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Crypto Bubble
Posted: February 8th, 2021, 8:17 pm
by moneybagz
I always said I’d exit the market when people you least suspect are entering the market. We’ve reached that point now but it’s not the stock market this time, it’s cryptos. My friend messaged me this week as he’d just started trading cryptos, my plumber has been trading them too, and my hairdresser has started trading currency/cryptos. Everything is pointing towards a bubble in cryptos so I certainly won’t be joining the crowd anytime soon. Could a crypto crash trigger a stock market crash and vice versa?
Re: Crypto Bubble
Posted: February 8th, 2021, 8:47 pm
by JohnB
I'm peeved my S&P 500 tracker now has bitcoin exposure because of Tesla. Both a bubble and evil.
Re: Crypto Bubble
Posted: February 8th, 2021, 9:28 pm
by Leif
moneybagz wrote:I always said I’d exit the market when people you least suspect are entering the market. We’ve reached that point now but it’s not the stock market this time, it’s cryptos. My friend messaged me this week as he’d just started trading cryptos, my plumber has been trading them too, and my hairdresser has started trading currency/cryptos. Everything is pointing towards a bubble in cryptos so I certainly won’t be joining the crowd anytime soon. Could a crypto crash trigger a stock market crash and vice versa?
Good question. If a bubble bursts, and a sufficient amount of value is lost, investors could be forced to sell shares which would trigger a drop in market prices. It might even cause a collapse of some institutions, which could cause a shock.
The dot com crash occurred because tech shares were grossly overvalued, driving up market prices unduly, and the collapse had a wide impact. Bitcoin is not part of the stock market. The GFC occurred because of bad debt held by financial institutions. If large institutions buy into Bitcoin, and it crashes, we could be in trouble.
These are just my ramblings, I admit that I do not have a clue what Bitcoin is except at the superficial level. I suspect it’s almost equivalent to gold, although you can’t make rings from it. After all, the gold price is largely determined by investor demand rather than utility value, and supply is limited.
Who would gain from creating a digital currency which imploded damaging mainly Western financial institutions? (Thought I’d start a conspiracy theory.)
Re: Crypto Bubble
Posted: February 8th, 2021, 9:38 pm
by LooseCannon101
The general public (not lemon fools) will find out the hard way that there is no such thing as a free lunch.
This is a classic Ponzi scheme, with punters being seduced into thinking that they can make quick and easy returns.
Hopefully, the bubble will burst before people start re-mortgaging their homes.
Re: Crypto Bubble
Posted: February 8th, 2021, 10:32 pm
by Mike4
moneybagz wrote:I always said I’d exit the market when people you least suspect are entering the market. We’ve reached that point now but it’s not the stock market this time, it’s cryptos. My friend messaged me this week as he’d just started trading cryptos, my plumber has been trading them too, and my hairdresser has started trading currency/cryptos. Everything is pointing towards a bubble in cryptos so I certainly won’t be joining the crowd anytime soon. Could a crypto crash trigger a stock market crash and vice versa?
Funny you should say that. In "The Combustion Chamber" (closed forum for qualified gas engineers) a few weeks ago there was a thread about how easy it is to make money by investing if you were smart about it. I asked what counted as 'smart' and Bitcoin and Tesla were suggested as surefire winners.
Re: Crypto Bubble
Posted: February 9th, 2021, 12:29 am
by DiamondEcho
Mike4 wrote:[Funny you should say that. In "The Combustion Chamber" (closed forum for qualified gas engineers) a few weeks ago there was a thread about how easy it is to make money by investing if you were smart about it. I asked what counted as 'smart' and Bitcoin and Tesla were suggested as surefire winners.
This sounds like a 'virtual' equivalent of late '99. I was working in NYC in a bank, we felt closer to the action than most others. Everyone was trading on the side (always buying back then!) more than they should have been putting down. Every week colleagues were coining it in. Coffee-machine chat was 'How much I've made this week. And my tip this week is...'. And the story was always how they'd made much more from speculating than at work doing their job. It was like having a permanent ticket to the lottery, everyone was sure to get rich eventually, simple eh?
