The trouble with crypto is that it has no intrinsic value and is often a vehicle for pump and dump scams: "Welch launched the Hawk Tuah coin—widely seen as a memecoin, or a form of cryptocurrency that is typically created for entertainment purposes—on the Solana blockchain Wednesday evening. Welch’s coin quickly hit a market capitalization of nearly $500 million before immediately plummeting 95% to $25 million as of Thursday afternoon, according to DexScreener data. The coin’s price as of Thursday afternoon after 4 p.m. EST is $0.002439, down from a high of $0.04916 Wednesday evening, according to DexScreener. The chaotic launch appeared to result in big losses for some traders. Coffeezilla, a crypto YouTuber with more than 3 million subscribers whose real name is Stephen Findeisen, said in a tense X space conversation with Welch and her team the Hawk Tuah rollout was “one of the most miserable, horrible launches I’ve ever seen,” accusing Welch and her team of insider trading, which they denied. CoinTelegraph reported about 80 to 90% of the Hawk Tuah supply was controlled by insiders or snipers—or entities that purchase large amounts of a coin’s supply at its launch—citing blockchain data from Bubblemaps and DexScreener, though Welch said in a post on X her team had not sold any tokens and they “tried to stop snipers as best we could.”" https://www.forbes.com/sites/conormurray/2024/12/05/hawk-tuah-creator-haliey-welch-criticized-for-chaotic-memecoin-launch-in-latest-bizarre-internet-stunt/
Having had a billionaire for a close relative - my mom's second cousin - I can tell you that from what I've seen, there's a reason that they're billionaires - they're addicted to getting as much money as they can get, as a crack addict is to crack cocaine. They'll do anything to get more money - and they're never satisfied. They shouldn't be targets of admiration or envy, they're just like any other addict. And they're pleasant as long as they're getting more of what they crave, as pleasant as any other addict.
They recommend avoiding new issues of crypto controlled by individuals, whose interest is not the same as your interest.
There is also the smart money - dumb money divide, as seen the last couple of days in Bitcoin. Naive traders made a big deal of the magic number of 100,000. Manipulators took advantage of them.
and I'd note this: "holding it in an online brokerage also costs next to nothing." And since most of these "brokerages" are nothing more than anonymous web addresses, there's not security against loss, in fact, outright fraud and theft are common - and virtually untraceable, even with NSA bulk collection in place for every internet transaction that goes through the US and potentially the UK. And it's possible for an exchange to be locked up and inaccessible, with the bitcoin held on such an exchange to be totally lost - one case is where the owner died, and there was no record of passwords, which died with him - "More than 100,000 cryptocurrency holders have learned a hard lesson in finality, after the 30-year-old CEO of a major Canadian exchange died, effectively freezing the company’s assets.
In an affidavit filed in the Supreme Court of Nova Scotia last week, Jennifer Robertson, widow of QuadrigaCX CEO Gerry Cotten, wrote that the company owes its customers $190 million, but can’t access the funds to pay them back. In an unusual setup, Robertson said Cotten was the only person with the cryptographic keys to access $137 million of cryptocurrencies kept in “cold” storage to mitigate the risk of hacks. The remainder is similarly frozen, in cash, by ongoing disputes with a bank and payment processors. The six-year-old company is now seeking protection from its creditors as it attempts to access the lost funds. Robertson’s filing was first reported by Coindesk." https://www.wired.com/story/crypto-exchange-ceo-dies-holding-only-key/
And then there's the Mt. Gox scandal: "Launched in 2010, it was handling over 70% of all bitcoin transactions worldwide by early 2014, when it abruptly ceased operations amid revelations of its involvement in the loss/theft of hundreds of thousands of bitcoins, then worth hundreds of millions in US dollars.[2][3][4][5][6][7]
In February 2014, Mt. Gox suspended trading, closed its website and exchange service, and filed for bankruptcy protection from creditors.[8][9] In April 2014, the company began liquidation proceedings.[10] Although 200,000 bitcoins have since been "found", the reasons for the disappearance—theft, fraud, mismanagement, or a combination of these—were initially unclear. New evidence presented in April 2015 by Tokyo security company WizSec led them to conclude that "most or all of the missing bitcoins were stolen straight out of the Mt. Gox hot cryptocurrency wallet over time, beginning in late 2011."[11][12]
The collapse of Mt. Gox and the subsequent arrest and conviction of former CEO Mark Karpeles led Japan to create the first formal regulations for cryptocurrency exchanges and virtual currencies." https://en.wikipedia.org/wiki/Mt._Gox
And this sort of thing is just commonplace... it's been going on since the outset.
