Ask HN: Why is the crypto market any different then the stock market?
I think it's exactly the same. If you think one is a Ponzi scheme, they both are.
There is nothing comparable in crypto - so it's a sea of crime.
If you look at the early history of stock markets - pre-regulation - it looks similar to current cypto markets - crime as far as the eye can see. This eventually caused regulation to happen. But everything is playing out much faster now, because it's all digital.
It's also much easier to run a crypto scam than a classical stock market one - way less work and time investment - so the bar is much lower. So, in the absence of much in the way of consequences, we would expect far more scams in crypto, because it's lower effort.
In favor of whom? Because I don't think it's in favor of the average American. IMHO, highly regulated would mean that 1. stock exchanges can't halt trading (eg robinhood) 2. People in positions of power (eg Nancy Pelosi) wouldn't be able to make any money from the stock market.
Obviously, coinbase can stop trading on their platform, but I don't have to use them or even need an exchange to trade on. The only insider trading on BTC would be lawmakers or a whale attempting to alter the price.
I won't attempt to defend Rep. Pelosi but what she is doing isn't insider trading. She isn't an insider for any corporation that she and her husband traded on. Instead she is using political power to manipulate stock prices from the outside. This type of naked corruption should be banned, but let's not confuse the issue with inaccurate labels.
Thanks for bringing up the incorrect label, I can't think of a better one at the moment but I guess I included lawmakers with the label since they may have access to information we don't, so from my perspective it may as well be insider trading, but you're right about the label.
To prove your point, all you need to do is create a company and get it listed on a major stock exchange with zero assets and the sole stated purpose and objective being to print and sell stock. Be sure to explain to the exchange that this is no different than any other stock.
Let us know how it goes and report back with your listing symbol so we can all buy in, help you inflate the stock price and get rich quick.
Remember sub-prime crisis and the "Collateralised Debt Obligation" -- basically: set up a shell "company" with no assets, issue 3 types of "stock" from it (tranches at the low, medium and high level), and then have this company buy underlying debt (say mortgages, or car repayment receivables), use the cashflows from those to pay the coupons (dividends) to the holders of the CDO in the various tranches, after taking a little something off the top. And voila - you have essentially the same idea.
We all know how that CDO thing ended, but, remember, it was _fully regulated_ and legit!
So lets not sleep walk into thinking that just because the SEC of the CFTC says it's okay, it is. They are flawed people, with profit motives, just like the rest of us.
There is no more blatantly direct, obvious or audacious fraud than creating money from electrons and selling it. Even wooden nickels were made from something in order to kinda, sorta look like money.
Crypto is proof of just how stupid intelligent people can be.
As you point out, CDOs were actually based on real assets with way more plausibility than crypto which is based on --- electrons.
> set up a shell "company" with no assets,
CDO's were assets. They were collections of mortgages. When you bought CDOs, you were buying real slices of mortgages (at various levels of abstraction).
The fraud existed because there were quantifiable differences between the value of the underlying asset and the value of the securities being offered.
So I guess in that regard, the same sort of fraud is theoretically impossible for crypto because a) none of the assets have a quantifiable value anyway and b) it's okay to throw away investor's money if you properly disclose it as a risk?
If you own 1/4 of a cookie company and the cookie company goes out of business, you still get 1/4 of whatever is left over from the cookie business (in this case, probably some equipment and hopefully a lot of cookies).
But most crypto is not comparable to stocks. It's comparable to currency. Currency markets exist, and there is an awful lot of speculation in them. And a lot of currencies do fail! But the main difference is, if I buy a bunch of Swiss Francs, I at least know I have one person who will take it - the Swiss government. If I buy a crypto from a blockchain, will the chain buy it back? No.
Gary Gensler, the boss of the SEC, would probably disagree. He's calling most of it (with the possible exception of Bitcoin and Ethereum) a security (read "stock").
As to your point about "currency" -- it's not _really_ that either, chiefly because of the tax treatment in most countries that have crypto-regulation. If you buy some foreign currency, it goes up, and you sell it, you are NOT taxed a capital gain.
If you buy crypto, or stock, or bonds, or real estate, it goes up, and you sell it, then you are liable for CGT. This makes crypto more akin to a digital asset, or a commodity.
> If you buy some foreign currency, it goes up, and you sell it, you are NOT taxed a capital gain.
Am I misunderstanding something? I thought Forex gains were taxed via the 60/40 rule.
But overall there are many differences in how these assets are owned and used, and how this market is accessed - it is apples and oranges.
BUt, if you are a long term investor, rather than a swing or day trader, the fundamentals of the asset are much more important. The supply-side economics of the asset, its liquidity, volatility, correlation with other asset prices, etc, all come into play, and these are very different between crypto, stocks, commodities, bond, et al.