Hidden meaning
"Financial market professionals were warned to make sure they stay on the right side of securities laws"
Should we understand from this phrase that they have already detected something unsavoury is going on behind the scenes ?
The chair of the United States Securities and Exchange Commission (SEC) has issued a strongly worded Statement on Cryptocurrencies and Initial Coin Offerings that recommends extreme caution for anyone contemplating any kind of involvement in such investments. The main thrust of Chairman Jay Clayton's words urged individual …
Um, the media are reporting widely its use in criminal transactions such as ransoms, and money laundering. Doesn't look very hidden to me! ... Nick Kew
Hi, Nick Kew,
Maybe the system is terrified of losing their money laundering monopoly ...... http://www.zerohedge.com/news/2017-12-11/hsbc-share-surge-us-doj-removes-sword-damocles-money-laundering ..... and their shirts too whenever guilty of facilitating this home grown madness ........ http://www.zerohedge.com/news/2017-12-11/its-mania-phase-securities-regulator-warns-mortgages-are-being-taken-out-buy-bitcoin
Some would tell you that mortgages are ransoms.
Maybe the system is terrified of losing their money laundering monopoly ...... http://www.zerohedge.com/news/2017-12-11/hsbc-share-surge-us-doj-removes-sword-damocles-money-laundering .....
I miss the days when Zero Hedge had the mission of being an economics blog, instead of trying to make Breitbart look like the Socialist Worker...
My reading of this is that some US financial market professionals may be selling crypto currencies to investors who are given the impression that the products are regulated when they are not.
I suspect this is aimed at fraud around the trading of crypto currencies rather than any underlying issue with them - there maybe in future but it isn't part of the SECs oversight at present.
I'm aware there are heavily leveraged (15:1) to exploit the current market so there will be tears...
For Bitcoin, that's just noise.
Maybe we should also be encouraging the newspapers to stop reporting on people who have become millionaires by investing a few thousand in bitcoin. Just encouraging the bubble to get bigger before going pop.
"encouraging the bubble"
I read a sincere post from someone saying the trick to bitcoin investment is to always sell when it has reached x 3 to x 5 times your bought price. That way you can't possibly lose.
We have speculative bubbles because there is a large supply of bigger fools like this guy.
Every penny anyone makes from bitcoin was or will be lost by someone else (less I suppose small commission like earnings on its use to evade taxes and the law).
As in, they actually cashed out ahead over a million dollars? I'm sure there are a few, but someone who bought a few hundred bitcoins a couple years ago for $5000 and who now have holdings worth $2.5 million or whatever aren't millionaires because the price of bitcoin could drop back down to where it started the year by Dec. 31.
Having a million dollars worth of bitcoin is one thing, but given how illiquid the exchanges are, someone who tried to sell a few thousand of them at once would probably cut the price in half.
Anecdotally, yes. Someone I know mined BTC when it was worth fuck all in the early days. Cobbled together 10s of them and just held them for shits and giggles as they may one day be worth something - the actions of a techie who probably wanted the fun of buying and building the rigs more. Fast forward to today and he's theoretically a $1+m guy. He does however face a number of issues:
Nah, it's perfectly believable.
I refer @ratfox to previous posts on the subject, listing a long history of global gullibility, including black tulips, south sea bubbles, the Wall Street Crash and Welsh silver and lead mines.(Actually, I don't know if anyone has mentioned the mines before, but trust me, many gullible/greedy people lost a lot of money - my book on the subject should be out next year, very reasonably priced)
The human race has a distressingly large number of people who are both greedy and stupid, and who never learn from history. I blame the government.
@ Pen-y-gors - of course it's a bubble, and could burst. But some bubbles can outlive us all. Most obvoiusly, gold, whose financial value has far exceeded any intrinsic value for millennia.
@ratfox - social experiment. Hmmm, well it's not without precedent (as has been pointed out). But a new concept with zero intrinsic value? This is most interestingly a commentary on fiat currency. Viewed like that, it's an intrinsically better store of value than something the Emperor[1] can just print more of whenever it's expedient.
[1] A reference, if you like, to the sub-plot in Goethe's Faust where Mephistopheles invents Fiat currency just when the Emperor is desperate, causing a devastating bubble.
But some bubbles can outlive us all. Most obvoiusly, gold, whose financial value has far exceeded any intrinsic value for millennia.
Gold clearly isn't a bubble. There's something inate about us humans that we like the shiny and it has fulfilled a role as currency/store of value for thousands of years. Sure its price may fluctuate and sometimes go into bubble territory (as a few years ago), but if you average those fluctuations out it's actually maintained a relatively steady value over millenia.
The thing about Bitcoin is that the investment madness is now starting to kill off its use as a currency. Some people argue about how fiat currency smells just as bad a Bitcoin, so whatabout that. But the point is, Steam just dropped it as a payment method, because transaction costs had gone up to £20.
