Stop saying “They shouldn't have invested more than they could afford to lose”
blog.mollywhite.net
blog.mollywhite.net
> So “don’t invest more than you can afford to lose” is tough advice to swallow for the large group of people who are seeing the gleaming promises around crypto, but who also don’t _have_ money they can afford to lose.
So if they don't have money, then they shouldn't invest it in speculative investments like crypto.
> It’s apparently easy for people to castigate those who’ve just lost everything by repeating this refrain, in the same way it seems to be easy for people to only start pointing out the “obvious Ponzi” or “clear scam” projects only after everything crumbles.
No, people have been saying since the beginning that crypto is a scam, not after these scams happen. And even if it were after scams happening, there have been so many [0] that surely people would understand that future scams are likely.
Honestly, I have no sympathy for these people. If they want to be greedy and commit millions of dollars into these scams ([1] which the author hyperlinks to) then that's on them. Play stupid games, win stupid prizes, isn't that how the saying goes?
[0] https://web3isgoinggreat.com/
[1] https://old.reddit.com/r/Invest_Voyager/comments/vsj9nx/how_...
That is indeed buried relative to many other points
Lots of folks online saying that crypto is the only way to beat inflation. We both know that's bullshit, but with so many people huffing the laughing gas, it's easy to get taken in, especially with influencers and the Crypto.com Stadium et al.
It just seems like a perfect storm of massive hype, a lot of very convincing marketing, and the wind blowing in the right direction between a pandemic, Brexit, war, and a possible recession.
When desperate, and many big names are involved, it can obviously look quite seductive. Used to work in this predatory niche about 7 years ago. Never again.
This also applies to my parents' generation, who grew up primarily subsistence farmers. They don't understand finances or markets or anything like crypto. They understand business investment as mutual actions of trust, where they lend their neighbor money and their neighbor buys something to benefit the town. Cryptocurrency hijacks those avenues of business investments by forming parasocial bonds and fake communities.
Exactly. The crypto promoters built a community, acted trustworthy, and then they exploited it for an affinity scam.[1] The promoters gave the impression they were on your side. They weren't.
Just like Madoff.
If someone borrows against their home to try to double their money in stock trading or the casinos, were they exploited by Wall Street or Las Vegas?
Actually, yes. There are laws regulating loans for the purchase of securities. Most jurisdiction ban lending for gambling.
2. This doesn't address the point of where the coercion was involved to make this "exploitation".
[0] https://www.lendingtree.com/home/home-equity/home-equity-inv....
[1]https://www.thebalance.com/can-i-invest-in-stocks-with-a-hom...
How is Wall Street exploiting them in this case? It sounds like they are committing some sort of fraud (perhaps even criminal?) against the lender by breaking the terms the loan by investing in speculative assets.
It’s considered one of the worst ways to use home equity, but it’s absolutely legal for all parties involved
> The crypto "community" need to own up to this.
Whatever that means
It's like when the tobacco industry sponsored ads to "prevent kids from smoking" while investing millions in targeting them anyway.
And look, I'm not defending the current banking system. Should average people have no options while the wealthy can use complex derivatives to increase their wealth and power? Probably not. I'm just pointing out that the crypto world shouldn't be doing this specific thing.
And as you mention in the second part, it is a very difficult and tricky balance between protecting retail traders while preventing them access to instruments that the wealthy can use to further increase wealth.
As an example, it used to be that USA-based customers could leverage trade (short trade or margin leverage long trade) on crypto exchanges, for example Kraken. However, due to regulatory pressure, Kraken now requires registering as an Eligible Contract Participant in order to margin/leverage trade - the key requirement being proof of $10M in discretionary assets.
On one hand, this is probably a net "good" - short trading or leveraged long trades are _extremely_ risky, with the former having infinite loss potential and the latter resulting in margin calls or a greater loss than the account is worth (i.e. you're in debt to the exchange). I have little doubt that retail traders would've lost more money were this restriction not in place.
On the other hand, this reeks of "you must be this rich to enter; peons need not apply". A wealthy person can 66
Crypto is magic made fantasy up numbers. At least with baseball cards, you get a baseball card.
Also people lie to get your money, that includes "celebrities" and companies.
*Most of the time you don't have idea if you talk to(or receive information from) real person, some hacker who hijacked their account, a program pretending to be a human(from emacs doctor to gpt3 and beyond), etc.
What if someone says to take some drug 'because it's safe' - when it's not?
I say let the lawsuits begin.
Or better yet, have some kind of basic regs.