Phhh! ALL these fads end up going up in flames. This one will be no different. There might still be opportunity if it continues to rise, but by gawd people need to know we've been through this many times before; AND how it inevitably ends.
Re: Crypto Bubble
Posted: February 9th, 2021, 8:06 am
by JamesMuenchen
In my view, it's very different to '99.
There's another $1.9 trillion stimulus package on its way in the US.
I'm not saying buy Bitcoin specifically, just don't assume that any asset class is in a bubble that is about to pop.
Don't fight the Fed. Especially when every CB in the world is doing the same.
Re: Crypto Bubble
Posted: February 9th, 2021, 2:35 pm
by hiriskpaul
Bitcoin seems to be touted as a solution to problems that are not really problems at all and is absurdly energy inefficient. Not much of a systemic problem if trading just takes place between retail, drug dealers, money launderers, etc., but Institutional investors are being sucked in now, which is scary.
Quantum computing announcements might precipitate a collapse:
https://www2.deloitte.com/nl/nl/pages/i ... chain.htmlOr governments/central banks may just regulate it into oblivion.
Re: Crypto Bubble
Posted: February 9th, 2021, 3:38 pm
by dspp
moneybagz wrote:I always said I’d exit the market when people you least suspect are entering the market. We’ve reached that point now but it’s not the stock market this time, it’s cryptos. My friend messaged me this week as he’d just started trading cryptos, my plumber has been trading them too, and my hairdresser has started trading currency/cryptos. Everything is pointing towards a bubble in cryptos so I certainly won’t be joining the crowd anytime soon. Could a crypto crash trigger a stock market crash and vice versa?
Moderator Message:
Relocated to Other Investing with similar topics.
regards,
dspp
Re: Crypto Bubble
Posted: February 9th, 2021, 3:42 pm
by Lootman
hiriskpaul wrote:Bitcoin . . . is absurdly energy inefficient.
I have heard this before but do not understand how or why. Do you know?
Re: Crypto Bubble
Posted: February 9th, 2021, 3:50 pm
by hiriskpaul
Lootman wrote:hiriskpaul wrote:Bitcoin . . . is absurdly energy inefficient.
I have heard this before but do not understand how or why. Do you know?
Essentially, huge mathematical puzzles have to be solved for each transaction, which eats CPU cycles. Cannot go into specifics as I have forgotten them!
Re: Crypto Bubble
Posted: February 9th, 2021, 4:02 pm
by swill453
Lootman wrote:hiriskpaul wrote:Bitcoin . . . is absurdly energy inefficient.
I have heard this before but do not understand how or why. Do you know?
This attempts to explain
https://www.bbc.co.uk/news/technology-48853230Two years ago Bitcoin was using as much energy as Switzerland. It's probably more now.
Scott.
Re: Crypto Bubble
Posted: February 9th, 2021, 4:06 pm
by Urbandreamer
hiriskpaul wrote:Bitcoin seems to be touted as a solution to problems that are not really problems at all and is absurdly energy inefficient. Not much of a systemic problem if trading just takes place between retail, drug dealers, money launderers, etc., but Institutional investors are being sucked in now, which is scary.
Quantum computing announcements might precipitate a collapse:
https://www2.deloitte.com/nl/nl/pages/i ... chain.htmlOr governments/central banks may just regulate it into oblivion.
I get it. You don't like Bitcoin.
Here is a 2 year old Forbes article that points out that the ATM's in banks may use more energy than bitcoin.
https://www.forbes.com/sites/investor/2 ... f001a81a91The normal comparison is to claim that Bitcoin mining used more electricity than Vesa or some country, totally ignoring why. Hint, there are less people in a country than the entire world. Vesa may have a few backup ledgers but bitcoin has a massive amount of them (every bitcoin miner keeps the ledger).