So because the Bitcoin processing system doesn't appear to scale well the worst outcome for it is if this bubble continues for another year or two - the "investors" might drive away the users. Leaving only investors left and not the underlying economy. If that happens, the collapse might be total. Whereas if the bubble pops now, it could go back to business as usual, like a few years ago when the price crashed from $1,000 in December to $50 by January.
Bitcoin fees are due to too many people using it, rather than the high price of Bitcoin. The plan to fix it is by adding another layer, called the Lightning Network, to move most transactions off-chain. This should get done over the next year, so if it can survive until then it can survive indefinitely.
What the hell is the point of having this magic cryptographically signed and un-alterable distributed ledger, if you then have to move all the transactions off it - in order for it to work?
Bitcoin had some clever ideas, but basically because the designer didn't understand the theory of money, it's too flawed to ever be a useful currency.
Plus mining is stupidly wastefully energy intensive - and how are the miners going to be paid when there are no more coins to mine. Plus how would Bitcoin then cope with the vicious spike of deflation that would cause. In general you want your money supply to expand at the same speed as your economy - so there's enough money to go round, but without causing inflation.
"Plus how would Bitcoin then cope with the vicious spike of deflation that would cause."
They're infinitely divisible, so you just keep adding more decimal places as the economy expands. The effect is pretty much the same as inflation for normal currencies.
As for the miners... yeah, when the coins run out they're not in a great place. Not only have they spent a great deal of money on power to make coins with a fairly small profit margin, but they've also invested an extraordinary amount of money into the physical equipment, much of which is now so specialized that it can't be repurposed.
Basically, the entire value of Bitcoin is based on wasted resources that could've been used for something practical.
The way I understand it, when there are no more coins to be mined, the miners get paid solely by the transaction fees.
Which suggests that the fees are going to rise!
Its already too slow and too expensive to use as a payment service. Well, except for ransomware, but how can you base an economy on that?
If my kilo of coke costs 1 bitcoin today and 0.7 bitcoin tomorrow, then that is deflation, regardless of how many decimal places I could quote the price to in the future, and it is a disincentive to spend money today.
I've no idea how much cocaine costs, these figures are for illustrative purposes only.
I've no idea how much cocaine costs, these figures are for illustrative purposes only.
I don't indulge and really only have the (I suspect somewhat inflated) PSS - police standard scale to go by, as reported in the press on the value of drugs hauls, but I think 1 bitcoin will get you an awful lot of cocaine, for the moment at least
They're infinitely divisible, so you just keep adding more decimal places as the economy expands. The effect is pretty much the same as inflation for normal currencies.
Naselus,
This is the wrong way round.
Say I hold 1 BTC and in order to have enough units of currency we're adding a decimal place, so 0.1BTC becomes the same value as 1 BTC. Extreme example. That means you've given me the equivalent of 9 BTC for free. This is money becoming more valuable over time. That's deflation.
Inflation is where money reduces in value over time. The Bank of England increase the money supply over the year by 4% to account for the growth in the economy + inflation, so every pound in my pocket or bank account is now worth 4% less than last year. Most of this is not done by printing notes and coins, so actually the BofE are targetting an average money supply growth over time - monetary theory and practise is really complicated and weird... So anyway that's inflation. The money in my pocket is worth less.
Inflation means I have an incentive to spend my money now, or invest it to protect its value. It also means if I take out debt, that the nominal value of that debt stays the same, while the real value falls over time, thus making it less onerous over time. Interest must then be charged to cover this loss of value, plus some profit for the lender.
Deflation means that I have an incentive to save my money now, as it will buy me more goods in future. The value of the money itself is rising - or the price of goods is falling - as both have the same effect.
This gives less incentive to invest, as my money is already increasing in value. So why take the risk? Without investment economic growth collapses. Debt becomes hideously awful. Because the nominal debt level stays the same, but now the real value of that debt is increasing. Thus if you can't pay it off, you're getting poorer every day. This also shrinks the economy.
The combination of debt overhang crippling people and companies, the incentive not to spend throttling growth and the lack of investment (borrowing to invest being suicidal) causes depressions that can last for decades - without massive government intervention. Japan was in depression from the mid 90s to last year - the 30s depression was ended by World War II (that's excessive government intervention...), the 1870s depression lasted until the 1890s. Greece, bequeathed inflation by incompetence and stopped from solving it by the Eurozone is predicted by the IMF to get unemployment down from its current 23% to 12% by 2040!!!!!
I refer @ratfox to previous posts on the subject, listing a long history of global gullibility, including black tulips, south sea bubbles, the Wall Street Crash and Welsh silver and lead mines.
For all of these, there was at least a claim that these things had intrinsic worth, or eventually were going to have one. The claim was wrong, but it existed.
To answer the incoming choir of voices about fiat money: Even for fiat money, there is an implicit assumption that the country issuing the money has an interest in having a semi-stable currency. For instance, the US government could technically pay their debts in one day by printing a single bill of $5 trillions and giving it to the Chinese. They're not doing it, because it would crash their economy into the stone age (along with most of the world). That's why people keep US instead of Zimbabwean dollars.