Whenever anyone talks about 'health' or 'finance' in the commons, they had better be very clearly indicating that 'they don't know what the F they are talking about' and that people ought to 'talk to a doctor/accredited financial advisor' first and that 'following this advice could lead to illness/bankruptcy' etc..
I would love to see theses turds have to follow the same regs drug companies do: "This diarrhea medicine may cause X, Y, Z and A, B, C etc."
Well it depends on who it is (which goes back to personal responsibility). If I'm taking drugs that my barber recommended I deserve the same fate as if I buy the stocks or crypto he recommended.
The guy saying 'sell your home to buy BTC' is one such person.
We need credible groups and institutions.
>The guy saying 'sell your home to buy BTC' is one such person.
Almost nobody did that though. Which means 99.99999999% of people saw that to be bad advice and acted accordingly. For the handful who decided it was a great idea, that's on them. We don't need to regulate the speech of everyone to protect the biggest idiots from themselves.
This wasn't Jim Cramer or some vetted CNBC talking head talking P/E ratios or future earnings potential.
These are carefully-engineered social media accounts with follower counts blown up by obvious market-engineering campaigns.
Again, to OP's point, if you're putting your life savings into speculative investment X, from the word of a rando instagram "influencer", you get what you deserve. Anybody in 2022 who doesn't understand that most social media presences are carefully curated, engineered, and biased, is a fool.
Live or die by the word of the shoeshine boy, it's a tale as old as time. We all learned of 1637 and 1929 in high school history. If you didn't pay attention, that's on you.
On the flip side, the frauds, criminals, and liars that run the entire crypto circus can all die in a fire.
And yet here we are with a bunch of people who were wiped the fuck out by promises the crypto ponzi scheme Voyager deposits were FDIC insured.
Except customer's funds were considered loans to Voyager and it was Voyager's deposits that were protected, not their victims.
But I'm sure the criminals running Voyager are spending the money much more wisely than some grandma on a pension ever could.
They were? Then everybody will be compensated.
The voyager victims were repeatedly and explicitly told that their deposits were FDIC insured - they were literally doing the “right” thing and putting their money in a safe high[er] interest rate bank, and their money was insured if the company did collapse.
Except they were being lied to the entire time, and there was no such insurance, so all their “safe” savings are now gone, while the owners of the fund are rich.
But yeah, it was clearly the victims fault.
Shame on crypto hucksters for lying and defrauding the common man but some blame is shared for betting so much with such little knowledge. If you have a house and/or a life savings and decide to bet it all on a get rich quick scheme then you get what you deserve. You have no sense and do not understand what you are doing. It is amazing that you even amassed a house or life savings to bet. You played yourself with your greed, envy, and pride.
What they did put their savings into an account that had a higher interest rat than a bank or credit union. The amount they were promised was lower than the normal interest rate for a normal bank savings account when I was a kid - again, not some promised massive return that you seem to think it was.
What you are saying is that anyone who has their money in a single bank is an idiot, because that bank or credit union could actually have been stealing their money, and be lying about having FDIC coverage.
Now, many (most?) of the victims here had their entire balances in USDC - a coin that is still 1:1 with US dollars - they were told that their accounts were in US dollars. They were repeatedly told that their accounts were FDIC insured, and that the company had sufficient reserves to repay all balances. This was a publicly traded US company, and the CEO was a former etrade CEO. They had no reason to not believe any of those claims - after all, the SEC, etc exists specifically to prevent that kind of fraud, and surely claiming FDIC insurance when you don't have it would be called out by the FDIC.
So again, this was NOT people trying a get rich quick scheme, these were people who were trying to have their savings in a higher, though still entirely plausible, interest rate. They were not investing in anything risky - they were keeping, as far as they knew, US dollars - and even though it was actually USDC, USDC is still 1:1 with US dollar, so they should be able to withdraw those coins.
Stop trying to blame victims.
Stop trying to claim that they were "investing" in a get rich quick scheme.
Stop trying to claim that they "should have known" it was fraudulent.
Just stop.
Unless you can provide some kind of justification for your victim blaming that would not equally apply to me as all my cash is in accounts with Wells Fargo.
With how people were talking about crypto up until recently, you would think it was "better than gold" or "better than stocks" or "better than forex". Those were repeated commonly by many people who were in no position to be offering any kind of financial advice. Look at all the celebrities that got on board with pumping tokens. Look at the Staples Center being renamed as the Crypto.com Stadium. Look at world governments mulling over CDBCs. Look at El Salvador with Bitcoin and Chivo.
