether crypto or the hryvnia is more stable is an actual dilemma.
A surgeon saved 177k over 10 years? Something else might be going on here.
What's amazing is that this person put his name in the WSJ as a gullible fool who can now be targeted by spearphishing scams (including that Crypto Recovery scam that has was even spamming HN recently) and shunned by his peers and potential clients.
You probably lose a lot of basic savvy when you're insulated from "the real world" for decade after decade (undergrad, medical training, residency, surgical training, high paid private consultancy, etc).
"Is it an obvious fraud? No, I'm too smart to fall for that. Therefore, I'll double down, again"
You can see it all over crypto today.
The fun part is that until a higher authority like the government steps in, we're going to have a lot of these schemes online for a long time. Herbalife and the MLMs use the tactic, crypto is just another; the future is ripe for people that use Madoff's tactics.
(Also, there must be a specific name for this tactic, and I would love to know what that it. But google isn't really coming up with anything for me. If you know, please comment and let me know? Thanks!)
So I have $100. I use that to buy $100 worth of Terra because it’s pegged to USD.
Then I can.. sell it for $100? What’s the point?
If they promise returns where are they supposed to come from? If my coins are pegged to USD how do they appreciate? Or is the idea they just give me more for holding?
But if the coins are pegged where do they get the money for the new coins they’re giving me?
If they don’t promise returns why would anyone invest in a stablecoin? If they give me more how is that not explicitly a pyramid scheme?
I can at least see the argument for BTC based on past appreciation. This I don’t get.
Staking rewards. It's marketed as a necessary feature of PoS cryptocurrencies, but it isn't really necessary if the cryptocurrency is actually centralized anyways. Centralized cryptocurrencies like USDT just use it to entice buyers with rewards for just holding it, creating inflation at the cost of everyone else.
This is a major reason against Proof-of-Stake: if you don't reward stakers, then they will be incentivized to abuse their powers and double spend. If you do reward stakers, it creates a ponzi-like incentive structure like this.
UST was appealing because you could supply it in Anchor protocol, which was a money market. Anchor advertised nearly 20% APY on your supply, so it was appealing to convert your fiat to UST and then supply it to Anchor like a high interest savings account.
USDT also doesn't incentivize holders of the token. Centralized or decentralized platforms may offer incentives for depositing token though, but this isn't done by Tether itself.
Terra had a sister coin called Luna which it planned to use to keep Terra stable. Luna had the price dynamics of ETH or BTC, where it's value depended solely on the whims of the market. The whole thing was a perpetual motion machine that failed very predictably. Matt Levine has some good coverage.
At the very least, similarly structured algorithmic stablecoin schemes should be identified as a species of scam and made illegal. Knowingly trying to pull this kind of thing on people who are going to be left holding the bag and wondering when their Luna2 airdrop is going to show up in some piece of tech that they don't understand... it takes malice.
Of course, the flaw in this whole arrangement, is that if LUNA is in a death spiral and money is only really flowing out of UST/LUNA, then the peg is not maintained.
Anchor lends it out to someone else at >20% APR because that other person is… brain dead? Who would accept that?
But again, where do the new Terra coins come from? If Anchor pays me in more stable coins, they had to buy USD to be allowed to mint them right?
Does that mean I bought Terra with USD to allow Anchor (which is Terra?) to sell my Terra to get USD to lend out at usurious rates to make USD to buy Terra to make up what they sold if mine and pay my returns?
Is that right?
How does anyone take any of this at face value? Why not just take USD to lend USD to get USD to return USD?
I’m ignoring answers like money laundering and avoiding KYC and other financial regs. If we assume everything is truly on the up-and-up how does this ever make any sense?
And again who borrows money, probably denominated in some crypto, at >20%? Isn’t that kind of the crux of the whole system? You’d need those people for this to work?
I understand, though disagree with, many pro-BTC arguments. I even understand the pro-NFT arguments. This… I can’t think of any plausible argument from my current understanding.
