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Comment by _qqm5 | Hacker News Reader

There's a beautiful difference. Unlike in 2008, today

- I can transact efficiently and safely without a bank account. This is currently not possible in traditional finance

- Subsequently, none of my assets are locked. I have never stored assets in an exchange, and have no need to do so.

- Exchanges can't ask daddy government to mint coins for a bailout.

Tl;dr: exchanges and banks who think they can get away with being overleveraged, doing unbacked derivatives trading, lending without locates etc. are in for a bitter surprise. Crypto can't be gamed so easily and it shows.

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The problem is, if these exchanges collapse, the value of that crypto you have will drop significantly. So yes, you still have your crypto assets, but there is a real chance they could end up being worthless.

Even if you don't use exchanges, you are still exposed to their failure because they are major players in the market that determines the value of the cryptocurrencies. When major players in a market go bust, it's unlikely that any of the other market participants will end up unscathed.

Given that crypto value is based solely on what other people are willing to pay for it, it really could go to zero. It probably won't go all the way to zero, but I'd still expect a significant drop.

This indicates that the value was propped up by market manipulation. I have no problem with a crash like this, as I have no exposure to centralized * exchanges.

I also don't have illusions about price action. I don't invest into crypto to make a quick buck. I invest because I fundamentally oppose traditional finance.

Really, no exposure to centralized finance? You only use crypto to pay your rent and buy your groceries and your clothing? Your employer pays you in crypto?

My bad, I meant centralized exchanges, not finance. Edited my comment.

> You only use crypto to pay your rent and buy your groceries and your clothing? Your employer pays you in crypto?

Oh how I wish that was true.

So in purchasing power terms, you have significant exposure since you now have to sell X% more of your holdings to pay fiat denominated rent.

That's one perspective sure. You could also say that I have to pay X% more compared to the inflated paper gains I had before.

crypto *is* traditional finance. whenever humans transact with each other, we reify the behavioral mechanisms which define us as a species. we cannot help but create economies, to trade and transact. all finance is "traditional" finance until our biology changes and new emergent dynamics and equilibriums establish themselves. however thermodynamics, statistics and other math might also have a lot to say on the matter.

there is no such thing as traditional finance, just finance.

When people talk about traditional finance, we mostly refer to the existing technologies for issuance of currency, settlement of fiat transactions, and the debt hierarchy.

Of course finance is an incredibly nuanced word. To quote V. Buterin:

> Finance can be viewed as a set of patterns that naturally emerge in many kinds of systems that do not attempt to prevent collusion

you are displaying a lot of foolish ignorance and compounding it with misplaced certitude but in good faith and a spirit of wide eyed curiosity I applaud your lack of understanding of finance. also you get a lot of credit for using the word "nuance" as if it somehow changes the definition of the word finance.

finance, trading, barter, humans will not allow collusion to continue unchecked. so finance being defined partly as the lack of check against collision is pure propaganda by Buterin and you are his mark. the only reason the collusion rife in the crypto space is so unchecked is because its a big casino constructed for you to play in by people like SBF, CZ, V. Buterin. The whales represent a huge cartel. The drama of the last few days is a parable of collusion, retail being tricked into gambling their life savings, retail being fed lies about how the word is and how the world is not, lies which are easy to disprove.

you are a classic retail mark, being fed and regurgitating marketing and propaganda to encourage you to play your part.

look up retail FX trading manias in Japan in the early to mid 00's as recent past as prologue.

First of all, the "collusion" Buterin is referring to is a game -theoretic term and is precisely defined. Based on your response I'm guessing you are not familiar with his blog post.

Calling something propaganda without being familiar with the source is probably the purest form of irony.

> you are displaying a lot of foolish ignorance and compounding it with misplaced certitude but in good faith and a spirit of wide eyed curiosity I applaud your lack of understanding of finance.

Why is this kind of defensive retort so commonly seen in discussions about the value of cryptocurrency?

Because it's a polarizing topic. I find this particular ad-hominem rather mild, compared to what you find on Reddit.

On HN this particular flavor seems to only accompany crypto. Other polarizing topics e.g. criticism of Apple or Facebook, or even China, don’t exhibit this weird style.

this is no ad hominem - I am attacking your statements here not you as a person. you are flaunting your ignorance and using some weird appeal to authority by posting a vague quote from V. B. which itself is like, not even wrong.

I am not defensive, I am embarrassed for you and all of the people poisoned by this antisocial propaganda, and it makes me despair for humanity.

I wasn't making an appeal to authority, nor was I agreeing with V.B. I was trying to point out that finance may mean different things in different contexts. Not sure why you keep obsessing over this propaganda narrative, as if I'm a brainless NPC. I'm open to learning new things, and if you're more knowledgable then I'll listen.