I'm not saying "crypto good, you are wrong", I am completely anti-cryptocurrency in its current form, there isn't one viable use for it, and that's without even getting into throughput speeds, scaling issues, or energy consumption. I am however saying that victim shaming is shady.
They were doing what the “experts” were telling them was the right thing to do.
Fuck off with your victim blaming BS.
If you can’t hold someone accountable for such decisions you are basically saying they should not be allowed to manage their own finances. People need to have critical thinking skills.
If someone wanders into the wilderness and gets mauled by a bear they’re a victim but it’s largely a fault of their poor judgement. And it’s absolutely fair to criticize their reasoning.
If you were a company, it would likely be seen as financial mismanagement not to do that. That's why companies that have more money than is possibly reasonable still have loans.
But anyway that's beside the point.
These people are not claiming to be victims due to crypto crashing, in fact many have their entire balance with Voyager in US dollars/USDC (which I just checked, is still 1:1 with USD). They are complaining that they went to withdraw the money that was in their account, and Voyager wouldn't let them, and then declared bankruptcy. Even at this point it would be more annoying than anything else, as Voyager had stated that they were FDIC insured so everyone's deposits were insured in the case that Voyager failed/declared bankruptcy.
Only then was it disclosed that Voyager had been lying about that, and in fact there was no deposit insurance, and they had stolen the content of everyone's accounts.
What you are saying is no different from, say, BofA declaring bankruptcy and that it wasn't actually FDIC insured so everyone has lost the money in their bank accounts; then I turn around and say that it's those people's fault as they didn't understand BofA's financials, and that the people who lost money didn't verify the FDIC insurance themselves. I sure as hell don't understand Wells Fargo's financials, and rely on them not lying about being FDIC insured.
Typically small net returns with long tail risks that include you losing your home. Seems like garbage advice to me.
> These people are not claiming to be victims due to crypto crashing, in fact many have their entire balance with Voyager in US dollars/USDC (which I just checked, is still 1:1 with USD).
They gave money to a company they did not understand. The company lost the money. As far as I can tell the company only claimed that US dollars were insured not that it really matters.
> What you are saying is no different from, say, BofA declaring bankruptcy and that it wasn't actually FDIC insured so everyone has lost the money in their bank accounts; then I turn around and say that it's those people's fault as they didn't understand BofA's financials, and that the people who lost money didn't verify the FDIC insurance themselves. I sure as hell don't understand Wells Fargo's financials, and rely on them not lying about being FDIC insured.
Bank of America is a very old company subject to regulation and is not suggesting anything about big returns. Hardly comparable
By all means, let’s regulate companies. But let’s not pretend people aren’t accountable for validating their own investments.
You can say that and still feel bad about the tragedies that are playing out around you.
I know someone who pulled all of his money out of the stock markets right as it was bottoming in 2009. The guy is not capable of making investment decisions. He's the kind of guy who falls for scams, quickly buys into conspiracy theories, etc. I'm not being condescending. It's just an honest assessment. I really don't know what we're supposed to do as a society for folks like him, though.
At the very least, I think public schools should have a mandatory financial literacy course that gives an overview of how to run your finances, and maybe a brief foray into things like iSeries bonds, etc. Extra points if it covers bubbles and busts and the psychology behind them, etc. Having read a few books on the subject, it was obvious we were in a bubble in the past few years. Literally all of the tropes I heard after the 2000 bubble were happening, from sports bars playing CNBC to random folks like a plumber boasting about trading Doge coin.
From https://www.bitcoininsider.org/article/165364/sam-bankman-fr... sourcing a Bloomberg interview that itself seems to be paywalled:
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One of the most interesting phenomenon happening right now is the rise of Luna and UST. Luna has this Treasury Reserve consisting of a lot of Bitcoin, which seems a little dicey, but some people say any idea of an algorithmically-backed stablecoin is a perpetual motion machine – it’s only a matter of time before it fails. Do you believe there can be a truly decentralized stablecoin? What do you make of these projects?
SBF:
I do have some sympathy to the perpetual motion machine crowd here. They can serve some useful purposes, but if you do zoom out, right, and you say, this is a stablecoin, backed by volatile assets, what’s gonna happen in a big market move. Right? Like, you know how this plays out.
-----
Is there a word better than "despicable" for believing that at least some things in the ecosystem are a scam but still profiting off helping people get scammed by those things?
Why would you just feel bad about the tragedies and not also furious at these people happily making money off of the tragedies?
Well, he’s the richest ethical altruist out there, so it appears that’s the word for it.