Even for bitcoin, the control structure is such that original large holders continue to hold enough bitcoin to move the market at will, without losing control. The original scheme had one holder controlling over 51% of the outstanding bitcoin, with insiders holding another 24% which I figured out in 2010. Here's the original whitepaper from 2008: https://www.ussc.gov/sites/default/files/pdf/training/annual-national-training-seminar/2018/Emerging_Tech_Bitcoin_Crypto.pdf It was designed to be decentralized, but as soon as centralized exchanges, like Mt. Gox, were adopted, then it became very easy to run all sorts of control frauds - and that's been the bitcoin and crypto game ever since.
Bitcoin is pure speculation, and it's always a *lot* easier to get in than it is to get out. If I do a momentum play on an investment, I want to get out within minutes - back when you could do that and not get nailed by frontrunners or electronic traders. You simply can't do that with Bitcoin, it's far, far easier to lose than to win, it's almost a sucker bet. And since the value is purely speculative lacking any sort of stability, it's not useful as a currency. Fiat is bad enough, but crypto is impossible, you could have 95% of your value wiped out in seconds. And I wouldn't put it past Trump and Musk to run a pump and dump - or participate in one if they got a cut.
You identify the risks. It is a matter of faith, and you, Stream, don't have much.
Some risks can be controlled. You can hold the Bitcoin privately, not through a brokerage. The risk that large holders could swamp the market through large sales cannot be controlled. The risk that manipulators will continue to make it very volatile cannot be controlled.
The alternatives also carry their risks. You have pointed out the risks of my gold ETFs. I think that allocated storage of physical metal in overseas vaults is safer, but still not 100%.
You have to diversify. It probably makes sense to own a bit of a major crypto such as Etherium or Bitgold. Also metals, real estate, and stocks.
It's not faith - the "evidence for things not seen", as the Bible would put it. Apart from blind faith, there's no evidence for the truth of the story of Jesus - nothing in the Annales of the Roman Empire, for example, which recorded the discovery of a phoenix in Egypt in AD 30 or so - looking for ten years before or after, there's no record - except in the New Testament, in the eyewitness account in the Gospel of John - of any of those events, and certainly not of an earthquake, a prolonged eclipse during the crucifixion, tombs breaking open, and corpses in winding sheets getting up and wandering around the streets of Jerusalem - and *that* would make the discovery of a phoenix rising from ashes pale into non-existence...
It's trust which I lack, especially for scandal-ridden systems of monetary manipulation for which there is no accountability or transparency. In these systems, there's no way to determine risk, because they are both centralized and utterly opaque. Every cryptocurrency white paper I have ever seen creates a system in which the originators of the scheme exercise total control over the assets, with little or no outside accounting or transparency. Of course, every one of these schemes *promises* eventual transparency and accountability, but at some undefined future point. The governance section of the whitepaper is where the rubber hits the road, and they're essentially identical as to the pattern they use. In considering an investment, I look at the track record of what has gone on, and in crypto I see, in every issue, a series of pumps and dumps - which might make momentum plays attractive, but the ordinary buyer just can't get out very quick - or quickly enough, say in milliseconds - and there's usually massive front-running by insiders and other such tricks. If I do a trade on the phone, I expect to have it go through while I'm on the phone. There's no crypto for which this happens, often the time to go to dollars or other fiat is days. And then there's the capital gains taxation - crypto is taxed at the 28% collectibles rate - like metals and metal ETFs - so you're looking at a pretty big move - taking exchange fees into account - before you can make money - and in the US, crypto will make you the target of a tax audit if not more. In Ukraine, things might be different, but in the US, unless you're already a major player, it's not worth the risk - and if you're a major player, you'd just start one of these schemes and watch the cash roll in...
