Comment by tluyben2 | Hacker News Reader

Comment by tluyben2 | Hacker News Reader

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The religious (for a lack of better word as it is a religion to believe that cryptocurrencies are inherently better than other assets (outside NFTs) but they do believe that if you read twitter/reddit) people are hodling but all the 'saner' people I know went out in december. There was enough writing on the wall to know that 2022 would not be a good year for some assets (and it's just beginning). Only the real believers are still holding and it's a drama; a friend of mine went 'all in' on Terra and is staunchly 'hodling' because he believes it's the greatest project in finance since humans invented currencies. He has 30+ years work of money in it which is his families money (his brothers and parents gave him their savings to 'invest') etc. But he is not depressed; he firmly believes it is coming back as it's decentralized. There are many of him. MANY.

I mean there are also other stories; an acquaintance (he invested in my business with cash in 2018) got out end 2017 with around 60m$ in cash; he was a waiter making minimum wage who borrowed 50k$ from his family who remortgaged their house (not rich people but at least house owners) in 2014 and gambled his families future and accidentally (he was a real believer, but the 'business scams' around blockchain made him a non-believer) gambled right. It's a weird casino.

Maybe it is my circle (but I read it on reddit all the time the past 10 years though) but the financially illiterate seem far more likely to 'invest' with borrowed money, do not diversify and put 'everything on red'/all-in kind of thing and then don't know what to do when that goes wrong (lie to their spouses and kids about it). An senior sales guy of my (then) company invested ALL his money and borrowed more (totaling many millions) in a Dutch web stock (worldonline) and lost everything; his wife, son, house, cars; basically life.

My issue is that these people are smart, but not "I work at Blackrock as a day-trader smart". In Finance, there are laws against a lot of the easy wins, and now the professionals are entering the Crypto space they're going to run circles around the amateurs.

As in, it's easy to be the best in your local club, but it's a real wake-up call when you try out at a regional.

Still, 'smart' is usually not buying at ATH (even a local high) or not having a stop loss if you don't have time to stare at your screen all day and night. I don't know how many people 'woke up' to a 90% dump in terra and were too late to act; that's not smart and you don't have to be blackrock smart for that. This is not exclusive to cryptocurrencies of course; I don't have any, but I do trade other more traditional assets as total amateur.

But yes, I agree with you; they will be taking most the winnings because it's their job. That doesn't mean you cannot make money as an amateur. The real naive people can just send their money directly to the Blackrock bank account; saves a lot of stress.

I completely get your point, and you're correct, but there are layers to it, especially in crypto. And I guess that means layers of fishy stuff.

If your luna stop loss was done in UST, you are also effed, even if you took the precaution of stop loss, because the "stable"coin dipped. Not saying that this was "safe" to do, but there are surely people out there who did this and got screwed, and I guess that would feel terrible.

> and I guess that would feel terrible.

Absolutely; there are proud whales saying they lost millions and laughing (not sure why) but I am very sorry for the people who lost a few k$ and now are in deep shit because they didn’t understand what they were doing. The ‘how can this be; I will get my money back right?’ type of thing.

I'm not sure about that--or at least, the reality seems more complicated.

Terra certainly has an element of complicated financial dynamics behind it such that people who know a little--but not a not--may think it's the greatest idea since sliced bread, and get eaten by the professionals. I agree with you there.

But a lot of the crypto ecosystem seems to be much more mundane than that. As far as I can tell, there isn't any financial wizardry behind NFTs; they're just a sort of weird social phenomena (is it a game? is it a market? is it sports betting?) where you can buy a thing at a price that has no basis in reality except insofar as someone else might buy the thing at an even higher price. I think that many--most?--people "investing" in NFTs realize and embrace the greater fool theory.

But, importantly, it seems to me that a random yahoo might actually be better able to predict when the gravy train will stop than an elite trader. So in some sense, it's quite egalitarian (if also stupid)!

I think the problem is, there isn't any magic behind NFTs—but a lot of people believe there is.

The financial wizardry behind NFT's is the wash trading. A lot of average people looking to get into NFT's simply don't understand that many of the 'success stories' they see of people making big money on NFT's are just wash trading trying to lure in the marks.

I mean, yeah, but wash trades aren't wizardry. Like, you go on eBay, it's always possible sale prices are someone selling to themselves and just paying the transaction fee. I hope/assume that's fairly widely understood.