For Bitcoin, there is nothing of the sort. Under all the complex cryptography algorithm ensuring various interesting features, you are literally buying a number in a finite list. It is very much like fiat money, except that the country is only made of people who happen to be currently working with bitcoin, and any of them can leave that country at any time without losing anything. As long as everybody does not leave at once, Bitcoin keeps existing.
All currency has transaction and processing costs. Even if it is just your time counting £300 worth of pennies (which I had to do, but thankfully had scales).
The Lightning system seems to just deffer some transactions until they can be lumped into one, and save some processing fees or time on the crypto side, by running a normal "tab" with suppliers or users.
It does not seem to be big enough of a change for the other random transactions to make the difference where it counts for the individual. But it does seem to make it easier for businesses. Why am I not surprised?
The Lightning system seems to just deffer some transactions until they can be lumped into one, and save some processing fees or time on the crypto side
Then what problem is Bitcoin solving?
I thought the point was simultaneous transactions to allow for trust over online payments.
With Lightning you're forced to trust one side of the transaction again - or whatever intermediary to hold the money in Escrow. I would point out that Bitcoin has a distressing history of intermediaries, like the exchanges, either stealing or losing the coins entrusted to them.
At this point, you may as well just use the banks, who have secure and cheap international transaction systems already in place. £20 is a massive transaction fee, and as almost nobody gets paid in Bitcoin, that doesn't even account for the fee you have to pay an exchange to get hold of Bitcoins in the first place.
Gold clearly isn't a bubble. There's something innate about us humans that we like the shiny and it has fulfilled a role as currency/store of value for thousands of years.
I remember an ex-colleague of mine commenting on the longevity of the precious metals used in the "clock of the long now" - his comment went along the lines of, "well after civilisation has finished itself off, the descendant, or equivalent, of the Mongol warrior, on board his shaggy pony, will strip it to give his mate some bright trinkets to make sure he gets a good shag when he makes it back to the tent"
Oh, that gives me an idea! I'm gonna be a billionaire!!!
An crypto-currency powered by online arguments. Every time someone's rude to someone else online, we encode part of our transaction log in their post. Coins will be infinite, as arguments on the internet are infinite. There's no cost to mining, because online arguments are going to happen anyway.
I'm calling it: Popcoin
My logo will be a styalised piece of popcorn with a line through it, like the dollar sign. In gold, naturally.
It can't fail!
Personally I bought some so that I could buy stuff online, but as not too many places accept btc, my small stash remains largely untouched. However, my HODLing has meant that the btc value has increased, but I'm still not looking at it as an investment: I use real (fiat) money for that...
Real fiat money isn't an investment. It's a relatively predictable store of value - but inflation still gives a penalty in holding it. Which is why you balance liquidity needs against cost of holding cash - and try to protect assets from inflation by investing the rest. Generally sacrificing liquidity for better returns.
The problem for Bitcoin appears to be that the "investors" are causing it to be less useful as a currency, for example by bidding transaction costs up to £20 a time - and if it once loses its value for use as a means of exchange then the value for the investors will soon disappear after that.
Real fiat money isn't an investment. It's a relatively predictable store of value - but inflation still gives a penalty in holding it.
Exactly.
Sadly the price indexes used to publish official inflation figures no longer bear any relation to reality. Real inflation is now in asset prices. The house price bubble that sucked the real economy dry in the first years of this century (while consumer prices reflected not our economy but rather the rise of Chinese exports), and the pension price inflation caused by money-printing in the zombie economy.
When people start to cash in their gains. That is, more people selling than buying.
Looks like a ramping up Ponzi scheme at the moment.
Or the dotcom boom where people were cashing in their pension pots to buy shares in companies with lots of hits but no revenue stream.
"Looks like a ramping up Ponzi scheme at the moment."
No, it doesn't. The people holding Bitcoin aren't receiving dividend payouts from the new entrants into the market; they're selling assets. It's a bubble - a very, very obvious one which is probably going to collapse in the next couple of days - but it's not a fraud.
You mean to tell me you aren't enjoying millennials smugly telling you that it's different this time as they pontificate their self-professed economic and financial wizardry?
As Danny Glover aptly put it in the Lethal Weapon series, I'm getting too old for this shit.
Most recently, I read of someone claiming the school of Austrian economics as their guiding light in/for cryptocurrency.
The State Bank of VietNam has some smart cookies in it's Ha Noi offices.
Ar first it advised extreme caution for anyone contemplating any kind of involvement in such investments.
Then the computer retail builders started promoting computers customised for Bitcoin mining. The State Bank (similar to the Bank of England) tested a few of the machines and determined that significant percentages of 'found' Bitcoins were being skimmed off and transferred to distant accounts for the benefit of the software writers.
The State Bank then banned Bitmining in VietNam.
" promises of enormous and rapid returns often prove too good to be true " - are we talking about bitcoin or the Republican tax plan here? It seems to be that they are both based on wishful thinking.
As far as btc go, I've recouped my original investment so I'm off to the pub.