Inquiring minds want to know [NOT 2/9/21]

2/9/21 brightersideoflife 35

Hi, friends!

Any burning questions or half-composed confusions you need help with? Advice needed?

The brain power is strong with this group, I feel like we could figure it out.

I’l start.

One of my friends, who I consider intelligent, is really trying to convince me to invest in cryptocurrency of some kind.

I understand the concept of a cryptocurrency as a monetary unit that is decentralized and not part of a central bank system. I understand how to use apps to buy or sell it. I looked up how the IRS handles cryptocurrencies because if I’m going to do something that could make taxes even stupider, I’d like to know.

What I don’t understand is how cryptocurrencies get value. I see how value fluctuates with them, like how bitcoin is ridiculously high now. Or how dogecoin had a spike after a bunch of people on reddit got obsessed with it.

But it feels like the only reason it changes value is because more people are convinced to buy it. I get that all stock is like this to an extent, but like Pfizer (or whatever company) stock has value both from what people want to spend for it and because the company produces either goods or services that consumers utilize. Cryptocurrencies seem to increase in value because more people buy them and I guess there’s a limited number total to buy? There’s no service or product behind it, just a conceptualized currency? It just feels like a pyramid scheme where money comes from convincing more people to do something with no actual value to it.

So dear smart internet friends, help me out here. What am I missing?

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35 Comments

  1. i shall start this comment with a caveat…i do not consider myself smart people
    i cannot shake the feeling that crypto as is….will crash and burn like a fucking pyramid scheme sooner or later
    ….course….actual fucking money has done that for many years too
    i think the trick is starting of rich

  2. I’m sure Meg has a much better answer but my basic understanding is that cryptos do have a finite amount available, which is why mining becomes more and more energy and processing intensive the less available of any particular crypto is available (Bitcoin for example).  I don’t think of cryptos as equivalent to stocks as much as they are equivalent to commodities.  Ultimately, gold, silver, platinum, heating oil, propane, cocoa, sugar and frozen concentrated orange juice are priced on a number of factors, including availability and the general desire of how much certain people are willing to pay for those commodities.

    Do I think cryptos will collapse?  Not really.  What I expect will happen is what has already been happening:  these so-called “decentralized” currencies will eventually be regulated to the point that they will become more stable and less stupid–which will probably also eliminate much of the frenzy behind them because there won’t be the possibility of getting rich quickly…which will likewise depress their value to the point that all the hype will disappear.

    • over here… courtesy of rona.. we seem to be headed for a cashless society fast
      but you know its gonne be bit euro or bit dollar instead of doge coin
      the ones in the know are making their fast buck…and the rest are gonna be fucked
      same as it ever was really

    • I think what people don’t really know is whether they’ll stabilize at a lower level when the hype is over, like precious metals tend to do, or if they’ll just spiral out like tulips did.
       
      I think dropping a little bit of money in them is fine if investing is just a hobby, but there are a lot of risks. Probably the worst thing to do is what some idiots do — buy them speculatively based on where you think they’ll be, and then get hit with a margin call. I know someone who played the market and got hit with one, and it was a big stretch to come up with the money he needed.
       
      One other thing driving the demand is they’re useful for money laundering, although the real big players seem to focus more on real estate and art.

    • I don’t know if my answer is a better answer, but my smart person answer is that I hate crypto. 

      I don’t understand it and I don’t invest in anything I don’t understand. 

      Per Blue Dog’s comment below, don’t invest what you can’t afford to lose in crypto. 

       

    • I don’t think of cryptos as equivalent to stocks as much as they are equivalent to commodities.

      This, in my opinion (please see what farscy said about himself regarding the smart person thing), is correct.

      …and although a lot of people got rich(er) from investing in cryptocurrency when it was first conceived, a whole lot of people lost big time. Also, a lot of the people who gained have just as quickly lost it all including what they originally invested.

      There are so many options right now that I doubt it is worth it unless you’re willing to take a risk. I think of it in a way that resembles internet search engines in the late 90s/early 2000s. I’d have invested in hotbot or dogpile or ask jeeves over google because, at the time, they were better than google…by far.

      • This is an interesting way to look at it. How could we possibly have known in the 90s that Google would be the last man standing? No one can look at the massive array of crypto currencies out there and know which is the one or couple of ones that will end up dominating. 
         
        Though I’m pretty sure it won’t be dogecoin. 

  3. We have a friend who bought low and wanted to sell when it got high. He told us that the “well respected” app he used to manage it to so many hidden fees when he sold it that he made very little; and felt it wasn’t worth it.

  4. It’s an invisible product. It’s pretend money. Imagine if any major bank or financial institution tried to come up with their own form of currency. They’d be laughed at. Until it’s backed and guaranteed by the govt, it’s monopoly money. 
    Want to invest? Buy land. Cause God ain’t makin’ any more of it. 
    Wanna gamble? Hit the casinos. At least there’s free drinks.

