Sick of people calling everything in crypto a Ponzi scheme.
Some crypto projects are pump and dump schemes, while others are pyramid schemes.
Others are just standard issue fraud. Others are just middlemen skimming off the top.
Stop glossing over the diversity in the industry.— Jon of The North (@krauza.bsky.social) January 7, 2025 at 9:52 PM
Annie Lowery, at the Atlantic [gift link]:
“The countdown clock on the next catastrophic crash has already started,” Dennis Kelleher, the president of the nonprofit Better Markets, told me.
In the past few weeks, I have heard that sentiment or similar from economists, traders, Hill staffers, and government officials. The incoming Trump administration has promised to pass crypto-friendly regulations, and is likely to loosen strictures on Wall Street institutions as well.
This will bring an unheralded era of American prosperity, it argues, maintaining the country’s position as the head of the global capital markets and the heart of the global investment ecosystem. “My vision is for an America that dominates the future,” Donald Trump told a bitcoin conference in July. “I’m laying out my plan to ensure that the United States will be the crypto capital of the planet and the bitcoin superpower of the world.”
Financial experts expect something different. First, a boom. A big boom, maybe, with the price of bitcoin, ether, and other cryptocurrencies climbing; financial firms raking in profits; and American investors awash in newfound wealth. Second, a bust. A big bust, maybe, with firms collapsing, the government being called in to steady the markets, and plenty of Americans suffering from foreclosures and bankruptcies.
Having written about bitcoin for more than a decade—and having covered the last financial crisis and its long hangover—I have some sense of what might cause that boom and bust. Crypto assets tend to be exceedingly volatile, much more so than real estate, commodities, stocks, and bonds. Egged on by Washington, more Americans will invest in crypto. Prices will go up as cash floods in. Individuals and institutions will get wiped out when prices drop, as they inevitably will.
The experts I spoke with did not counter that narrative. But if that’s all that happens, they told me, the United States and the world should count themselves lucky. The danger is not just that crypto-friendly regulation will expose millions of Americans to scams and volatility. The danger is that it will lead to an increase in leverage across the whole of the financial system. It will foster opacity, making it harder for investors to determine the riskiness of and assign prices to financial products. And it will do so at the same time as the Trump administration cuts regulations and regulators.
Crypto will become more widespread. And the conventional financial markets will come to look more like the crypto markets—wilder, less transparent, and more unpredictable, with trillion-dollar consequences extending years into the future.
“I have this worry that the next three or four years will look pretty good,” Eswar Prasad, an economist at Cornell and a former International Monetary Fund official, told me. “It’s what comes after, when we have to pick up the pieces from all the speculative frenzies that are going to be generated because of this administration’s actions.”…
Trump, his #failson family, most of his backers and a big chunk of his minions are heavily invested in cryptocurrency (which, you ask me, is one sure indication it’s a scam built on lies and false accounting). The eventual saga of their upcoming Treasury raid — assuming there’s any historians left to write it — is gonna make the Teapot Dome scandal look like preschoolers playing cops & robbers.
Baud
I’m already blaming 2029 Democrats for not fixing everything perfectly fast enough.
KatKapCC
Still happy to have never understood crypto.
lurker
@Baud: so that’s the plan for Finally Baud 2032! (?)
; – )
Wag
@KatKapCC: No need to understand the minutiae of this scheme if you’re smart enough to keep all of your assets out of the crypto market.
Steve LaBonne
@Baud: Why didn’t they put Elon Musk in jail? Attorney General Doug Jones is useless.
Xavier
@KatKapCC: Only thing anyone needs to understand is when to get out. If you don’t know that, don’t get in.
Goku (aka Amerikan Baka)
“Dominates the future”, not “leads in the future”, but “dominates”. Interesting word choice
NotMax
Winter will pass. Snap up those tulip bulbs now before the spring rush.