For instance, I really like your view of finance as these emergent properties of human behaviour. My question is then: how do you propose we refer to the entities we currently have in place for trading of securities, market making, fractional banking, clearing houses, central bank issued fiat, etc? Clearly there is a difference between those "things" and what we do in DeFi, right?

So what label am I allowed to use to distinguish these entities from DeFi?

The only point at which you should quote Buterin is if asked to quote someone with absolutely no knowledg trying to speak from a position of authority. Him making up a new definition for a widely used word to justify the existence of his shitcoin does not make it gospel.

>This indicates that the value was propped up by market manipulation.

I'd wager the propping was part manipulation and part speculative mania, of which the latter his been dispelled.

I think the mania is still there, based on some of the reactions I see defending crypto. But a lot of people must have bailed out to make the Bitcoin price drop so much.

I'll believe the mania is over when Bitcoin reverts to pre-2017 prices and stays that way forever. Honestly I've been considering buying some because I suspect the dip will be temporary, but ultimately I'm not that foolish with my money.

Dare I say - based.

> the value was propped up by market manipulation

The entire crypto market is nothing but[1] market manipulation and speculation. If that goes away your crypto will be virtually worthless.

[1] pre-empting the "but it's used for practical things in countries with crumbling economies instead of the local currency" argument: yes, but that's such a tiny portion of total market cap that it probably doesn't affect the value of your holdings by any meaningful amount.

> [1] pre-empting the "but it's used for practical things in countries with crumbling economies instead of the local currency" argument: yes, but that's such a tiny portion of total market cap that it probably doesn't affect the value of your holdings by any meaningful amount.

Also good ol' fiat dollars are better than crypto for that use case in pretty much every way.

Exchanges should not collapse if all they do is collect commissions from people trading. They collapse when they issue their own tokens and borrow hard assets against those very soft tokens.

Yeah the exchanges are collapsing because They all held positions and went exchanges. Although at some point they collapse for counter party risk

Nobody in the crypto industry has the self-control to just be an exchange.

The whole idea of crypto attracts the same people as other get-rich-quick schemes. Some scammers, some earnest people. But all ultimately lacking in self control.

if these exchanges collapse, the value of that crypto you have will drop significantly

The throne is never empty, right? We are probably still to find out if it’s worth sitting on long term, but since that genie left the bottle, I suspect it is.

You sound just like one of those house owners with a fat mortgage on the eve of 2008.

When you buy an asset from heavily leveraged market you get high risk even when you don't use leverage yourself.

The crypto I buy is not leveraged, it's sitting in my wallet - unlike IOUs, stocks and derivatives.

In crypto, leverage exists solely because of people who aren't doing self-custody and DeFi. They brought this upon themselves.

Genuine question: what are you doing with that crypto anyway if not planning on cashing out back into fiat currency again?

My understanding is that the vast majority of cryptos are useless for actually paying for anything and the vast majority of businesses still don’t accept them anyway. So unless you are basically only using and holding BTC (which has a relatively small market of goods that can actually be purchased with it on a daily basis), I’m not really sure what good that crypto is doing for you other than sitting around as a speculative asset which will need to be converted via an exchange.

Genuine answer: I'm holding my crypto assets until I can exchange them for the goods and services I need. I never exchange any crypto back to fiat.

I don't "invest" to make money. It's a currency. I buy it to use it. I might have to hold it for 5 years, maybe 10, maybe 30, or maybe I'll die and crypto will never be successful (a sad thought but possible).

But in the meantime I'll do what I can to improve adoption. That includes working on core protocols, improving UX for non-technical users, or writing software that helps vendors with payment integration. I also make an effort to approach business and show that there is demand for crypto payments.

This is literally the only way to make crypto successful. All this price action non-sense, and people wanting to get fiat-rich is just unproductive noise to me.

you should invest your spare cash (no matter what the currency) into actual investments. cash is dead money, and taking a buy and hold approach to foreign exchange trading is probably a bad idea compared to something like (just off the top of my head) the All Weather Portfolio.

King dollar has been disagreeing with you.

And the people in the housing bubble mostly lived in those houses, yet they got burned by the crisis nonetheless.

You don't properly evaluate the present value of money if you are willing to trade your present money for future money at completely unknown conversion rate and adoption date.

Relative to the strategy of buying it when you could use it (which also satisfies your intents) you are practically speculating. You can also look at it like opportunity cost.

> You don't properly evaluate the present value of money if you are willing to trade your present money for future money at completely unknown conversion rate and adoption date.

Unknown can mean many things. I'm convinced that the fair value of crypto is much, much higher. Adoption is still sluggish and small.

I believe in crypto's success, which you might call speculation.