    • Ehhh I mean all money is pretend money. Money only has value because of a social contract that says so. As butcher said, it’s closer to a commodity because it’s tied to the mining. But in that sense, the tulip crash is a good possibility to keep in mind.
       
      In theory, I’d rather have this international sort of highly tracked currency than anything tied to a particular government, which we should all be aware, can also crash spectacularly. In practice, I have no idea how it’ll work out. I suspect it will stabilize in the near future and the wild swings will stop, and people will stop treating it like stocks. 

    • if theres one thing fucking rona has thought me
      all money is fucking pretend money
      it does not exist and only has meaning if you are poor
      coz gubments can magix bazillions out of clean air…and appparently not hurt the deficit
      i wish that revelation helped me in any way
      i mean…shit..the steam coming out of me ears could probably heat and bubble a bubblebath…soo if yer willing to pay i will gladly offer my anger issues?

  5. This is just my hate-brained crackpot theory but I think crypto gets a lot of the excitement from the fact it is not regulated and taxed. I think that will be short lived and it’ll just be another stupid thing we are supposed to have and I’ll be the last on the bandwagon like usual with technology. 

  6. I was talking to a friend of a friend yesterday that claimed he made $30,000 in the last few months on crypto, we told him to get out now!  I’m fearful of it but know another guy that started a server farm to “mine” for it.  He generates so much heat from the computers he uses it to heat a pot farm.  Now that guy may be making some money from it but I still don’t get it.

  7. Hell, I couldn’t even understand what your particular conference in New Orleans was all about a couple of years ago when we happened to be there at the same time (and can’t even recall the name of the concept now), so don’t ask me to get my head around this shit. 

  8. My husband invested a small amount quite some time back, and another small amount maybe a year ago or so. He has not invested more than we’re willing to lose if it goes belly up. For a little while he was making some gains by following predictions and moving money between different currencies, but there are just so many moving parts he got tired of it.
     
    I think if you want to make money on it, you probably have to jump on a new currency and hope it takes off quickly (like same day or within days), then sell quickly before it stabilizes. But there are probably better ways to make money. I wouldn’t have invested personally until the whole thing stabilizes more, and then it just becomes another form of money, but one that isn’t tied to the US government if our end stage capitalist system finally shits the bed. 

    • My financial guy gives me a small amount to make my own choices with in my retirement account.  I’ve been using it for EVs & alternate fuel companies so at least it’s things I believe in.  Some have done ok but only a few have really paid off so far.  I’m in it for the long haul though so we will see what happens if this country ever does the right thing.

    • “I think if you want to make money on it, you probably have to jump on a new currency…”
       
      Basically this.  But like stocks, “Buy & hold.”
       
      And–when you BUY–pick a price that you feel is “high enough,” and when/if it *gets* to that high, SELL a decent chunk of it!!
       
      No Ragrats.
       
      If it gets higher–you can ALWAYS sell a little more–andcif you’re worried about being “the guy who sold ALL his Apple stonks!” hold back maybe 5-10 “coins,” for posterity… it it makes it into Apple/Microsoft/Berkshire Hathaway territory, those 5-10 will be all you need, anyway!😉
       
      BUT–as the others mentioned, 1. watch out for Hackers, 2. Don’t throw lots of $$$ into it, OR money you can’t afford to lose (seriously, think of it as dumping a few bucks into a slot machine–just something to do to pass the time & have a little fun!), and 3. WRITE DOWN YOUR ACCOUNT PASSWORD, *and* keep that piece of paper in a safe deposit box!!!!
       
      Because you don’t wanna be that guy, who bought in really early,  and then locked themselves out of being able to actually SELL the investment & tap the money!😉

  9. I’m a bit of a luddite, and have long been poor/broke, so I’ve some pretty heavy biases here…
    I think I first heard of bitcoin during the occupy protests.  tried looking it up, didn’t quite fully understand it, and I think even then, for people trying to set up their home computers to bit-mine overnight/while at work/etc., it cost them more in power consumption than they’d get through the bitmining.  And I think a lot of it was done through spammy websites and hackers with bot-farms and remotely controlled computers and such.  I don’t know if it’s finite, but I’m under the impression that every bit coin produced/mined, makes the production of the next one more difficult and cpu intensive.
     
    If anything, I’d suspect the recent-ish proliferation of ransomware (as well as vulnerable networks so people can have a stupid wi-fi lightbulb or toaster or whatever…), also may be contributing to the demand for bit coins, and raising their price.
     