//
toine
@Xavier:
Like during the housing bubble, you might not even know you are in… Tons of opaque derivatives all based on pumped up, crappy paper to start with. The real question is how and when to dump the stuff, and where to put your money when you do. Any ideas? Gold? Diamonds? A bunker and lots of guns?
Steve LaBonne
@Goku (aka Amerikan Baka): What he will actually accomplish by to make this country irrelevant to the future. Thanks, “patriots”.
KatKapCC
@Wag: @Xavier: I keep my millions under the mattress.
Never had any interest whatsoever in crypto and have no regrets about that.
NotMax
@KatKapCC
I’m gonna need a bigger cookie jar.
:)
Goku (aka Amerikan Baka)
All the while employers have been pushing more and more responsibility to save for retirement onto their workers via 401ks for the last 30-40 years. Which, if you invested responsibly into broad index funds, worked out well for a lot of people. But this crapto shit is gonna fuck all of that up. I can’t even imagine what the Bogleheads forum must be like right now. They banned talk about cryptocurrencies as I recall, and a not insignificant number of them were conservatives (politics also banned for the most part there)
Glory b
Why all crypto currencies should die in a fire…
https://www.currentaffairs.org/news/2022/05/why-this-computer-scientist-says-all-cryptocurrency-should-die-in-a-fire
RepubAnon
@toine: 9mm pistol ammo and reloading gear and supplies (brass, primers, bullets, powder)…
Anne Laurie
‘Gold & diamonds’ is a time
worntested psychological security blanket, if you need one. Guns will just draw predators, like flies to manure.Seriously… the best safeguard is always ‘keep your pantry stocked and build a local community of like-minded individuals’. Friends (okay, even neighbors) will get you through hard times better than a bomb shelter full of inedible ‘wealth’.
(News reports during the height of the pandemic really cemented this reality for me; even in, for example, a sophisticated high-tech, high-income urban environment like Shanghai, being on good terms with a neighbor who had a friend who could get you a desperately needed prescription refill or access to a hospital bed was *literally* worth more than a stash of gold coins!)
KatKapCC
@Glory b: Maybe not the best phrase to use at this present moment.
Glory b
@KatKapCC: True, but the article was written before the California fires.
Goku (aka Amerikan Baka)
@Anne Laurie:
I mean, what if bad guys with guns come around and want your stuff? This assumes that law enforcement is useless or they’re the “bad guys with guns” who want your stuff
Urza
@Goku (aka Amerikan Baka): Whatever you invested in 2008 was a bad year to retire. Being in the market is a crapshoot if you pick the wrong year. Or if you keep it in the market after retiring.
Goku (aka Amerikan Baka)
@Steve LaBonne:
Hopefully, he’s stymied enough that that doesn’t happen
Goku (aka Amerikan Baka)
@Urza:
There’s always been a lot of talk on the Bogleheads forums and investing circles of being an passive index investor (401ks, etc) retiring in 1966 and how you would have had a bad time for much of your retirement. Though, I remember also people coming to the conclusion that that scenario was fairly rare and to not worry too much about it and that you’d still likely be ok by adjusting your spending
Another Scott
Weird things might be going on in the bond market. Or maybe not? Not sure. Future looks obscure.
BradDeLong.substack.com (long except, then the paywall appears):
Keep one’s wits about one. Things might be very weird for the next few years.
Best wishes,
Scott.
Goku (aka Amerikan Baka)
@Urza:
From my understanding, you’re supposed to. You just lower your risk by having your portfolio be less stock-heavy and have more bonds in it, traditionally. The Balanced Portfolio 60% stocks/40% bonds is even recommended for people in the accumulation and decumulation phases
jonas
Narrator: “He didn’t know what any of those words meant…”
Kristine
Sounds like yet another “vote in the Dems to clean up the GOP mess” timeline.