The trouble with crypto is that it has no intrinsic value and is often a vehicle for pump and dump scams: "Welch launched the Hawk Tuah coin—widely seen as a memecoin, or a form of cryptocurrency that is typically created for entertainment purposes—on the Solana blockchain Wednesday evening. Welch’s coin quickly hit a market capitalization of nearly $500 million before immediately plummeting 95% to $25 million as of Thursday afternoon, according to DexScreener data. The coin’s price as of Thursday afternoon after 4 p.m. EST is $0.002439, down from a high of $0.04916 Wednesday evening, according to DexScreener. The chaotic launch appeared to result in big losses for some traders. Coffeezilla, a crypto YouTuber with more than 3 million subscribers whose real name is Stephen Findeisen, said in a tense X space conversation with Welch and her team the Hawk Tuah rollout was “one of the most miserable, horrible launches I’ve ever seen,” accusing Welch and her team of insider trading, which they denied. CoinTelegraph reported about 80 to 90% of the Hawk Tuah supply was controlled by insiders or snipers—or entities that purchase large amounts of a coin’s supply at its launch—citing blockchain data from Bubblemaps and DexScreener, though Welch said in a post on X her team had not sold any tokens and they “tried to stop snipers as best we could.”" https://www.forbes.com/sites/conormurray/2024/12/05/hawk-tuah-creator-haliey-welch-criticized-for-chaotic-memecoin-launch-in-latest-bizarre-internet-stunt/
and
https://bfi.uchicago.edu/wp-content/uploads/Gandal-Neil-etal-An-examination-of-the-cryptocurrency-pump-and-dump-ecosystem.pdf
Having had a billionaire for a close relative - my mom's second cousin - I can tell you that from what I've seen, there's a reason that they're billionaires - they're addicted to getting as much money as they can get, as a crack addict is to crack cocaine. They'll do anything to get more money - and they're never satisfied. They shouldn't be targets of admiration or envy, they're just like any other addict. And they're pleasant as long as they're getting more of what they crave, as pleasant as any other addict.
They recommend avoiding new issues of crypto controlled by individuals, whose interest is not the same as your interest.
There is also the smart money - dumb money divide, as seen the last couple of days in Bitcoin. Naive traders made a big deal of the magic number of 100,000. Manipulators took advantage of them.
and I'd note this: "holding it in an online brokerage also costs next to nothing." And since most of these "brokerages" are nothing more than anonymous web addresses, there's not security against loss, in fact, outright fraud and theft are common - and virtually untraceable, even with NSA bulk collection in place for every internet transaction that goes through the US and potentially the UK. And it's possible for an exchange to be locked up and inaccessible, with the bitcoin held on such an exchange to be totally lost - one case is where the owner died, and there was no record of passwords, which died with him - "More than 100,000 cryptocurrency holders have learned a hard lesson in finality, after the 30-year-old CEO of a major Canadian exchange died, effectively freezing the company’s assets.
In an affidavit filed in the Supreme Court of Nova Scotia last week, Jennifer Robertson, widow of QuadrigaCX CEO Gerry Cotten, wrote that the company owes its customers $190 million, but can’t access the funds to pay them back. In an unusual setup, Robertson said Cotten was the only person with the cryptographic keys to access $137 million of cryptocurrencies kept in “cold” storage to mitigate the risk of hacks. The remainder is similarly frozen, in cash, by ongoing disputes with a bank and payment processors. The six-year-old company is now seeking protection from its creditors as it attempts to access the lost funds. Robertson’s filing was first reported by Coindesk." https://www.wired.com/story/crypto-exchange-ceo-dies-holding-only-key/
And then there's the Mt. Gox scandal: "Launched in 2010, it was handling over 70% of all bitcoin transactions worldwide by early 2014, when it abruptly ceased operations amid revelations of its involvement in the loss/theft of hundreds of thousands of bitcoins, then worth hundreds of millions in US dollars.[2][3][4][5][6][7]
In February 2014, Mt. Gox suspended trading, closed its website and exchange service, and filed for bankruptcy protection from creditors.[8][9] In April 2014, the company began liquidation proceedings.[10] Although 200,000 bitcoins have since been "found", the reasons for the disappearance—theft, fraud, mismanagement, or a combination of these—were initially unclear. New evidence presented in April 2015 by Tokyo security company WizSec led them to conclude that "most or all of the missing bitcoins were stolen straight out of the Mt. Gox hot cryptocurrency wallet over time, beginning in late 2011."[11][12]
The collapse of Mt. Gox and the subsequent arrest and conviction of former CEO Mark Karpeles led Japan to create the first formal regulations for cryptocurrency exchanges and virtual currencies." https://en.wikipedia.org/wiki/Mt._Gox
And this sort of thing is just commonplace... it's been going on since the outset.