They put their retirement savings into “insured” accounts with “guaranteed” reasonable returns.
You say they should have known it was scams, but if they were scams why was the news filled with tales of the success of crypto, and tech sites and “influencers” all aggressively pushing crypto.
If these were scams then why wasn’t the news filled with them being shut down?
No these are people who, as far as they understood, were simply storing their savings in a “high” interest rate savings account. They weren’t throwing money around on coin base, or following micro trends. They were doing the right thing, and trying to limit the amount of value their savings were losing to inflation.
Remember the account values of many of these services were reported as still belonging to them. What happened was one morning they woke up to find out that the balance they were seeing was a lie as the companies had sold off their assets, and lost all their money, without their permission, and was refusing to let them withdraw it.
Then some asshole like you comes along and says that it’s their fault.
Commodities? Forex? Stock market? Bonds? Rare art?
Investing is a horrible idea for laypeople
Hence, sad to say, it is becoming more the case that they key to homeownership in many cities is investing in something that grows faster than inflation as well
It’s (sadly) largely the reason why I think Robinhood became so popular
Government bonds are one of the few "safe" low-yield investments.
Anyone who has lived in emerging markets knows the sentence soon becomes "Don't invest in <previous safe investment> more than you can afford to lose."
And the last stage in such countries ends up being: "Don't put more dollars in your bank than you can afford to lose" (because your failing bank or country will confiscate it).
Until you reach this stage the number of scams increases exponentially.
I'd like you to meet Sam the Scammer: "If you would have bought bitcoin on this date in 2019 you would have been up 200% by now. You would have doubled your money in 3 years. literally."
"probably"? Are you willing to be held criminally liable when the elderly take your advice and the S&P does not bend to your will for the next year or two due to say -- oh I don't know -- unforeseen world events?
edit: I was alluding to the possibility of c): not investing in the S&P or crypto for the duration and suffering inflation. which would have been better than a) and b) since inflation is added on top of both those losses.
The statement in question is obviously true in a literal sense. It is–almost as obviously–used to convey more than just the literal meaning, usually in the sense of "they shouldn't blame anybody", "they shouldn't ask for help", or "they deserve this".
It is simply a basic question of humanity that people can get themselves into situations that are terrible in a way that is not proportional to whatever stupidity got them into it. Nobody would say the death penalty is appropriate for speeding, and we therefore help people who are injured in accidents. The details are obviously subjective: a blanket bailout for people losing money in these markets would strike me as inappropriate. But so does obvious glee at their suffering.
To your speeding analogy, most of these people are losing proportionally. Unless they're margin trading, if they put in 500k from their house mortgage into a coin which crashes, they lose at most 500k, they don't lose more than that, which is a 1 to 1 proportional amount. Now on the other hand, there are some Robinhood traders who turn 5k into -750k [0], usually through options, and that is what I'd call disproportional, and I have some sympathy for that, often because those people didn't even know their losses could be so large.
[0] https://www.cbsnews.com/news/alex-kearns-robinhood-trader-su...
The problem is that cryptocurrency purveyors have marketing budgets, and cryptocurrency skeptics do not. It's difficult for people to get the message that cryptocurrencies are a scam when the promoters are running superbowl advertisements, and the detractors can only comment on the internet.
Pyramid schemes, ponzi schemes, and all sorts of other schemes would like a word with you. Scams can be around for a long, long time while still bilking plenty of people.
I believe the author’s thesis is we need public resources to start holding promoters accountable. Criminally, if they defrauded. Financially if they were just dumb.
Nobody is seriously advocating for reïmbursing the victims. I wouldn’t go so far as to say they deserve what they got. But it’s their problem to solve.
"China has executed the former head of one of its biggest asset management companies who was convicted of corruption. ... The execution of Lai Xiaomin was carried out on Friday three weeks after the 58-year-old was sentenced to death by a court in Tianjin. Lai was found guilty of taking bribes amounting to Rmb1.8bn ($280m) over a 10-year period when he worked at Huarong Asset Management and before that at the China Banking Regulatory Commission. ... The court said Lai’s crimes had caused serious losses to the interests of the nation."
[1] https://www.tomshardware.com/news/china-crypto-illegal-priso...
[2] https://www.ft.com/content/820cf0ec-09a7-4d2e-a86d-897de725d...
We need actual prosecution around crypto in America. Not Beijing-style show trials.
[1] https://www.bloomberg.com/news/articles/2012-06-29/xi-jinpin...
