Crypto’s collapse may have done the economy a favor
wsj.com
wsj.com
That's the reality. The only reason prices went up is because the "whales" build up this domino bonanza sucking in real people's money in the process.
Since no sane person would invest in crypto in the short to medium term, I don't see how the industry will recover from that.
Personally, I believe the only way is to "earn" for doing stuff on the internet. Yet, the experience is that earning in a highly volatile currency is not the incentive many people think it is.
I don’t think people entirely buy lottery tickets expecting to win and doing the rational thing of calculating expectation values and taking calculated risks after weighing opportunity costs. They just want to daydream and paying a few dollars for a ticket makes that more exciting.
It's basically being marketed as a get rich quick scheme to most retail.
* options have legit uses but almost no one is retail is using them for things like capping risk.
Of course, they're are always people who spend everything they have on gambling, but most people agree that a lottery is something you expect to lose.
When people invest, they don't expect to lose. Of course course, there is always the risk of losing, but the difference between a lottery and an investment is that there is an expectation of loss in the former case.
There were enough cryptocurrencies that got pumped enough that people who bought into crypto felt that they had a good chance at succeeding. Also, there's been an insane amount of delusional fanboyism surrounding crypto that would be seen as completely insane if we're talking about gambling.
A lottery ticket costs no more than a few dollars. Even if you buy a bunch of tickets to improve your odds, that's still a few hundred dollars tops.
What I mean is to say, it is a more honest/accurate statement that "you have zero chance of winning when you buy a lottery ticket" is more true than claiming they have a chance, (even if it is literally true) due to how our mind biases work.
We buy raffle tickets, not because we expect to win, but because we support the cause.
Gambling can be entertainment. If I spend all night in a casino, end up $50 down, but had a fun night, how is that different to a ballgame, or show, or whatever. [1]
In the same way people buy lottery tickets not because they _expect_ to win, but because its entertaining to _think about winning_, and the ticket is the price of admission. [2]
[1] clearly there's a difference between losing entertainment money, and rent money. And gambling is not a good hobby for most people.
[2] actually _winning_ the lottery has massive relationship downsides, which one can clearly ignore while daydreaming. Losing all your friends, an almost inevitable consequence, seems like a bad thing...
Spending enough money on lottery tickets to produce a quality of life change would, on the other hand, be a bad idea.
There are always marks to go around.
However we would also be remiss not to observe that the reason a collapse in something like the stock market is so painful is because central banks and governments manoeuvre to artificially flush the system with huge amounts of credit. That means that a crash takes out not only current earnings, but forces a big re-evaluation of what is possible in the future too as huge amounts of leverage start to unwind. Then the cavalry arrives to bail everyone out and preserve value-destructive systems.
The central banks aren't going to ride in to save the crypto markets, so people are going to be more cautious about levering up. We expect the falls to be sharper, more decisive and over more quickly with less lingering pain.
- WSJ
E.g., all AOC could muster is a self-congratulatory joke about League of Legends.
And he is still scheduled to speak at the NYTimes event next week. NYT has harassed others for much much less (https://www.nytimes.com/2020/07/14/business/media/bari-weiss...).
https://www.marketwatch.com/story/why-arent-you-in-jail-alre...
TIL.
Maybe if you are AoC or her fans you need follow someone hard to know what they said and didn't say.
But why don't you address my comment instead of taking a swipe at me?
(a) trying to prosecute the con men (helps no one, is just a punishment)
(b) systemic changes to prevent such crime in the future (helps middle class not to make a stupid decision)
(c) some other policy, like, I dunno, better healthcare access (helps people in peril regardless what their decision is)
Rationally, there are many systemic problems to solve by policy and proper justice is just too low on the list when it comes to benefit/cost ratio.
I take issue with this statement. I accept that there are limited resources and there is a question of how to use those resources wisely. However, there is a reason beyond simple question of karma/balance for a society to ensure that sufficiently egregious crime is punished. I absolutely disagree that it helps no one as it very well may stem a tide of future con-men, which is not without a toll.
Now compare that to option c ( other policy change ), which, in current gridlock setup seems somewhat unlikely.
That said, I accept that there are other considerations at play here.
But to be honest, I am not sure retributive punishment really prevents crime all that well. U.S. has a lot of laws against fraud, and has a pretty good track record in investigating and punishing as far as different governments do, and fraudsters still appear. I think in most cases, people aren't rational about committing a crime, they often self-delude themselves somehow that whatever they are doing is morally acceptable. I think there was an interview with the FTX CEO, who answered the interviewer's question with incredulous "the way you describe what we do, it indeed looks like a fraud". So I think some people have the ability NOT to see their pyramid scheme as a pyramid scheme.
On the other hand, people who will rationally consider whether to do a crime or not, should not necessarily think that because someone got away with a crime, they will get away with it too. You might as well think that the police/justice will be better prepared to a similar crime now.
There is no such thing
>helps no one, is just a punishment
Not true. This makes me feel better. That is invaluable.
>helps middle class not to make a stupid decision
I don't feel anything about that.
>helps people in peril regardless what their decision is
I don't feel anything about that.