Even for bitcoin, the control structure is such that original large holders continue to hold enough bitcoin to move the market at will, without losing control. The original scheme had one holder controlling over 51% of the outstanding bitcoin, with insiders holding another 24% which I figured out in 2010. Here's the original whitepaper from 2008: https://www.ussc.gov/sites/default/files/pdf/training/annual-national-training-seminar/2018/Emerging_Tech_Bitcoin_Crypto.pdf It was designed to be decentralized, but as soon as centralized exchanges, like Mt. Gox, were adopted, then it became very easy to run all sorts of control frauds - and that's been the bitcoin and crypto game ever since.
Bitcoin is pure speculation, and it's always a *lot* easier to get in than it is to get out. If I do a momentum play on an investment, I want to get out within minutes - back when you could do that and not get nailed by frontrunners or electronic traders. You simply can't do that with Bitcoin, it's far, far easier to lose than to win, it's almost a sucker bet. And since the value is purely speculative lacking any sort of stability, it's not useful as a currency. Fiat is bad enough, but crypto is impossible, you could have 95% of your value wiped out in seconds. And I wouldn't put it past Trump and Musk to run a pump and dump - or participate in one if they got a cut.
You identify the risks. It is a matter of faith, and you, Stream, don't have much.
Some risks can be controlled. You can hold the Bitcoin privately, not through a brokerage. The risk that large holders could swamp the market through large sales cannot be controlled. The risk that manipulators will continue to make it very volatile cannot be controlled.
The alternatives also carry their risks. You have pointed out the risks of my gold ETFs. I think that allocated storage of physical metal in overseas vaults is safer, but still not 100%.
You have to diversify. It probably makes sense to own a bit of a major crypto such as Etherium or Bitgold. Also metals, real estate, and stocks.
It's not faith - the "evidence for things not seen", as the Bible would put it. Apart from blind faith, there's no evidence for the truth of the story of Jesus - nothing in the Annales of the Roman Empire, for example, which recorded the discovery of a phoenix in Egypt in AD 30 or so - looking for ten years before or after, there's no record - except in the New Testament, in the eyewitness account in the Gospel of John - of any of those events, and certainly not of an earthquake, a prolonged eclipse during the crucifixion, tombs breaking open, and corpses in winding sheets getting up and wandering around the streets of Jerusalem - and *that* would make the discovery of a phoenix rising from ashes pale into non-existence...
It's trust which I lack, especially for scandal-ridden systems of monetary manipulation for which there is no accountability or transparency. In these systems, there's no way to determine risk, because they are both centralized and utterly opaque. Every cryptocurrency white paper I have ever seen creates a system in which the originators of the scheme exercise total control over the assets, with little or no outside accounting or transparency. Of course, every one of these schemes *promises* eventual transparency and accountability, but at some undefined future point. The governance section of the whitepaper is where the rubber hits the road, and they're essentially identical as to the pattern they use. In considering an investment, I look at the track record of what has gone on, and in crypto I see, in every issue, a series of pumps and dumps - which might make momentum plays attractive, but the ordinary buyer just can't get out very quick - or quickly enough, say in milliseconds - and there's usually massive front-running by insiders and other such tricks. If I do a trade on the phone, I expect to have it go through while I'm on the phone. There's no crypto for which this happens, often the time to go to dollars or other fiat is days. And then there's the capital gains taxation - crypto is taxed at the 28% collectibles rate - like metals and metal ETFs - so you're looking at a pretty big move - taking exchange fees into account - before you can make money - and in the US, crypto will make you the target of a tax audit if not more. In Ukraine, things might be different, but in the US, unless you're already a major player, it's not worth the risk - and if you're a major player, you'd just start one of these schemes and watch the cash roll in...