    Lately, I’ve been seing ATM-style machines for… buying? bitcoin popping up in corner stores and such.  I really don’t care enough to even look at one, but I suspect this can’t be good…
     
    And then, I think stock markets and investing in general is for the corporations and the rich, and everyone else playing small-scale is just the bottom of that pyramid…
     
    If I weren’t poor, I’d have a house with a lawn that I’d yell at y’all to get off of (not really, I hate lawns)

  10. I invested a small amount in crypto.  Not directly, but via a Canada City ETF that supposedly tracks Bitcoin/Etherium because I don’t trust any of the exchanges that sell/buy the stuff.
    Jumped off a day before BitCoin’s last deep dive and made a “whopping” $50 after after selling.
    I think that the blockchain and some of the tech around crypto will be the future, but…
    1. All the coins are based on wishful thinking.  What is backing it up?
    2. Every crypto is dominated by a few people who can fuck up all the small fry because they own so much of the crypto.
    3. This is a libertarian’s wet dream to thrive in some anarchy where they’re the big fish.  In finance, you need to have some trust (even with shitty banks) to put your money into someone else’s hands.  Do you trust your money to someone who’s entire philosophy is based on self-interest/psychopathy/greed?  And has no interest in allowing any regulatory agency to keep things from going sideways?  Yeah, I thought so.
    4. Too volatile.  I can’t get behind anything that has wild unpredictable swings based on emotions.  Stocks are 50/50, but there is still logic (sort of) behind it. I’m still annoyed at WSB because it fucked up my long term investment in Blackberry.  I’m a buy and hold investor, not a day trader.  During the initial run up in Jan, I ended up acting like a day trader and made a good amount of money relative to the  amount I invested because I “timed” it/got really lucky.  That stock is too messed up right now to even invest in.
    That’s how I see it.
     
     

  11. What everyone’s saying is correct: There may be a small gain possible but it’s volatile, and it’s backed by absolutely nothing and it’s an environmental catastrophe at a time when we really need to stop having those.

    Moreover, the people who are most invested in it aren’t actually interested in “the future of money” or “the blockchain will change everything!” or whatever gauzy BS they’re slinging: They simply would prefer that they be the central bank rather than the government because they see it as a profit center. (Not that the stock market isn’t much of the same nonsense, but there are at least some guide rails there. Crypto is completely whim-based.)

  12. My hunch, which of course means nothing, is that crypto is like Santa. It exists because people believe it does. You can only use it to buy something if the other person accepts it has value. I know the internet and Venezuela seem to agree it does, but I’m not sold. If someone hacks me and ransacks my bank account, at least that’s insured.

    • THIS!!!!!!
       
      AND, as soon as a large (read financially well-off/well-rated) Nation-State finally decides to offer and back, their OWN cryptocurrency?
       
      I suspect that almost all the non-backed crypots–if not ALL of them!–are going to tank, and probably within a matter of hours of the announcement of that government-backed (even if it’s only partially insured/backed by “real” money, folks will flock there, over a non-backed one)…

  13. …cryptocurrency isn’t something I think I know a ton about…but it seems like you don’t need to know a ton about it to know there’s tons of things about it not to like

    …so I get the attractive part about the potential for decentralized currency…& even some of the potential advantages of the blockchain approach to the whole shared ledger thing…but things head south pretty fast from there in terms of stuff to like?

    …the obvious one being the energy usage

    https://cbeci.org/

    …but another being that while, say, the dollar won’t cease to have value unless the federal government is gone (in which case there’s probably other stuff to worry about) the reliance on technology where crypto is concerned sure seems like a lot of potential failure points for anyone who’s holding the stuff directly, as it were…that shared ledger might so far be fairly impervious but if/when somebody figures out how to game it even that may yet be more vulnerable than advertised…& the various forms of “wallet” can fail in a variety of ways to keep you connected to your coins

    …curiously enough the NYT just did a couple of pieces about ways the stuff is edging into banking territory in a more substantive (if as yet not necessarily substantial) manner

    https://www.nytimes.com/2021/09/05/us/politics/cryptocurrency-explainer.html

    …& there’s some interesting stuff involved in that (if you can look past the bit where bitcoin alone is drawing more electricity than an increasing number of countries & has the potential to top out above the power requirements of some pretty electricity-hungry places…like the UK…the “upper bound” of that cambridge estimate would actually involve that currently being the case, even…so some would call it “dirty money” in a whole new sense) like the sort of middle ground offered by “stablecoins” & what have you

    …mostly, though…at least for now…it seems like currency isn’t really an accurate description for most of them…as a bunch of people have pointed out the speculative investment/pyramid scheme aspect of the stuff makes it more akin to an asset…so far to buy anything with it you mostly need to start by converting it into a more functionally fungible currency…unless you happen to be paying off a ransomware attack…or looking to spend on “the dark web”…or a handful of other places

    …so…speaking for myself…I don’t think I’m buying in anytime soon…but then I thought facebook sucked even when it was new…so it’s fair to say there are a lot of people who don’t agree with me about a lot of stuff

    …&…well…don’t get me started about NFTs?

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