Thor Heyerdahl
When I heard a 20-something barber at my barbershop go on and on about crypto – even after being told it is built on no fundamentals, I really wanted to leave a copy of one of our front pager’s books at his chair. History is going to repeat itself
Money for Nothing
https://thomaslevenson.com/money-for-nothing
sentient ai from the future
@Glory b: it will, and we will all go with it, because do you have any idea what the carbon footprint is of producing these digital tulip bulbs?
sentient ai from the future
from over a decade ago:
https://www.antipope.org/charlie/blog-static/2013/12/why-i-want-bitcoin-to-die-in-a.html
Urza
@sentient ai from the future: Its been a scam from the beginning. And people in it early are on top of the Ponzi scheme. The mythical creator is still the wealthiest by coins with like $100billion. Its literally made to be deflationary which makes anyone getting in later worse off than those that got in earlier. It is not a way to run a currency. And dollar for dollar if it weren’t for people joining its still worth less than the electricity spent mining it every single day. Not even counting hardware expenses. It has to have new people coming in to go up in value. And with the value fluctuating 5% and more per day its a Weimar Republic level of bad as a currency. You’ll notice most of the companies that were taking bitcoin a few years back stopped even though the value is going up. Which makes it a lottery, tulip, goldbug investment. You can make money, but eventually it will fall apart. Tying the US economy to it means everyone gets to along on that ride.
sentient ai from the future
my nightmare scenario is that shitbird is somehow able to create a “strategic bitcoin reserve” and it introduces volatility into the treasury market.
that, plus the tariffs, which he absolutely is going to try and do regardless of what his apologists say, and which go to the treasury, are going to allow his cronies to more easily loot the treasury by selling it bitcoin, bought with the proceeds from higher prices on everyone for everything because thats what tariffs do, and then taking out increasingly high interest rate bonds. or i dunno, maybe he says we dont need the gold in fort knox anymore, you can buy it with bitcoin.
volatility is the mortal enemy of investment, which relies on accurate-enough assessment of risk based on fact and historical patterns.
shit is going to be crazypants, and i am inches from selling all my index funds and just going with money market accounts for the next two years, because interest rates might be pretty good and even improving over the near term.
RandomMonster
I’m always late to the party but I hear tulips are the next big thing and I’m going all in. Who’s with me?!
feebog
@toine:
I can remember a very smart realtor and investor explaining the housing bubble to me. I kept insisting that many supposedly savvy investors could not be that stupid. He kept assuring me they were.
VFX Lurker
I thought about changing my asset allocation for Idiot 2.0, but so far I’ve done nothing.
All of my retirement accounts are in Vanguard LifeStrategy Moderate Growth or its equivalent. I put everything on autopilot in January 2017 when Idiot 1.0 took the reins, just so that I wouldn’t have to look at what he did to my retirement savings. It’s been on autopilot ever since.
I have 12 days to make changes, but I can’t think of what would improve on my current setup.
Anne Laurie’s upthread suggestion of focusing on one’s community may be the best investment.
Gretchen
@Anne Laurie: Interesting. So we have to be on good terms with our neighbors?
Diamonds aren’t as good a store of value as they once were. DeBeers kept a lid on the number of diamonds available for sale at one time to keep prices high. But now lab diamonds have been produced that can have better color and clarity and fewer flaws than mined diamonds, without the guilt of buying « blood diamonds ». There are a number of lab diamond makers, and they have little incentive to hold production down. I got a lab diamond a couple of years ago, and the insured diamond fell out and was lost recently. The jeweler told me that since lab diamond prices had gone down since we bought it, we could get a bigger stone for the same price. It’s beautiful but I’m not going to count on trading it for food in the end times.
TONYG
@KatKapCC: My understanding is that crypto is the latest manifestation of the Greater Fool theory of investing. Buy something for a lot more money than it’s worth under the assumption that a bigger idiot will come along to buy it from you for even more money. What makes crypto different from earlier asset bubbles is that the underlying “asset” — cryptocurrency — has ZERO inherent value. So when no more Greater Fools show up, the bubble bursts and anyone stupid enough to invest in this loses all of his/her money. The fact that anyone is pretending to take this scam seriously is just another disgraceful aspect of our current “culture”.