> This is literally the only way to make crypto successful. All this price action non-sense, and people wanting to get fiat-rich is just unproductive noise to me.

Why are you buying crypto regularly? If you don’t care about the price, and you have no idea what the fair value is - what’s the right coin and right amount to hold?

Your response is the first that's really interesting. I know that the fair value is much, much higher than it is now, because there is virtually no real adoption.

> what’s the right coin and right amount to hold?

That's an amazing question. I have truly no idea. I'm investing based on my personal conviction.

But this opens up a really interesting discussion about game theory and prediction markets. In a zero-sum prediction market, refusing to play is pareto-optimal and an equilibrium strategy.

So you could call me an irrational actor. I'm making a first move based on personal belief, thereby giving you an opportunity to arbitrage me. I believe that the fair value is higher than it is now. If you believe differently, short me. (I'm just joking of course, but I do find your question intriguing, and is something I've been thinking about a lot)

> I *know* that the fair value is much, much higher than it is now, because there is virtually no real adoption

(emphasis mine)

This seems like an incredibly bold claim to make. I would argue that there is little adoption because many have judged crypto to be of little value.

I often find that crypto enthusiasts who go all-in on game theory are from making rational decisions despite sounding partially logical.

This is such a meaningless stance in the context of this discussion.

If only everyone was buying various crypto and holding it in a cold wallet for the next 300 years!.. that’s the only true usage for crypto. No insidious banks, no fiat, no regulations, just pure bits in my virtual wallet until I die.

Owning coins that can't be exchanged for anything is kind of a pointless endeavor, is it not?

The value of most coins is going to zero as a result of this. Crypto is going to be a frigid wasteland after this for quite a while.

There are tons of vendors I actively use that accept crypto. Not as much as I'd like, but hardly no one.

But yeah, you're right, a currency nobody uses is obviously worthless. I'm attempting to drive adoption so that they CAN be exchanged for goods and services.

And when the mom-and-pop bookstore down the road can no longer exchange their crypto for fiat (needed to pay their taxes), do you think they’ll keep accepting your crypto?

It depends on the government.

"Crypto Currency Now Accepted For All State Tax Payments" https://tax.colorado.gov/cryptocurrency

"A sufficient amount of cryptocurrency to cover the tax, obligation and fees is converted to dollars"

No it doesn't. Your crypto is not and will not be denominated in crypto. It's still dollars.

Good proxy for the promise and reality of crypto though - you need to interact with some shitty PayPal crypto platform and they charge you charge 1.8% for the luxury of doing so.

For comparison, what is the credit card fee?

For a better comparison, the debit card fee would be about 25¢.

Ohio tried it, and now http://ohiocrypto.com/ is a blank page.

I looked at the Colorado site. I predict this will also get shut down. Basically you are paying more just so you can say, "I paid my taxes with cryptocurrency", which honestly seems stupid.

You're not getting it. Vendors almost all immediately convert Crypto to USD or their local currency. When the exchanges collapse that will no longer be possible. Poof, your ability to use Crypto also ceases at that very moment.

You are incredibly exposed to the same risk that these exchanges have.

If a large enough user base and set of vendors accept crypto, there's no need for converting to USD.

How do you handle refunds? Converting twice? Sure, charge users for it, you'll be driven out of the market by businesses who are not scared to keep a crypto wallet liquid.

How are the vendors that accept crypto paying their invoices? The company I work for has hundreds of vendors and suppliers, and none of them accept cryptocurrency. They all seem to want USD.

By expressing your desire for crypto payments to said vendors. If there's enough demand, the industry can change to accommodate it.

This dynamic actually exists even in much more conservative/slower moving fields like hardware manufacturing. It's a slow process

This train of thought requires every single person involved in production down to the person putting the item on your doorstep to be a true crypto believer.

Don‘t forget the IRS!

I was giving OP the benefit of the doubt that they live somewhere with terrible currency policy and no cap gains like Turkey or Czech Republic.

But yeah, something tells me the taxman isn't all that interested in your bitcoins.

Honest question: Suppose you lived in a world where crypto was more common. What if you have a vendor who refuses to use crypto? Would you still transact in fiat?

Even if crypto catches on more than it has, I do not think everybody will want to deal with it. I am do not do any importing or exporting. Dealing with another currency just seems like wasted energy.

I'm a pragmatic person, not some crazy fundamentalist. I do use fiat where necessary, yeah.

> I do not think everybody will want to deal with it.

The thing is, crypto should be much, MUCH easier to deal with, we just don't have mature software/UX around this. Because we're still figuring out best practices, and people are learning about this tech.

And do those vendors use crypto to buy from their suppliers? Otherwise, they have to raise their crypto denominated prices as the exchange rate falls and you're still in the same boat as selling it yourself.

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