Here is an explanation of the bitcoin ledger system.
https://www.investopedia.com/terms/b/bitcoin-mining.aspA solution to problems that are not really problems? Possibly true. I know that Plato had a few bad things to say about democracy and certainly it hasn't solved problems that didn't exist without it. It's also fairly inefficient, requiring all that counting of votes. Manually in this country but using that dreded electricity in the likes of the USA.
It's ok for criminals to use bitcoin, but not institutional investors. Why? Possibly because, unlike the American dollar or the UK pound, the central bank can't create it out of thin air at government need.
FWIW, I have never owned any crypto currency. I just think that it can't be dimissed that easily. My concern is the absolute limit on the number of bitcoins that can exist and how those who keep the blockchain ledger are to be paid in the long term. At some point the existing method must breakdown.
Re: Crypto Bubble
Posted: February 9th, 2021, 7:34 pm
by Leif
swill453 wrote:Lootman wrote:hiriskpaul wrote:Bitcoin . . . is absurdly energy inefficient.
I have heard this before but do not understand how or why. Do you know?
This attempts to explain
https://www.bbc.co.uk/news/technology-48853230Two years ago Bitcoin was using as much energy as Switzerland. It's probably more now.
Scott.
At present it’s very rarely used as a currency, just an investment. As a currency it would consume horrendous amounts of energy, which is why IMO it would be immoral to use it as such.
I ignored Bitcoin as I didn’t understand what it was, except at a superficial level. And I’m not going to touch it now. I’ve come to the conclusion that Bitcoin is digital gold. Although Gold has an intrinsic worth, the price bears little relationship to its intrinsic value. It is priced according to demand from investors, and its scarcity, as its hard to mine. Bitcoin is the same.
So why the mania? Get rich quick!
That raises the question of why we need a digital version of gold. Maybe that is not the right question, and we should ask why anyone would create it. Perhaps one or more clever people saw a way to get rich, and bingo, here we are. Or perhaps someone deliberately created a currency which they knew was flawed. Supposedly it was designed to fix the flaws in existing currencies when used in transactions, but for that purpose it’s useless.
Re: Crypto Bubble
Posted: February 9th, 2021, 8:21 pm
by Urbandreamer
Leif wrote:I’ve come to the conclusion that Bitcoin is digital gold.]
.....
That raises the question of why we need a digital version of gold. Maybe that is not the right question, and we should ask why anyone would create it.
Digital gold is not new. There is the likes of Bullion Vault and exchange traded funds. There even was an electronic gold exchange which ran into difficulties with various governments.
Bitcoin is significantly different. Unlike gold it is a fiat currency.
I know that many dismiss it, however possibly a comparison will illustrate a few ideas.
1) You buy gold through Bullion Vault. They claim to store it for you, but you have to trust them.
2) You buy an ETF, either one that holds the physical gold or one that uses derivatives. Again you have to trust the provider.
3) You take pound notes out of the bank and stuff your mattress. You need to trust the government not to devalue the currency.
4) You buy bitcoins, You have to trust that the millions who run the ledger system recognise that you own those bitcoins (you also accept investment risk just as you do with 1,2 and 3).
Without getting TOO idealogical, while bitcoin didn't exist in 1976, Friedrich von Hayek was talking about the denationalisation of money.
https://en.wikipedia.org/wiki/The_Denat ... n_of_MoneyAccording to the European Central Bank, the decentralization of money offered by bitcoin has its theoretical roots in Denationalisation of Money: The Argument Refined.[10]
Re: Crypto Bubble
Posted: February 9th, 2021, 9:00 pm
by Leif
Urbandreamer wrote:Leif wrote:I’ve come to the conclusion that Bitcoin is digital gold.]
.....
That raises the question of why we need a digital version of gold. Maybe that is not the right question, and we should ask why anyone would create it.
Digital gold is not new. There is the likes of Bullion Vault and exchange traded funds. There even was an electronic gold exchange which ran into difficulties with various governments.
Bitcoin is significantly different. Unlike gold it is a fiat currency.
I know that many dismiss it, however possibly a comparison will illustrate a few ideas.