Collect many of those short-term high-interest loans into a single bucket, and you have a longer-term high interest facility. Like being an LP in a credit fund. So there is a fairly high fundamental yield. Not 20%, but maybe 6%.
Second, as the GP mentions, they were also using their marketing budget to pay an unsustainably high yield to excite and entice investors. So on to the 6%, add another 4% of VC money.
Finally, they were underestimating the risk of the underlying loans defaulting, thereby causing them to overestimate the APY on the pool. That brought them to a place where they thought they could pay 20% instead of 10%.
There might be more to it than that but that's what I understand.
People deposited to receive incentives. They borrowed to receive incentives. That’s it.
The APY was chosen arbitrarily. Nobody there underestimated default risk.
Dumb place to stick your money FWIW.
They're probably crypto speculators looking to lever up. If crypto could double in one year then borrowing at 25% isn't crazy.
where do the new Terra coins come from? If Anchor pays me in more stable coins, they had to buy USD to be allowed to mint them right?
Terra was pegged to $1 but it wasn't backed by USD. Terra was backed by Luna and it was possible to convert Luna to Terra without any USD being involved. People called this out as unsafe in 2021.
Why not just take USD to lend USD to get USD to return USD?
I'm not sure regulators would allow anyone to do this kind of lending in the real banking system.
I’m ignoring answers like money laundering and avoiding KYC and other financial regs.
Don't ignore it. The purpose of a lot of DeFi is to allow people to do things that regulations don't allow.
And again who borrows money, probably denominated in some crypto, at >20%? ... You’d need those people for this to work?
AFAIK Anchor never had enough borrowers to sustain itself. I suspect the long-term plan was to draw in deposits with the 20% rate as a teaser, then lower rates over time and hope depositors stayed due to inertia. Other lenders like BlockFi and Crypto.com offer have also lowered their rates multiple times over the past 18 months.
I'm not trying to defend Terra/Luna/Anchor here; it was always doomed and it failed. But it wasn't obviously doomed; only a few people did the math that showed the danger. If you only look at the surface it looks like it works.
The reality is that these juiced returns were not sustainable and in the end made it even harder for them to defend the peg of their poorly designed pegging mechanism.
You can't compare the returns in the crypto space to the banking sector. At the moment leverage on an exchange (Binance) costs 7.3% PA at the moment. The exchange also takes a fixed percentage of your trade as a fee. This is why locking up stable coins on Binance nets you more interest than the average savings account. A bank can't or won't lend you money against crypto.
Another scenario is someone who holds say Bitcoin. They have a decent income and want to buy a new car. If they think Bitcoin will appreciate in value instead of selling Bitcoin to buy a new car (which will trigger a capital gains taxable event) they can just borrow against their Bitcoin. The cash or stablecoin for the loan has to come from somewhere. Like I said above banks won't accept Bitcoin for a secured loan.
E.g., there's likely high demand for USDT to move money out of Russia, given the currency control and Visa/MC restrictions. But if you're currently in Russia sitting on a massive pile of USDT, you probably don't want a massive ruble exposure either, and hodl'ing that USDT seems like a fairly solid strategy for the time-being?
Tax evasion and money laundering
You can trade your stablecoins against other cryptocurrencies that they are paired against on exchanges or you can loan your stablecoins to a platform for a profit so they can lend it out to others for a profit. Banks do the same thing. When you deposit money into a bank account you are essentially lending the bank money. We call it a deposit but it's not like the bank is actually holding 100% of everyone's deposits.
> If they promise returns where are they supposed to come from? If my coins are pegged to USD how do they appreciate? Or is the idea they just give me more for holding?
A low risk way of generating a return would be the platform lends out the coins you have locked as a secured loan for a profit.
The high risk way of generating a return would be the platform you have your stable coins locked up on finds another lending platform generating a higher return than they are promising and they invest your locked up funds there.
> But if the coins are pegged where do they get the money for the new coins they’re giving me?
