> But I don't understand everyone's certainty that cryptocurrencies are a fraud-bubble-scam-Ponzi-mania.
When it blows up, you won't understand why the SEC didn't protect you. By then, you'll realize it was a mirage all along, and you'll want someone to blame for letting it get so out of hand. Every piece of news you interpret will tell you that losing money was not your fault, because that's what you'll want to believe.
On the flip side, the current price action is causing the same sort of confirmation bias--just in the opposite direction.
By way of an understanding of human nature. From the book Bull! A history of boom and bust:
“...A bubble, Galbraith observed, is always supported by the belief that there is something new in the world. The history of past cycles is dismissed as irrelevant.“
That’s it in a nutshell. It is a time-tested part of who we are, and it’s almost like you’re either born with the ability to see that or you’re not. I don’t know why.
I don’t know how much the price will go up, but it going up, even to a million dollars a coin, means little. It will eventually go down and violently so, and some people will be badly hurt. Just people being people.
Assets need to be productive in order to be true investments. Like farmland or businesses. Otherwise, you’re speculating on price appreciation. Look at gold over the last 100 years and overlay its price graph over the Dow Jones during the same period. They’re not even close.
Counterpoint: Galbraith confidently called the US stock market a "classic bubble" in April, 1999. At that time, the Dow Jones was at 10,494. Today it's at 24,504.
Looking back with 20/20 hindsight, it now looks like Galbraith was wrong.
> Assets need to be productive in order to be true investments
Counterpoint: Maybe assets need to be useful to have value. Land, copper, the balance on a Walmart gift card and my World of Warcraft gold don't produce anything, but they're useful, so they have value.
> Counterpoint: Galbraith confidently called the US stock market a "classic bubble" in April, 1999. At that time, the Dow Jones was at 10,494. Today it's at 24,504.
No! Current day valuation versus 1999 valuation has nothing to do with each other. In 1999 the market was over valued and the bubble soon popped.
> > Assets need to be productive in order to be true investments
> Counterpoint: Maybe assets need to be useful to have value. Land, copper, the balance on a Walmart gift card and my World of Warcraft gold don't produce anything, but they're useful, so they have value.
The key difference between an asset and investment is that investments produce returns.
> The key difference between an asset and investment is that investments produce returns.
Right, but an asset can go up in price and stay there if demand increases and/or the currency the price is denominated in is losing value over time. Especially true if supply is limited.
I don't expect BTC to stay at $17000 - it could go down or up, and I wouldn't be the least bit surprised if it's currently in a bubble that pops. It might then go to near-$0, or it might proceed to regain those levels and continue even higher over time, depending on how demand evolves against the ultimately fixed supply. I remember $500 for 1 BTC seemed insanely high at the time. $675 must have seemed crazy for gold in 2006, but I don't expect it to return there again despite the intervening ups and downs.
Because the fundamentals of Bitcoin and The Blockchain are complete garbage. Both are solutions in search of problems. Neither solve any real world problems outside of how to conduct shady, illegal business (murder for hire, crypto-ransomware, mail-order bath-salt delivery) and both do a pretty piss-poor job of even that.
This is why bitcoin will ultimately fail. It is a useless product. Full stop.
True. Only if they have zero leverage at play. No borrowed money, no loan to default on. If not then there is most definitely going to be some element of a bailout.
Anecdotal: but in the last month I have come across 6-8 people who have taken or know someone who has taken 2nd mortgages, maxed out their lines of credits, and credit cards to "invest" in crypto.
I'm generally a-ok with investment loans (not from credit cards), they are a good resource to reduce portfolio risk - if the loan remain tax deductible. But what is currently transpiring is insanity.
Someone will definitely get bailed out (hint: it will likely be the banks that's unknowingly provided the leverage).
The current leverage from mortgages are probably not that big. What i am worried is the combined effect of high housing prices & relaxed loan requirements, and upcoming stock market burst.
When it blows up, you won't understand why the SEC didn't protect you. By then, you'll realize it was a mirage all along, and you'll want someone to blame for letting it get so out of hand. Every piece of news you interpret will tell you that losing money was not your fault, because that's what you'll want to believe.
On the flip side, the current price action is causing the same sort of confirmation bias--just in the opposite direction.