When we really have a bear market people are going to lose their minds.
Which ones?
I checked r/bitcoin, r/btc, r/ethereum, r/litecoin, r/bitcoinmarkets. Only one I saw with it was r/cryptocurrency
News report: http://www.esquire.com/news-politics/news/a26570/bitcoin-min...
so akin to pinning the suicide prevention hotline on /r/the_donald after trump won?
Read this: http://www.businessinsider.com/bitcoin-volatility-risk-adjus...
What this is telling you is, if you wanted a lot of excitement for potential gain, you could have always leveraged up your ho-hum retirement account and done better.
Without an understanding of how much can actually be lost. So when this happens, they might not think in percentages but in "how much did I just loose". Combined with the regret of "I wish I sold earlier".
This is just me speculating, I have no idea if that's what goes on in their mind, I just imagine it is.
The problem with this characterization is when enough people lose their shirts on leveraged crypto purchases, a problem of individual finances becomes one of collective policy. I'd be careful with dismissing the problem as one contained to the stupid.
There was a thread on the front page, earlier, where multiple commentators were equated the odds of a massive and permanent Bitcoin crash with that of a meteor impacting the earth [1]. Multiple people honestly could not imagine how Bitcoin could possibly become absolutely worthless. These are otherwise-reasonable people who, through a combination of misinformation and FOMO, got involved in something over their heads.
Korea may be at the point where a 50% sustained drawdown plunges a significant fraction of the population into hardship. That, in turn, could trigger a recession. In case it needs to be said, now is not a good time for the Seoul to plunge into a financial and political crisis.
I've gone from finding this Bitcoin fascinating, to being cautiously weary, to being outright dismissive, to becoming worried about systemic risks.
The subtle genius of the truly stupid, is their unstoppable penchant for making their problems yours as well!
It's probably worse than that. The collective craze around crypto is likely spurned by social media influence tactics. Most of this is from me just reading the forums as I obviously don't have proof, but along with ICO scams, exchange failures, software vulns, and SEC cautionary notices, there's enough for me to be broadly suspicious that these tactics are at least partly coming from the top owners of bitcoin who are manipulating the price.
You have to make huge efforts to pretend that a currency with virtually no regulation around it that works across borders has only honest actors trading on honest information. And low-dollar investors are certainly not going to band together and run price manipulation schemes.
And this will be utterly dumb if the major banks get involved significantly.
That seems unlikely. Something like 2M of 51M people have any crypto there, and only a small fraction would be overextended significantly. Anyone buying a couple months ago would still be up.
How do you know that?
For traditional securities, we have margin and prudential lending rules. These systems aren't perfect. But they incorporate lessons from crises past. One of those lessons is about how system risk can grow exponentially unexpectedly quickly.
I don't have the hard data of course. It's a guess based on crypto still being up over a 2 month period. I also assume people are roughly the same in Korea as everywhere else so only a fraction are being crazy reckless in their investment.
That's not to say that the losses aren't enormous for the largest margin speculators, but the vast majority can't be hurting too badly.
Margin only handles the expected volatility of an instrument, not the tail risk.
Your broker is on the hook if you default. This means collateral requirements and risk limits. For example, see TD Ameritrade's rules [1]. These rules are filed with and reviewed by various regulators.
> Margin only handles the expected volatility of an instrument, not the tail risk
This sentence doesn't make sense.
The Federal Reserve's Regulation T limits initial margin to 50% [2]. If you have $10 of cash, you can't buy more than $20 of securities. This limits your losses to twice your principal, which margin lenders are supposed to ensure you can afford (via suitability checks).
This rule is part of why brokers won't accept deposits from credit cards. It's also why they ask you for information on your net worth, income, et cetera. There are further controls in place to make it difficult to e.g. take out a line on your home and use it to buy securities. None of these safeguards exist with cryptos.