They are created out of thin air. Basically they have to incentivise people to use their coins while keeping enough funds on hand to mop up any excess liquidity on exchanges when the price of their stable coin breaks peg. Governments do the same thing with national currencies. They incentivise you to use national currency by naming it legal tender and enacting capital controls as we have seen recently in Russia, Turkey and Lebanon.
If they don’t promise returns why would anyone invest in a stablecoin?
In some countries trading from crypto to crypto is not a taxable event unlike trading crypto to dollars. Stablecoins were embraced by exchanges too so it really is a lot easier to trade crypto for crypto than it is to trade currency for crypto or vice versa. Essentially people don't invest in stable coins for the most part. They use them because they have a greater utility than actual dollars.
That said buyer beware! Cryptocurrency is a largely unregulated space and regulations exist for a reason!
One large part of this is simply lack of education.
The other part is the realization that if making close to minimum wage, investing in an index fund would still take quite a very long time to go up significantly.
Give the choice of waiting 40 years for not a huge payoff or gambling your 5K-10K of savings for a potential 10x return in a year or two, it's easy to rationalize the latter.
Of course, now I'm fortunate enough to be a well paid SW. The marginal utility of every dollar above 75K is low in the present, so I can put all that in investment funds.
which is why it's overwhelmingly large number of lottery buyers are poorer folks.
It's especially bad in Mexican communities. I've seen so many buy them, scratch them at the counter, and go back for more. Sometimes they don't even play the 'game' they just scratch the barcode and scan them.
No method, just hope. You can see the fever in the eyes sometimes, no different than casino slot pullers, or a drug addict getting a fix.
Some of my family members (on the mexican side) spend insane amounts, $20/card and lost constantly. Easily spending thousands but all they seem to remember are the times they won $20-200.
I've thought about this a lot, and think a better idea would be for people to pool money together, and using a program to choose several winners a day. once you've won you can't again for X days. once you've paid so much without a win you're guaranteed $x or something.
I think it's along the lines of what insurance was supposed to be in theory. Without admin costs and some random people leeching money from the top (C-suites) maybe it'd work better.
> In Africa, the most popular instruments are rotating savings and credit associations (ROSCAs) - more commonly known as "merry-go-rounds" in English-speaking Africa and as tontines in Francophone countries. ROSCA members meet at regular intervals, and all deposit the same amount of money into a common pot at every meeting. Each time, on a rotating basis, one member gets the whole pot.
[0] https://en.wikipedia.org/wiki/Rotating_savings_and_credit_as...
[1] https://en.wikipedia.org/wiki/Poor_Economics
It mentions tons of users in Brazil but not really whether it's successful.
Maybe something like that truly could be tried here.
Of course it mentions trust and social connections being imperative and I feel we now have a glaring lack of those hwre in the US :(
Indeed. For someone who can save $25/month, if they invest it on an index fund for 40 years, assuming 8% average/year, by the end they have about 87K. Adjusted for inflation 40 years from today, that's won't be much money.
So if you all have left is $25/mo, it's almost more rational to buy lottery tickets with it. Sure you'll almost certainly never win but the investing won't get you much either.
Half a billion dollars pulled out today, all at once. Almost four billion in the last week. The market cap for USDT has dropped from US$84 billion to US$63 billion in the last month and a half.
Looks like we're going to find out soon what assets really back Tether.
[1] https://coinmarketcap.com/currencies/tether/
FWIW, I agree Tether is flaky and worth avoiding (to the point of having a short), I just cringe at attempts to cite market cap as a meaningful figure on its own.
[1] https://assets.ctfassets.net/vyse88cgwfbl/1np5dpcwuHrWJ4AgUg...
It’s misleading to look at the market cap with the implication that it’s fluctuations are due to loss of value per unit (the usual cause for non-stablecoins).