Chris Johnson
@VFX Lurker: Ann Laurie’s suggestion of investing in your community absolutely is the best way forward.
Me, I think it’s the original Republicans that might save us, and many of the billionaires, because they’re very wealthy in dollars.
Trump’s job is to wreck the United States, with bitcoin being an effective way to crash the dollar. He’s out to wreck the US standing in the world by having us act worse than Russia to justify Russia’s position against NATO, and he’s out to wreck the dollar’s status relative to say the ruble. He’s not smart enough to intend this but he does the bidding of Putin and he runs the Republicans.
Some of them are smart enough to understand this: see Moscow Mitch, who worked with Putin to seize power and now thinks he can defy him. Some of the Republicans do in fact see that Russia is losing, and that they are being set up. You won’t see them decry Trump, he’s been their tool to get power: they’ll try to outlast him, and they’ll try to seize all the power and then hold it themselves.
Putin’s fixing to have it all turn to ashes in their hands, and/or just plain kill them. They won’t like that. Billionaires won’t like total economic collapse. They stand to lose more.
Talk of buying guns so people don’t take your stuff is dumbass talk. What stuff? I’m trying to design my life around the idea that bad guys, including who knows, cops or Trump’s FBI raiding me while they are not themselves starting fires, can come and try to take my shit. So I’m turning to replacing stuff with software that I can just go get again.
For actual STUFF stuff, I got my house painted, which cut my ‘wealth’ literally in half just to do that. You can burn paint but good luck stealing it. I got a heat pump water heater, also damn expensive. It was hell to even get down the basement stairs, good luck stealing that! Stuff like that. Fortify your home not with guns but building it to withstand the future we’re inheriting.
Chris Johnson
Here is a concept of investing in your community: if there’s a place for a local food bank or community garden, bankroll that. Put money in, buy community resources and turn ’em over to the community. Watering systems for the garden, greenhouses, prettify them or whatever. Spend your own money on upgrades beyond what a thing like that could possibly do on its own, and make the thing way better. And turn it over: no ‘return’ on that ‘investment’.
Anyone who remembers, owes you one in a very real sense. If you’re serious about not lording it over them and making demands of them in return, then if you’re ever seriously in a jam, all doors will open to you.
Professor Bigfoot
@Chris Johnson: I’m far less concerned that they’ll come for my “stuff” than that they’ll come for *me* and any other Black person they happen to stumble across.
We have history in this country and it rhymes.
Chris Johnson
@Professor Bigfoot: Absolutely. This.
So that means one possible choice for me, is if I had wealth maybe I put money into building refuge space into my house. So if I had to shelter somebody, I’d be able to do that conveniently. Because if it came to that it would no longer matter whether it was conveniently or inconveniently.
lowtechcyclist
@Urza:
Since it’s not really a currency, that’s no surprise. It’s really stock in a company that has no assets and does no business. So of course the price will crash at some point.
I’m hoping for late this year, far enough along so that only hardcore MAGAts will believe it when they try to blame it on Biden, but early enough so that Trump & Co. have three years to fall on their faces in their attempts to clean up their own mess, and nobody will ever identify the Recession of 2026-2028 with the Democrat that takes office in 2029.
Pittsburgh Mike
This is silly. Crypto is mostly fraud of various types except for Bitcoin, for which fraud is a secondary use.
Bitcoin, as the biggest coin in terms of transactions, is used for money laundering. The thing about money laundering is that they don’t mind overpaying a bit for the service, so my guess is that as long as there isn’t a run on the currency, it can keep creeping upwards. There’s always going to be *some* demand for the stuff from criminals.
Wilson Heath
Make Depressions Great Again.