The Luna "automatic peg" stuff is genuinely clever, but with genuinely surprising implications (at least for me, a casual observer/layperson) for dynamic instability.

Yeah I mean wash trading isn't that sophisticated, but it is wizardry to the people gettinf fooled by it. The algorithmic peg and other stablecoin shenanigans aren't necessarily that sophisticated either, and yet...

Fair point.

You're perfectly describing the sunk cost fallacy. The naifs who overcomitted on a "guaranteed win" investment can't walk back from it because that would mean giving up on a lot (e.g. 50% or more) of their investments, which often as you said isn't money they really had "lying around" (even your retirement fund isn't really disposable once you actually need to retire on it). The failure to achieve the promised growth paradoxically converts them into true believers because they see no way out without admitting they ruined their lives.

A lot of crypto grifters (and even mainstream celebrities) have been actively encouraging these people to sink literally all their capital in coins or NFTs with unrealistic promises and FOMO. They did this because they knew it would work and drive up prices enough for them to be able to cash out by dumping their worthless void money on the unwashed masses.

> You're perfectly describing the sunk cost fallacy.

Sounds like a classical pump-and-dump scheme.

I think the prevalence and scale of criminal activity through crypto was under appreciated in the mainstream.

Let’s be real, much of the market activity is money laundering, ransomware and other payoffs, and Chinese people bypassing currency controls.

It’s no coincidence that China cracked down on miners and the price dropped a few months ago. It’s plain as day now that with Russia being removed from the internet and most markets, buy-side demand for crypto is sinking.

It wasn’t so long ago we had some fans of crypto on HN, lots of stories how this or that scheme was going to work.

First movers want to sound and convince others they are right and “now” is the right time to step in.

Most of it can be debunked if you had a good economy course that tells you how value is created.

I think the early days were full of promise. Circa 2010-2015 crypto felt like Wired magazine in 1994 about the internet.

Unfortunately, reality is a harsh mistress.

Indeed. I also have no doubt some early adopters got real rich. But they were the top of the pyramid. The merry go round plays as long people keep joining. Looks like we hit some sort of limit at the bottom of the pyramid.

Now they might find some new investors, but it will only delay the inevitable.

I think religion is exactly the right word. Humans build story's and meaning around otherwise innocuous things. And that didn't just stop with the rise of the secular world.

Yeah, this is the dark side of all this "diamond hands", "to the moon" bullshit. A handful of winners, a majority of losers, and some people going complete bankrupt because they are foolish.

> Yeah, this is the dark side of all this "diamond hands", "to the moon" bullshit.

Also known as "please continue holding the bag".

There are many of him. MANY.

See Reddit's "apecoin" subreddit, which had two suicide threats yesterday.

Well, if your 'advisors' (usually indicated in reddit/twitter as people 'much smarter than me' by which they mean devs who work on blockchain projects and 'financial gurus' who post a lot of charts with arrows pointing 'in the right direction' (which wasn't hard the past few years as it was generally just 'up' unless Musk posted something)) say it's a sure thing and suddenly you are at the start of a recession with massive inflation and your entire savings wiped out... It is hard to blame them; saying 'it is only money' works when you have money. Luckily there is quite a bit of help and helplines to talk them down.

Don't believe stories you read on Reddit. Most of them are creative writing exercises.

I have a hard time feeling sorry for these people. Sure, they may have gambling tendencies, but at some point, one must reckon with the consequences of their actions, and reap what they sow.

Not to mention that many of these supposed victims are arrogant assholes, whom I and others tried to warn in every possible way and we only got mockery and disdain in return.

It doesn't mean many of them are like that because you have dealt with some arrogant assholes. You dealt with a vocal group and that is usually a tiny minority.

> The religious (for a lack of better word as it is a religion to believe that cryptocurrencies are inherently better than other assets (outside NFTs) ...

Outside NFTs? C'mon. Signed JSON blobs with a URL you pay for? All equally worthless.

Let's not "my god is better than your god" this.

That's not what I meant; I meant 'they' believe cryptocurrencies are better than other assets (outside NFTs) as in; they ALSO believe those are better than other assets. I wasn't saying NFTs are better; I was actually saying (well meant to say) they are equally superior in 'their' belief.

Ahhh I misread that, I apologize. Thanks for the clarification.