You might as well say that your bank lost $500 when you made a $500 withdrawal (while neglecting to mention the deletion of $500 in liabilities).
https://news.ycombinator.com/item?id=31392605
Prerequisite: you expect USDC to keep parity with the dollar.
20% yield?
I never expected it to last long and had a clear date set in my calendar when I would cash out, but to me it sounded like their decision to pump VC money into rewards. Lots of companies do that, see PayPay in Japan which used to give you 20% cashback on EVERY PURCHASE you made, with every 10th purchase in the system getting a 100% caschback, just so they can grow faster than others. It was bonkers and burned so much money, but now they are the dominant payment app in Japan.
So for me, put money in, ride some of that 20% while VC money is still around, then bail.
I also regularly monitored the reserve dashboard how much reward money was left, the ongoing proposals, and how the APR was supposed to change month by month until it reaches a fully self-sustainable rate. In fact, when reserves for anchor dry out, it was supposed to automatically reduce the rate to the sustainable rate which was like 4-5% or something.
I also put money into UST on Binance to reduce my exposure to onchain Terra, because I trusted Binance more than I trusted the protocols.
Well, long-story-short, about a week before my cash-out date Terra collapsed and I lost 90% of my investment. That was a lot of money for me and it will take a long long time to re-save that.
With that understanding, you now know how to play the game - which is to say you MUST get out before the ponzi collapses.
Your job as investor/gambler is to get in while the house of cards is starting to be built, and to get out before the Jenga tower collapses - and it definitely will.
If however you play crypto and tell yourself how it's changing society, crypto has real value, the blockchain will change the world and all that sort of garbage, then you'll lose because you don't understand the fundamental system at play, which is the ponzi mechanism, with nothing at all underpinning the "investment'.
If you truly understand it is a ponzi scheme then it's quite exciting - an open, legal, consensual, highly organised globally distributed ponzi scheme - that's something entirely new.
Do you think that with the collapse of every ponzi scheme that the next ponzi scheme is somehow less ... scheme-y? I'm not even sure what that really means, but it seems to me that ponzi schemes, by definition, always go to 0 in the long run. There are no foundations, just greed and misery.
Can you clarify?
There is real innovation happening though, fuelling the FOMO every time another bubble forms.
The actual value-additive innovation right now is happening around financial primitives being rebuilt in a decentralized manner, using smart contracts. Everything from the virtual machine to the language capabilities (and restrictions) to the "legos" used to build decentralized applications are constantly evolving.
The constant hacks are also a form of hardening that's happening. New kinds of attacks are regularly discovered, and then exploited or responsibly disclosed, and then protocols start to guard against them, and the entities building the "legos" (I'm mainly talking about OpenZeppelin) upgrade any pieces that need to be upgraded.
I have bought and sold Bitcoin on an exchange and the anonymous person on the other end of the trade did not make any promises of returns.
By your definition is Uber stock a ponzi scheme? It too does not provide a return and relies on buying pressure to increase it's price so people can reap the rewards of their so called "investment".
I would argue that a better mental model of the crypto space is a decentralised globally distributed digital casino.
To be fair I probably wouldn't disagree if someone said UST was a actual Ponzi scheme. Holding UST had no real utility compared to the alternatives. The only incentive to hold UST was the 20% APY. Deliberate or not it was a classic ponzi scheme.
In that description the people on the top of the pyramid are just the early buyers or founders, and the later you buy a specific coin, the lower on the pyramid you are. When early whales start selling of their bag, you as a late-joiner will be left holding your own bag.
This of course does not necessarily apply to the minority of cryptocurrencies which have an actual use-case other than just existing.
Great. Whatever few cents are left will now be lost to this new scam from "Mr. Kwon".
BTC and ETH are the interesting and worth putting a small percentage of your holdings into (BTC [0] as an international store of value that has benefits over gold, ETH as the core programmable token that backs anything that stores stuff on chain to manage decentralized state). Vitalik is earnest and his writing is pretty great. Everything else I'd probably avoid (except to play with). ZCash's privacy protections are pretty cool. Outside of that risk is extremely high. Lots of bad actors, but also a pretty cool new technology with a new capability for self-custody. If someone tells you you can make 20% risk free returns, they're lying to you.