[1] https://www.tdameritrade.com/retail-en_us/resources/pdf/AMTD... page 11
That is for stocks, with options the margin call can grow to a value quickly where a retail investor cannot afford it ever.
Edit: Looking at td margin schedule shows they'll require 20% in a reg-t account, so only 5 to 1 leverage at least. Still can risk $5k and owe 20k to your broker.
What this means is that for most people when crypto crashes, it sucks but will simply be a cool story. This isn't .com or the housing bubble where many people's lives were ruined.
Of course with the craze, the stats could have changed over the last few months.
People's lives may be ruined by this - they've often essentially been scammed into investing in cryptocurrency because they cannot understand the risks. If a financial adviser were promoting bitcoin to most people, it'd be illegal. I don't think it's fair to say this is OK because it won't affect people you know.
Proportional to the total market is important because it puts into perspective how few people will really be impacted, and if it is something that could spread into the economy as a whole.
Found the stats: https://coinspectator.com/news/127996/survey-finds-average-b...
No, they shouldn't have. But many people don't actually understand what a high-risk market is, and especially not one as volatile as Bitcoin. They've heard their cousin/friend/waiter made a couple thousand bucks off it, done some googling, and found several thousand people saying this is the next big thing, with fancy graphs and miracle use cases and so on and so forth to prove it. Big well-known news sources like Bloomberg talking about it, and how big well-known investment banks are interested in it. This is the end result of what lack of regulation looks like.
People get bamboozled - similar to many scams, you might get tricked into losing a couple of hundred bucks and calling it a life lesson, or you might get scammed into losing your life savings and winding up in severe debt.
A few people (and it's more than a few) being impacted enough to cause them to be extremely worried about how they'll pay their bills, how they'll afford to keep a roof over their head in their later years, is important. It's maybe not as important to you as widespread economic collapse, but it's nothing to pretend isn't an issue. The comment you were originally replying to wasn't talking about economic collapse - it was talking about the impact on individual people.
Is that an appeal to consequences or did you have a different point?
That being said, scammers, shysters and pumpers always say bombastic shit like you are saying. That is how they get all the rubes to buy into their scam.
Beyond the scammers there is a lot of hard computer science research happenning.
You don’t have to tell me exact figures for how many people you personally know in each category, but my point is that if both figures are sufficiently small in absolute terms then the example is meaningless.
So you think a 1000% increase in likelihood to win the lottery is meaningful?
I’m not saying a 1000% increase is insignificant relatively speaking. I’m saying that in the absolute context, it can be essentially meaningless. Which circles back to my point: you should add an absolute context to your numbers instead of just saying you know more cryptocurrency millionaires than startup millionaires.
> you should add an absolute context to your numbers instead of just saying you know more cryptocurrency millionaires than startup millionaires.
My intention is not writing a paper here in HN but showing an observation that impacts the life of people around me because like it or not they can spend the rest of their life doing whatever they want at an scale I have not seen in my lifetime in an underdeveloped country like Argentina.
Beyond all your calculations it is something singular to note and that is why I mentioned it here.
Just a run-of-the-mill scam and run-of-the-mill stupid people.
However, those people will be demanding government intervention when their money is gone, so get ready for the regulatory party!
Pretty safe to predict that bitcoin will the the Bernie Madoff of this business cycle.
You don't lose your house or your shirt, and the only real consequence is poor credit for a few years.
And if bitcoin goes up? Pay it off, keep the profits...you still win.
Your summer home or a rental property, sure.
So someone with a cheap house or little equity could still Bain Capital themselves with Bitcoin, declare bankruptcy and start over while avoiding homelessness. But if you're 90% of the way through a half-million-dollar mortgage then yeah you'll have a lien placed on the property.
http://www.alllaw.com/articles/nolo/bankruptcy/homestead-exe...
Where on the page?
https://www.reddit.com/r/Bitcoin/
Or a different page?
> cryptocurrency subredditS
Please tell what people would do if the S&P got cut in half.
In the future this saga will be a great anthropological study.