A lot of everyday Joe's and Jane's put money into crypto. The amount of hype from crypto was pretty strong, including some governments adopting it.
You should have some sympathy for those people.
We are grown ass adults. How many warnings do you ignore before something bad happens?
In the spirit of my Master Sergeant I laugh at these imbeciles losing all of their money.
How many tech sites were filled with people talking about how crypto was going to change the world?
How many “influencers” and celebrities were advertising crypto?
How many Super Bowl ads?
How is a person who simply wants their savings account to make more interest than inflation meant to know that all of that was a scam? It’s not like these people and companies were being charged with fraud.
For many of the victims of the crypto scams index and retirement funds are unavailable or apparently higher risk than what the cryptobros have been claiming crypto as.
These victims aren’t being greedy or playing stupid games, they were simply trying to do the best they could with what they had - and all the cryptobros have been saying for a few years now - apparently supported by markets surging (often through wash sales and other fraud).
Or there were the people who were explicitly and repeatedly told that their deposits were FDIC insured, only to discover that that was also a lie.
Don’t fucking victim blame you PoS.
It's not a thesis, it's just clickbait. No need to give it any credit or attention.
In 2015 I joined a local club for electronics hobbyists. It was great, we met every other week, had show-and-tell presentations of the things we were learning and building, I made a lot of friends and learned a whole lot. But, in 2020, it started getting taken over by crypto bros: where before we'd have presentations about a new IoT platform or how to generate some signal, now we'd have presentations about yet another bitcoin-trading thing, usually not even run by people who were regulars in the group.
At each one of these, I and a couple others did try to explain, politely, that crypto wasn't what was being claimed (overnight guaranteed millions!) and that these people didn't seem to understand basic things about economics (bitcoin is not a "store of value"). And we got laughed out of the room for it.
After a few times of that I just stopped going to the club, and I wasn't the only one because the whole thing disbanded a couple weeks after that.
So, when you say that the crypto people lied about this and people got suckered in, well, no sympathy. Because you're ignoring all of us who tried to point out the lies and caught shit for it.
Maybe you all shouldn't have invested more than you could afford to lose.
Yeah, a bunch of people ignored you and ostracised you. But not everyone. Not most people. Most people never even got the chance to ignore you.
If people put X USD into buying Bitcoin, and then can sell that Bitcoin for Y USD, and Y is greater than X, then the extra money has to come from somewhere. Where? Without knowing that answer, even before I knew the first thing about blockchain or crypto, I was unwilling to buy any.
I don't care who in your life was lying to you or pressuring you to invest, anyone who got suckered in without asking that basic question should have done more due diligence.
You can feel smug and vindicated for being treated unfairly in the past, I won't take that away from you, it sucks that it happens.
But the amount of airtime paid for by people saying "be careful" or even a nuanced "I like bitcoin long-term but be careful with some of these risky new schemes" was basically zero compared to the amount of resources relatively rich people spent trying to convince suckers to make them even richer by buying into their bullshit.
I say, don't blame the victim without trying to fix that as well. Why do we shrug when millions are spent to try to outright lie?
But I have zero sympathy for the people who dumped their life savings into something that sounded too good to be true, and were jerks toward anyone telling them about the risks / misunderstandings. I know someone in his 60s who put his life savings into it, and (until I explained it) didn't know that bitcoins were mined. Did not know where they came from, just understood that the line was going up. (I do have some sympathy for him because he wasn't a jerk about the whole thing, but, the others... nah).
I get this every time I talk to programmers about a concept that isn't completely obvious. And some that are completely obvious
Agreed on much of what you wrote, but this isn't accurate. Anything is a store of value if people say it is. Baseball cards, art, books etc. all fall under the same definition.
Bitcoins take value to create, and creating it consumes that energy / compute, but all you get out of it is a receipt that proves you spent the resources. You can't use the bitcoin for anything; you can only sell it to someone else who thinks it's a store of value.
And with most stores of value, there is no guarantee you will get out more or equal to what you put in.
Baseball cards are generally valued more than an equivalent-size rectangle of cardstock. Books are priced higher than a ream of paper; saying the value of a piece of art comes from its frame is usually an insult.
I would argue that those things are also not in any way a store of value: the only thing you can do with them is sell them to someone else. If no one else wants them, they're worthless. By your logic a big pile of beanie babies is a store of value, since someone spent a lot of money in the 90s to get them, and they took cloth and plastic pellets to make.
The way I've usually heard it explained is that doing some sort of productive work (growing wheat, clearing land, mining things, whatever) can store the value of that work because you create something useful with it. The resources it took to grow the wheat are stored in the wheat, and can be retrieved by not having to grow wheat next year.