I feel bad for people that lose everything making dumb bets. It's why all the institutional investor rules exist. It's why there are restrictions on trading with leverage. Still, it's annoying that I'm prevented from making bets (or investing in startups) because of people like this. I understand the purpose of the regulations and clearly there's a need, but it's still annoying.
[0]: https://www.matthuang.com/bitcoin_for_the_open_minded_skepti...
[1]: https://vitalik.ca/
Somewhat related this article was pretty interesting: https://www.lynalden.com/what-is-money/
At what price?
If BTC does become a real international settlement layer then it’ll be worth a lot. It’s basically an asymmetric bet on that (which is why small % is good enough).
Similar for ETH being the default for programmable token.
Extremely no. It's FOMO and no real value all the way down.
I'll just provide 2 sources for this, fossuser, and then you can judge for yourself. Cause I just feel bad if someone else trusts someone I know to be intellectually dishonest at times.
[0] https://www.truthcoin.info/blog/pos-still-pointless/ (Vitalik being intellectually dishonest in his responses, which is proven by Paul in his follow-up article)
[1] https://twitter.com/adam3us/status/1273353652447608834
But if you are OK with all that, ETH and BTC are fine investments for those seeking to self-manage a high risk high reward portfolio, and ofc. for only a small percentage of net wealth
but I would argue against BTC on the grounds of PoW energy waste - keeping your portfolio greener - and the fact that ETH is able to achieve the same international digital-gold-like properties but with better cryptographic tech, interoperability and privacy features. It is hard to see the long term 10 years BTC thesis - maybe only scenario where it continues to surpass ETH is if PoS proves to be an untenable consensus mechanism.
Which ETH? As far as I understand the currency keeps forking and rewinding every now and then because whatever safety features it provides to "smart" contracts are widely insufficient and the resulting buggy mess falls over the moment a sufficiently motivated script kiddy so much as sneezes into its general direction.
The one hard fork was fine imo - it’s probably good to have an extreme case community fallback when there’s serious abuse. BTC is the counter to that and why I think it’s good as a store of value long term (rather than just holding ETH).
In the meantime a couple of friends who never worked got rich(er) just because they bought a few thousands $ (money borrowed...from their family) worth of crypto at the right moment.
What is this bullshit? Why am I even busting my ass trying to create value, when I could just buy shitcoins and become a millionaire?
I don't think this is healthy for any society. I don't even want to get rich with a fucking lottery. I want to earn it, to provide something to others and get something in return. No, I don't consider "making a market more efficient with my investments" as providing value. It's just speculation.
As someone from China, where central government limit foregin currency exchange, Bitcoin is a god-given tech. I'm not arguing for its value and i don't mean to persuade anyone. This is my opinion. I believe in its value. And guess what? I miss the crypto train too. And I have zero crypto investments. Because I don't want to take unncessary finantial risk when I cannot. I didn't borrow to bet on Bitcoin. In fact, I didn't bet at all. I didn't envy those who bet and win. Because there 100 losers for each winner.
Hard working provides higher expected return than betting.
Wise investmens and hard working provide higher expected return than hard-working alone.
Just my personal thoughts.
Unless you have funds to throw on it and you become rich without ever moving a finger. I mean yeah, congrats for your ability to "see" the future, but I struggle to understand how you created any value, how there's anything more than luck and income inequality to support a case for your new wealth to be legit. You're just extracting value from whoever came after you, in what is a classic Ponzi scheme.
If you already had capital to begin with, you never even really "risked" on it. If you have $10 milions and you risk $1 milion, that is in no way a risk comparable to someone who owns $1k and risks $100.
> As someone from China, where central government limit foregin currency exchange, Bitcoin is a god-given tech.