1) You buy gold through Bullion Vault. They claim to store it for you, but you have to trust them.
2) You buy an ETF, either one that holds the physical gold or one that uses derivatives. Again you have to trust the provider.
3) You take pound notes out of the bank and stuff your mattress. You need to trust the government not to devalue the currency.
4) You buy bitcoins, You have to trust that the millions who run the ledger system recognise that you own those bitcoins (you also accept investment risk just as you do with 1,2 and 3).
Without getting TOO idealogical, while bitcoin didn't exist in 1976, Friedrich von Hayek was talking about the denationalisation of money.
https://en.wikipedia.org/wiki/The_Denat ... n_of_MoneyAccording to the European Central Bank, the decentralization of money offered by bitcoin has its theoretical roots in Denationalisation of Money: The Argument Refined.[10]
And yet it acts like gold, albeit with some advantages eg no need to have a huge armoured vault. Despite what you wrote, it’s not suitable as a currency, as it would consume absurd amounts of energy. It is a commodity rather than a currency.
Re: Crypto Bubble
Posted: February 10th, 2021, 6:08 am
by GoSeigen
Leif wrote:
And yet it acts like gold, albeit with some advantages eg no need to have a huge armoured vault. Despite what you wrote, it’s not suitable as a currency, as it would consume absurd amounts of energy. It is a commodity rather than a currency.
If alchemy produces gold then yes, bitcoin is like gold. Funny, so far it has been a currency, then a store of value and now gold. IMO it's a rubik's cube, intriguing, a flash in the pan, perhaps with a long-term niche interest but as valuable as a lump of plastic in the long term.
Doesn't matter whether hiriskpaul likes bitcoin or not, his argument is 100% sound.
GS
Re: Crypto Bubble
Posted: February 10th, 2021, 7:26 am
by Urbandreamer
GoSeigen wrote:
Doesn't matter whether hiriskpaul likes bitcoin or not, his argument is 100% sound.
GS
Which one? I think that he made, or repeated, a few.
I tried to provide a few counter arguments. I suspect It's my comment you refer to.
I don't think that he has any of the facts wrong, as I agree with such facts as he stated.
However dismissing bitcoin because it's used by drug dealers and money launderers. Surely we should dismiss the US dollar as well!
After all it is WELL known to be used by drug dealers and money launderers. So much so that some of those money launderers are simply washing the money in detergent to remove the drug residue.
https://www.civilized.life/articles/mar ... alifornia/Oh and some of those drug dealers are operating legally, if you follow that link.
Am I to assume that you agree that we should all avoid the US dollar because, like bitcoin, it's used by drug dealers and money launderers? Is that the argument that you feel is 100% right?
How about posing some arguments of your own. Either about bitcoin, or to get back to the thread, is the current price in a bubble?
Personally I see it as supply and demand. If Tesla, Paypal and Ruffer try to obtain large quantities of any limited resource, wouldn't the price go up?
Will it go down? I personally expect that it will as things settle down.
Re: Crypto Bubble
Posted: February 10th, 2021, 7:54 am
by GoSeigen
Urbandreamer wrote:GoSeigen wrote:
Doesn't matter whether hiriskpaul likes bitcoin or not, his argument is 100% sound.
GS
Which one? I think that he made, or repeated, a few.
I tried to provide a few counter arguments. I suspect It's my comment you refer to.
I don't think that he has any of the facts wrong, as I agree with such facts as he stated.
However dismissing bitcoin because it's used by drug dealers and money launderers. Surely we should dismiss the US dollar as well!
Poor poor logic (straw man). His point was that drug dealers and money launderers are about
the only people it is useful for. That is not true of the dollar.
GS
Re: Crypto Bubble
Posted: February 10th, 2021, 8:02 am
by GoSeigen
Meanwhile the energy wasted on this monstrosity is an outrageous, criminal tragedy, absolutely no hyperbole intended. For that reason alone I will never touch it. I am astounded that someone like Elon Musk doesn't feel the same.
GS