My point, whether we agree on the terminology or not, is that Bitcoins are not anything useful: they take massive amounts of resources to create, just like farming or mining, but all you get out is a proof-of-work receipt that says "yes, he lit that pile of money on fire to create this."
Not necessarily. There is more use for blank card stock than card stock damaged by some obscure overprinted card from the 1990's. You can't use it for anything, it's been "consumed" with the design. Same goes for shitty overprinted books or "art". An artist will pay for blank canvas, but not a painting my niece did of dogs playing poker.
So it goes back to the idea that a store of value is anything people agree stores value.
Steph Curry telling people FTX made it so they didn't have to be a crypto expert, for instance. But maybe inexperienced non-experts tossing money into a whole bunch of random tokens is NOT a great recipe for success...
A whole lot more time and money is spent on telling people you should put your money in this thing than is spent telling them to think twice, that there's no such thing as a free lunch, that promised double-digit rates of returns suggest it's not a safe investment, etc.
So either turn down the volume on the one, or turn up the volume either louder on the latter. I'd pick the former, though.
I would not believe anyone who said they did not already know this deep down. Even children learn this early on by just observing the world.
Nobody gives away something for nothing. All these "investors" were aware they were gambling and hoping to earn something for nothing.
Cause on the other hands, here's all the competing information you're wanting people to filter out:
* government officials were getting on board with "pay me in crypto!" bullshit and similar
* millions were spent on advertising campaigns about how actually, these days, you don't have to think about it
* millions were spent on advertising campaigns trying to get people afraid of being left behind
* government policy in the US, due to conservative politics, has made investing for your future an increasingly individual responsibility rat-race for several decades now
* new computer technology, in the past five decades, has created something from nothing wealth-wise MANY times, often (but not always) in sustainable ways
Even a relatively skeptical investor, who hadn't heard of it in 2012, and who sat on the sidelines in 2017, at this point may have looked at a ten-year chart of BTC, said "ok, there's some solid history now, maybe the chicken-littles are actually the same sort who say that the whole stock market is a scam, even the government is starting to get on board with crypto"... and then you want them to be able to dig deep enough to understand why they're all castles in the sky to some extent, but some are more or less guaranteed to fall apart more quickly than others?
Now it could be that people started to treat these as a kind of pro forma disclaimer, like the small text about "past results are not guarantees of future returns" that you see with traditional investments. But the warning was there.
Yes, maybe there is some willful self delusion. Then again, I don't think anyone really understands economics --- well enough to predict the future, anyway. There's no shortage of folks who understand it well enough to "explain" the past.
What?
Uber stock doesn't generate revenue either as it's not a profitable company. In the current meta paying dividends is worse that doing stock buybacks so it's unlikely for the stock to ever be a revenue generating asset.
Free lunches are everywhere. Children who learn that they aren't just by observing the world, aren't very observant.
> "Nobody gives away something for nothing."
Open Source software props up a lot of the internet, much of it given away for nothing. College students make a point of going round the dorms of wealthy international students who buy furnishings and electronics for the year, then leave it all out on the kerbside instead of shipping it back home. People around the wealthy Western world send stuff to the dump or to charity shops just to avoid the bother of putting it up for sale and collecting money for it. There's an entire website (FreeCycle) created just to organise giving things away for nothing. Google N-Grams records people giving away dogs with the term "free to good home" in the 1940s.
I know that Crypto is mostly about avoiding regulators. That's not a good idea. Regulators are not the enemy. When done right, they level the playing field and protect the small investor.
If they don't "have money they can afford to lose", then there are no "gleaming promises" for them. At best there are lures...
Though I'm down with the idea that it's partly fault of those advertising this as a surefire profit, and preying on the desparate and/or financially illiterate...
People are told to “invest for retirement” and to do their financial planning based on 4-8% per year growth after inflation, when the risk free rate has been 2% or less for 20 years.
If the US stock market stagnates for the next 20 years like it has in other countries, people will be blamed for buying ETF’s too. “Don’t invest money you can’t afford to lose”, say the people who profited from 20% annual growth on houses while mortgaged to the hilt. But also, “why can’t millennials afford houses?”
You're trading risk for reward, so the standard advice of de-risking your portfolio as you approach retirement age is quite reasonable. Doesn't make much sense for a 24 year old to stick to the risk free treasury rate for 40-50 years.