Why? Most usage of crypto I see is either tax eavsion or on the black markets. Drugs, weapons, fake ids and much much worse. China is doing well and the rest of the world is considering limitations on crypto as well.
> Wise investmens and hard working provide higher expected return than hard-working alone.
I agree on this, but fuck this world where you can get richer than people who work without doing any hard work.
Well, it depends on how you view the condition. I believe that a citizen should be able to change any local curreny to foreign currency. If citizens are not allowed to do that, they are exploited by the governemnt, who can simple print money to finance its corrupted operation. And that's what happen in china.
I don't care about the price of bitcoin. I care about the ability of moving my money wherever I want.
> If your friend only had $5k in total and threw them all in Terra then I guess the lesson he got in the crash is way more valuable than any savings he might have kept. He would have lost them anyway on the next shitcoin.
So if they lose money, they deserve it.
> In the meantime a couple of friends who never worked got rich just because they bought a few thousands $ (money borrowed...from their family) worth of crypto at the right moment.
> What is this bullshit? Why am I even busting my ass trying to create value, when I could just buy shitcoins and become a millionaire?
If they win money, they don't deserve it.
I guess we should just send the money to you.
> So if they lose money, they deserve it.
I didn't say that. Just that it was bound to happen sooner or later. It's clear though that as with any other Ponzi scheme, there are people who join early and profit and people who join late and give all their savings to the early comers. OP's friend is one of the late comers. My friends are early comers.
> If they win money, they don't deserve it.
Again, never said this. I'm just saying that it's a lottery and that it's crazy to have masses of people betting their future livelihoods on this Ponzi scheme.
By the way yes, I don't think you really "earned" your wealth if you got it on the lottery or from your parents. Sue me. Or better, get to work and earn your wealth.
> resentment
No resentment. Just pity for people who think they earned and deserve all they have, when in fact they've just born in the right family, in the right place, at the right time.
> I guess we should just send the money to you.
Keep your lottery money. As I pretty clearly stated, I want to earn mine with actual work.
I am honestly disappointed that the only cryptocurrency that is worth using is dead. If anything, if I wanted to get into crypto I would have to create my own cryptocurrency which is inherently anti speculative and encourages people to work and trade instead of rent seeking. However, even if I were to do that, I would run into two problems. I don't need a decentralized cryptocurrency for this, a normal bank would be good enough, the only point would be to bypass regulations. Because taxes are payable in a different currency than my own, there would be a constant drain of people selling the currency for dollars to pay taxes for example.
Since cryptocurrency is inherently unusable as a medium of exchange, it is a complete failure.
That also applies to crypto - at any given point in time, plenty of people are investing in crazy speculative schemes. A minority of them win big, while a majority loses some or most of their money. The crypto crowd who bough 10 years ago just happened to select the right lottery ticket, while other people who at that time invested in equally far-fetched ideas (AR startups, synthetic meat, whatever crazy fad that died in the early stages before even reaching mainstream media) lost their money.
Unfortunately it is. For most of human history the rich got richer and the poor just stayed poor. It's truly sad to say, but people will suffer along at a subsistence level pretty much indefinitely.
Without a wartime boom or the threat of an organized Left to force concessions, which were the two major drivers of wealth moving to the lower 90% in the 20th century as far as I can tell, we will continue on our current path.
It is a real thing. You have to blow up your industrial competitors to achieve a worthwhile and meaningful postwar boom.
The difference today is that even if we blew up China, companies still wouldn’t invest here. They just go to India or Vietnam.
We do need more unions in this country. Because our historically low union membership was not enough to stop outsourcing. My hometown‘s manufacturing was strong and has been gutted. It was an anti-union town. And no, the companies did not reward that. It just made it easier for them to go to Malaysia.
Indeed. I wartime booms are a thing of the past. I guess the reason is that mobilizations are smaller as a function of the total economy and/or the economy is a permanent wartime economy given that the USA is almost always at war somewhere.