> it is a religion to believe that cryptocurrencies are inherently better than other assets (outside NFTs)

Why would NFTs be worth anything more than the digital tulip bulbs of cryptocurrencies? NFTs are just as worthless IMHO.

I believe they're saying that cryptocurrencies aren't inherently better than most assets - but NFTs are such inane garbage that you could argue cryptocurrencies are 'better'. Very much damning with faint praise.

Sidenote: the actual tulip bulbs were far less silly. They were a productive investment. You could plant them to make more bulbs.

You can stake crypto to make more crypto too!

Fair point - but you can't stake NFTs, can you?

If not, somebody is feverishly writing an ERP now

Their selling price is on the blockchain, there is no practical reason why you can't. Valueing them might be a bit tricky though.

I can use my Monopoly money to get more Monopoly money, too.

That’s the root of the scam!

One of the big appeals from crypto people is essentially “all money is bullshit, so buy my bullshit”. The even nuttier people would position Bitcoin as gold.

Well now you're getting into what 'worth' means. As a kid I had a bunch of baseball cards that Becketts said were 'worth' $X. I took them to the local shop and they would only pay some value < $X. "But it says right here they are worth $X!" My grandfather was smiling and said you learned a valuable lesson that something is only worth whatever someone will pay.

NFTs are a bit like celebrity signatures. They are worth what someone will pay. If a celebrity verifiably digitally signs something and they only do it once, that is worth something to some people as a collectible. It is not worthless as long as someone is willing to pay something. And, like other collectibles the market can have huge swings and sometimes never recover (like all my baseball cards lol).

You are aware that nft are a link stored in a database and not the picture or whatever. The picture is on a server and can be deleted.. btw did happen en mass.

Yes. In my example it's not about what the NFT points to, but who signed/minted the NFT itself. That's why I used a celebrity signature as an example.

NFTs are worth nothing to me, but so are celebrity signatures. That doesn't mean they are generally worthless b/c people collect all sorts of stuff.

IMO most NFTS have a significant amount of flaws that weaken any potential value as a collectible, at least in the current popular implementations.

For one thing, they're by definition tied to a shitty blockchain and you have to deal with any potential bullshit affecting said chain including fees, slow transactions, potential scams, etc. For another, they're not really an object, just a bit of json pointing likely pointing towards a flat image hosted somewhere else (that anyone can freely access via the link). Sure, they enjoyed a brief popularity and lots of media attention, but already the NFT marketplace seems to be waking up to the reality that most of these "investments" will never turn a profit. And that's the real issue I see: most of these purchases were not someone who wanted to collect something, they were made by someone who wanted to invest in an asset that would later be worth something. And so the actual value as a "collectible" has been inflated and is due for a huge crash, which is already happening.

I know some are meant to carry benefits towards the holder, like exclusive access to X service or community... that is a small minority currently though, and many of those benefits are shaping up to be just empty promises, and even then an NFT seems like a poor vehicle for systems that could have been done better without any "decentralization" or crypto integration.

They have some value relative to the system they are found in. Consider some fungible tokens which still have value. Say gold coins in online video games. These have some value, even when trading them is against ToS and will get you banned. Their value is relative to their usefulness in the game, and as long as the game in enjoyable, people will assign them so value relative to the enjoyment they can extract. Nothing about the game must be engaged in. There are people who live their entire lives without ever touching an MMO, much less a specific one like WoW or Runescape. Yet fungible tokens still have some value within those ecosystems.

Mobile games have taken this much further, with people buying fungible tokens for hundreds of dollars for the enjoyment they get, though this has become questionable as more of the game is engineered towards feeding an addiction which will cause players to pay more for their enjoyment.

The issue is the approximate cap on this value. Even by the inflated standards of whales paying for mobile games, we still see a cap of value around $1,000s for a month of value. Thus an NFT that provides value in a similar ecosystem should be able to max out at a similar evaluation, assuming it is tied to a system with as much investment in the fun as the big hit mobile games (which is often quite a lot of investment compared to what any single player, even whale, is spending).

We see NFTs going for much more than that in systems that have far less investment in being enjoyable, which I think can be contributed to people investing to get rich by selling at an even higher price.

In conclusion, I think that NFTs can have some inherent value, as much as fungible tokens in a game can, but that such value would be far below where the market currently is. Someone should only spend as much on NFTs when the enjoyment they get from spending on NFTs matches the enjoyment that similar amounts of money would bring from their other hobbies.

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