And also encourage “don’t invest more than your willing to put down and hood for 5yrs in case of a sudden downturn”
Edit: P.S. my HN handle was created well before Elon was pumping doge and I now regret my HN handle
Now Molly White wants me to feel bad, but like Rhett Butler at the end of Gone With The Wind, "Frankly my dear, I just don't give a damn."
I mean, instead of responding to these people as 'giving poor investing advice' it should be more along the lines of 'they are all giant scammers, liars and hustlers, along with 99% of all crypto activity'.
It's kind of interesting how well she documents everything as if it needs to be documented.
Just assume crypto ads/services are a scam until there is evidence otherwise.
Edit: yes, yes, fine, there might be some value in crypto, there's some intellectual goodwill there, but it's full of giant hustles, frauds and scams, and the pragmatic reality is the rational, default purview should be 'it's a scam'.
The industry has completely burned any goodwill, it will take something else to recover it.
I'd rather young people learn about scams young than fall to a get-rich-quick scheme when they have a family to support or are about to retire.
The reason old people call all get-rich-quick schemes 'scams' is that many have already been through these episodes.
I’ve invested in Crypto, and I am still mildly up on my total portfolio. I was even using one exchange that got shut down; that’s $2k I will never see again. I never put more than I would feel comfortable with losing and that’s why I have nothing to worry about.
" So “don’t invest more than you can afford to lose” is tough advice to swallow for the large group of people who are seeing the gleaming promises around crypto, but who also don’t have money they can afford to lose. They can take a big chance in hopes of the bright future they’ve been promised by an industry with a huge marketing budget, or they can risk missing out and staying in an already untenable situation.
It’s apparently easy for people to castigate those who’ve just lost everything by repeating this refrain, in the same way it seems to be easy for people to only start pointing out the “obvious Ponzi” or “clear scam” projects only after everything crumbles. "
These people don't even want to use crypto to make transactions. It's definitely not a good idea to put all your net worth in it for a number of reasons also. Principally being it's not a mature system. There's nothing that says a new crypto alternative will come out tomorrow that totally voids all the stuff that exists today.
Cryptocurrency investing isn't unique.
Equating crypto to investing in companies is nonsense.
That's my point.
>Equating crypto to investing in companies is nonsense.
Why? Even if you go back to "It's not providing any value to society to buy crypto and resell it at a higher price later to some sucker." It's not like me selling a share to someone else provides society value. Unless I do something for society with the money I made, but the same would apply to money based off profitable cryptocurrency investments.
Of course nobody should invest a large portion of money they need into something as speculative as cryptocurrencies. But that doesn't mean that people that are not critical enough of outlandish claims and invested in stuff like Celsius deserved to lose it all. There are certainly people that understand the risk and participate anyway, and greed got the better of some of them. But there are also people that were essentially just scammed.
What's the crypto community been saying for year? That transparency, identity, accountability, and regulation are for oldheads? How's that working out?
They were speculating in crypto.
The difference is that investments have some rational reasoning behind hoping for a future profit, beyond 'the greater fool' theory.
Bonds have a solvent business's pledge to repay them. Stock represent ownership in some business, hopefully one that makes profits for its owners. Crypto seemed only to hope that someone else would come along and pay more for it.
See what Charlie Munger and others have said. For a long time.
People shouldn't have invested more than they could afford to lose, and the recent crypto situation is a massive systemic regulatory failure. Predatory companies were making impossible promises with zero transparency and accountability, BUT it's still on the investor to do their due diligence if they're going to be placing huge bets.
Here's a quick clip of Mark Cuban saying that Voyager was virtually risk free: https://www.youtube.com/watch?v=uZYMtVBXUrE&t=119s.
I'll give Mark Cuban the benefit of the doubt that he thought his words were true, but even being that closely tied to Voyager, he didn't really know what was going on.
I pulled my little bit of cryptocurrency out of BlockFi because I have no way of really knowing if they'll be another Voyager. There are few players I trust on the cryptocurrency space.
For the layperson, there is no way you could have done proper DD for these investments because the regulations to force disclosures that could have helped you did not exist. However, the inability to do proper DD on their claims due to the information not existing probably should have served as a form of DD.
This company claims they provide low-risk xx% returns due to their risk mitigating crypto lending strategy, yet this company does not publish who/what they lend to and their claims are unaudited. Since they're unregulated, there's also no protections in place for investors if it turns out their claims are bogus.