> We do need more unions in this country
Agreed, but I don't think that would allow us to repeat the gains of the last century. Capital make big concessions to the working class in Europe and the US in the 20th century because there was a very real threat of a revolution lead by the organized Left.
Agreed. Partially due to increased globalization. We've been globalized since colonial times, but instant communication was the real game-changer. There's no turning back now. No matter how many populist movements rise up around the world as a last gasp against it. It's hard work to achieve collective bargaining, easy to overthrow a government in a coup. People are clearly choosing the latter in the USA, but they won't like the loss of democratic freedom in the end.
What unions in the US can achieve is dignity for workers. They won't get the share of wealth they once had, but they can be treated with more respect, more time off to enjoy themselves and their family and friends. Essentially we could achieve a western European quality of life, at best.
There's nothing wrong with that. The way people live over there with less income, but overall better quality of life is the best-case scenario for the US going forward. While they have some serious security risks, I'm envious that they have already sorted these things out while the US still has struggle ahead economic side. And we may fail, and simply become another Brazil, rather than like Germany. I think Rio de Janeiro style slums are more likely in our future, rather than Berlin. Our people and leaders just don't have the culture and stick-to-it to achieve that reality, in my opinion.
The working class here is too easily divided by the asset holding class. Just tell them unions are bad, or focus on minority issues, whether it be LGBTQ or racial minority strife and you have a distraction for 1 to 3 generations' lifespans. Right now, given the lack of focus on the working class and corporate focus on general social justice issues, we're kissing away the next 100 years that need to be put towards all working class people. Money and job security are what people need, no matter who you are.
I don't see a true working class revolution begin in the US until 2060 or so. It may take all the way out to 2100. There's just too many people that would otherwise be working on this, that are extremely focused on gender and racial studies. No money is going to come out of that for anyone. Corporations and the capitalist class know it.
You'll know you have achieved enlightened corporations when they are publicly promoting collective bargaining. They're flying rainbows instead, keeping the money, and everyone on both sides is feeling good.
While that's a pessimistic take, the good news is that the propaganda that unions drove out US enterprise is demonstrably false. That has been revealed to have been a total scam and I think everyone sees it at this point. You lose nothing at all when you have collective bargaining rights, it's all upside. As long as the business is solvent, the boss may be angry at merely one Lamborghini rather than five though. Or just wealth for him to retire at 45, rather than generational wealth for the next 3 generations being available.
Worker-owned enterprise also needs to happen. There's just no rational reason why for proven business models, like 7-Eleven out of Japan, needs to run half of our convenience stores when those could be owned and operated by the employees. With better pay and customer service as a result. I'm fine with venture capital and risk-reward for unproven business models, but many of these large corporations are parasites like 7-Eleven. We have to kick these corporations out and retake our local economy. No reason to allow them to have end-to-end control all the way, and it will encourage some local suppliers to pop up as fellow cooperatives see eye to eye and work together.
I think this is the take-away of the modern world economy.
If you can somehow get enough money to join the asset-holding class you have a chance, otherwise you have no chance. And even if you can, you're fighting a serious uphill battle against the people who got there earlier and got to that sweet free number-go-up zone while you were still toiling.
Right now a friend of mine is trying to buy a modest house in the Bay Area (not SF) -- and he's worried that the $1.5M he can afford is not going to be enough (for things listed at $1.3M) because people with generational wealth, or people who won the tech lottery, are going to come in with $1.6M cash offers.
It's not that insane yet in most of the world but I see no reason to believe this is not the direction.
So, if you don't have a path from work-work into assets, what are you supposed to do?
That is how it worked for the last two thousand years.
That’s a terrible example. Remote work is a thing if you for some reason have to work for Bay companies.
It is easy to blame the government, but don't to take the responsibilities by themselves.
There are many people who warned about the crypto bubble and the ponzi scheme over the years. But the crypto-bro's told a different story.