And so the narrative of such news is also further boosted and manipulated by the media, poisoning the psychology of tons of retail investors. It would be better that these media organisations do not add any oxygen to these 'too good to be true' schemes and survivorship bias of a few winners just for retail investors to click their ads, as they attempt to get as many suckers FOMOing into schemes like Celsius, Stablegains, etc in the first place. The media, influencers, etc are all partly to blame for spreading this as well.
It also isn't exclusive to crypto. It is also no different to the SPAC craze of many failed SPACs going under, high risk options on penny stocks and other highly speculative stocks that retail investors were sucked in by the mania and dumped upon recently. There is no change in what happened of these pump and dumps and the mania of Jan 2021 other than more people losing their whole investment.
Yes. All of it needs to go under strict regulations. Include that for Stocks (SPACs), Crypto and Options as well.
For example, here's a pull quote from the NYT piece:
> But as some people mint millions from little-known cryptocurrencies, others have seen impressive gains disappear overnight. For every Solana or Luna, there’s an out-of-the-way token that shoots up in value, only for its price to collapse. Some of these projects are scams, or what industry experts call “rug pulls,” in which someone aggressively markets a coin, then immediately liquidates the holdings, leaving investors with major losses.
The whole second half of the article is about such scams and how many gains are ephemeral "paper gains".
Meanwhile, the New York Post piece quotes an expert who says "The volatility attracts people who like gambling, excitement and so forth ... They’re not so interested in underlying economics, but [rather] the chance of a very rapid, high gain, or a very rapid, sharp loss." It also profiles a TikTok influencer who uses astrology to predict coin prices -- with the clear implication that this is ridiculous.
So while the overall message of the essay is on point (there was tremendous misleading and dangerous advertisement), a lot of "traditional journalism" was in fact extremely skeptical and quick to point this out.
I absolutely agree. However...
I'm sure we both know that all of this is no different to the pump and dump / exit scams of 2017 repeated again for this run. Once again when it is all going up, the media selects a few winners to boost and create headlines like this to get retail investors to put their life savings in and it is only then once the crash eventually happens, the stories turn negative with the 'we saw it coming' rhetoric, despite spreading articles with clickbait headlines luring retail in to those extremely risky investment platforms where they don't read or care about the risks.
I don't expect retail investors to care about the loses of others or reading the whole article as they are attracted to the high risk, high reward aspect of these speculative and high risk assets. Thus, they will ignore the losers that got 'unluckly' and they will take their punt in whatever has been promoted by the media, thanks to the clickbait headlines.
> It also profiles a TikTok influencer who uses astrology to predict coin prices -- with the clear implication that this is ridiculous.
Oh yeah 'that' one. [0][1] Shame on Reuters and others for boosting this fool during the hype of Jan 2021. To show you how dangerous and ridiculous this individual is for her flawed 'analysis' and 1M+ account following, just look at her greatest h̶i̶t̶s̶ misses:
>> “However getting into mid-March, I see a big correction. Mid-April is also really less optimistic. May is bullish.”
[0] https://news.ycombinator.com/item?id=25776080
[1] https://reuters.com/article/us-crypto-currencies-astrology/w...
>All of it needs to go under strict regulations.
Of course, then lots of people here will scream that the government can't tell them where to invest or not invest.
Madoff’s “unusually consistent” returns of 10% were a huge red flag but even his allegedly savvy clients were happy to keep getting statements. Their greed enabled his.
Greed is a real thing and at a certain level it seems to shut off higher reasoning functions in the brain.
“If it seems too good to be true it probably is”
That said fraud is fraud and there really are perpetrators and victims, more or less.
It is much more difficult to scam someone honest.
The nice part about the definition of an accredited investor is you can now just pass exams if you aren't wealthy enough. For me, that is enough to ensure sufficient liberty exists for those who want it. You do need sponsorship though, which should change.
I consider myself someone who is pretty adept at investing. I have a degree in economics and I've studied finance on my own time for many years. I've had many conversations with friends who simply lack the discipline to learn about finance, make a strategy and stick with it. Many friends have been hurt by investing in crypto, panicking, then taking their money out.
People are simply too stupid to make these kinds of decisions. If you want to take those risks, go pass Series 7, Series 65, and Series 82 exams. At least then you're somewhat competent enough to know why you make a bad call.
There are plenty of words for transactions that should be limited to money you can afford to lose: Las Vegas, lottery tickets, options, crap, toxic waste, street drugs.
It’s more sensible than keeping it in cash for that long. Money in risk-free liquid form is guaranteed to lose to inflation.
1. Scammers exist. Fuck those guys.
2. Dumb people are dumb.
Both things are true. You can’t call-out one without calling-out the other.