Many people expected that the bubble bust earlier. Some people where over that and stated that crypto is here to stay as long as there are people who can convince others to pour money in, yeah, like a ponzi scheme.
Crypto-bro's told the blue sky's, because it is decentralized and no government is able to regulate it. Now the government is blamed.
You may could blame the government, if it is regulated by the government. But it isn't. The crypto-bro's worked hard that it should not be regulated. So, you can't blame the government.
We've known that the whole crypto scene in general is a fraudulent, cynical ploy to get rich at other people's expense. Any conversation with anyone involved in the industry quickly reveals that their goal is to get rich from asset speculation. And that means for them to win, someone else must lose.
The thing that the article describes is an inevitable consequence of this process. This story will play out again and again - gullible people getting their lives ruined by "investing" in crypto because they believed a bunch of blatant lies about it.
This is fraud. There needs to be consequences, and the liars going to jail for deliberately destroying other people's lives.
Do you really think if you ask Charles Hoskinson (creator of Cardano) this, then this will become clear? If so why bother with so much peer-reviewed academic research? Is that all part of the scam?
Similar question about Vitalik
> This is fraud. There needs to be consequences, and the liars going to jail for deliberately destroying other people's lives.
I guess you haven't kept up on the news of how the South Korean government are dealing with Do Kwon and co.
Where did they think the money was coming from, if not ultimately gullible individuals whose lives are being ruined by this?
Also, there is a lot of VC money in Cardano and Ethereum
I think there's a lot of hand-waving and bullshit before we get to the "yes, this is ultimately funded by speculators, and a lot of those speculators are uninformed people putting their life savings at risk". But that's where the conversations I've had with crypto people end up.
And I believe regulations are coming. Regulations don't conjure out of thin air - but tend to be the result of people or governments getting screwed over.
I'm not saying that's a bad thing, but I struggle to envision what a tightly-regulated crypto market would look like that wouldn't defy the entire point of crypto.
I think that regulations would come in the form of how so-called stablecoins and their owner companies can operate, how other companies (exchanges, etc.) can operate, and so on.
Take stablecoins - one might regulate these with hard requirements of how many % of their backing are in extremely liquid assets. Take tether - the idea is that it should be backed 1-to-1 with USD. Of course, that is not the case, at all. The owners have said that it's not backed at such ratio.
With extremely opaque stablecoins, you really have no idea what they're backed by. Imagine if stablecoin xyz said "We're 99.99% backed by [some currency]!" but then it turns out that they're backed 5% by said currency, and the rest has been put on the stock market - because the owners figured they could get filthy rich by betting all that money on low-risk stocks. Works until it doesn't work, and then people do a run on the coin.
So, regular audits, full transparency, hard regulations around what they can or can't do. That alone will probably flush out the majority of fly-by-night scams.
I think it is understood that most people are in it for huge and quick gains. Some crytpo fundamentalists will say that they're in it "for the tech", but I would be very, very surprised if that was the case for majority of crypto holders. So you are right - a regulated crypto space will probably drive out many of the speculators and gamblers, but I think that's OK. In the end there's a need for cheap and efficient cross-boarder payments, without having massive companies as middle-men. But to achieve true mainstream adaption, that will come at costs. The wild-west days are closing up.
Not necessarily if the crypto assets maintain long term value. I doubt people who bought bitcoin at $100 feel like losers out of it.
who are those people going to sell them to at a greater value?
the only "value" it has is that someone believes that they can sell it for more.
eventually that stops being true and someone loses all the money that everyone else gained. It's zero-sum, it has to be, because the bitcoin itself produces nothing of value.
But the comments here are wrongly equating Terra to the rest of crypto such as ETH, and assuming everything will collapse just the same. The value of ETH is not that the price will go up or provide predictable yield - its primary use is as a gas token in order to interact with the network, like trading any token or depositing value in a smart contract. The price of this fuel can go up and down, but the asset will always remain in demand for as long as people still wish to continue to do these things on the network.