For anyone wondering, the purpose of crypto is not to be a store of value, but to be a currency. If you don't want to speculate on its price you buy BTC that day, you transfer that BTC to purchase whatever good you want. The seller can do the same, converting his BTC to something else or for cash as soon as he makes a sale.
To clarify:
1) It is a lot better if Bitcoin is used by a relative minority of people and flies under the radar. In places where it's really needed it's penetration will be a lot higher. We see that in Venezuela and in many places in Latin America with high inflation.
2) Centralized exchanges using a centralized digital coin with no backing != crypto
3) Most crypto != crypto. Bitcoin surely is.
4) Speculating on its price is an unintended side-effect.
5) The purpose of crypto is to remove the middleman.
6) The SBF saga has nothing to do with crypto.
I hope that explains some of it.
I have zero skin in the game and I couldn’t care less if btc goes to zero or 1 million. But btc seems to be terrible even as a currency with terrible transaction processing times and overheads.
The day cash is banned, it's completely over.
1) When you buy things to survive/thrive with crypto, you also owe taxes to the government
2) Crypto isn’t legal tender for paying your taxes in the United States (or almost any other country)
3) You (or your counter-party) have to use an exchange of some type to obtain USD and pay your taxes
4) If you don’t pay your taxes the government will seize your assets and do it for you
5) If you resist the government will use violence to incarcerate you
I hope that explains some of it.
Crypto for cash, peer-to-peer, without an exchange. I personally know lots of people doing it, every single day. No way to map one BTC wallet to an individual. Those unpaid taxes do not exist.
I bid you best of luck with the IRS. Those unpaid taxes do indeed exist and I’d suggest you talk to a lawyer if what you wrote is what you truly believe.
I don't know. It really comes down to what Alice and Bob agree to in the exchange, that's the beauty of it. Purchasing property using property is kind of pushing it
Otherwise EVERYTHING would be "valued" at $0 right before it's sold and then people would "gift" the sale amount to dodge taxes. The IRS isn't dumb.
Here's the thing: abstractions (or "man-made horrors horrors beyond your comprehension") are feeble. With a big enough catastrophe, natural or not, the IRS along with any US intitution will cease to exist.
Just because the government doesn't know about the exchange does not relieve the parties of their legal obligations.
Whether or not a person believes they should pay those taxes are immaterial to the fact that they are owed.
Kind of a "Don't quote laws to men with swords" situation
Satoshi only solved one part of the puzzle with bitcoin. But the problem is much larger and crypto-land is beset with untalented frauds.
monke_face_nft-2 (copy).png
If there were a real government demanding payment of taxes in bitcoin, then it would have value. Until then, it does not. El Salvador does not count because El Salvador is inconsequential, and either way they have no army. Also, it's obviously a political stunt by their young and hip president.
> The density of connections between these players is nicely illustrated with a sprawling diagram in an October report by the Financial Stability Oversight Council ( https://home.treasury.gov/system/files/261/FSOC-Digital-Asse... ) , which brings together federal financial regulators.
> To historians, this litany of contagion and collapse is reminiscent of the free banking era from 1837 to 1863 when banks issued their own bank notes, fraud proliferated, and runs, suspensions of withdrawals, and panics occurred regularly. Yet while those crises routinely walloped business activity, crypto’s has largely passed the economy by.
I'd also suggest looking at https://www.fdic.gov/about/history/timeline/1850-1899.html
The "free banking period" ( https://link.springer.com/chapter/10.1057/9781137361219_2 ) ended with the passage of the National Bank Act - https://www.occ.treas.gov/about/who-we-are/history/founding-...
Crypto is trying to reestablish the banking system of the 1800s with all the fraud, bank runs, banks creating their own currency, and the like... and then realizing why all the regulations that are in place are in place.
What it's really doing is proving that those regulations aren't necessary, because it's possible to have a crypto crash without affecting the general economy.
Because the benefit of those regulations is so that ordinary people can have a safe place to keep their money. But that works even if it applies only to savings banks and not to crypto, because that gives risk-averse people the safe place to hold their deposits even while a fast-moving unregulated system exists alongside it.
Which gives the best of both worlds.
This is only true because the only people (to within a rounding error) using cryptocurrencies are speculators, scam artists, and their victims.
If cryptocurrency ever became what its proponents suggest—a mainstream currency in general use—then these crashes would affect regular people and the general economy just as the ones mentioned in the 1800s did.
Meanwhile it could enable technologies like P2P social media where distributed hosts get paid in crypto for providing network services without needing a centralized payments intermediary and various other things.
There are a lot of people who have put a few thousand dollars that they couldn't really afford to lose on the promise that this was the future of money and that they needed to get in on the ground level.
https://www.theguardian.com/technology/2022/nov/19/the-money...
> ‘A lot of us feel cheated’ William, a construction site manager from California, was woken by a text from friends about potential trouble at FTX in the early hours of 8 November. At the time, the 40-year-old had about $85,000 of fiat currencies on the exchange, plus three bitcoins worth about $55,000 and about $10k in other altcoins - a significant chunk of his assets.
Bitcoin and other crypto currencies are not the domain of the millionaires and billionaires. Yes, these people are speculators - but they're ordinary people with incomes much closer to the median than likely you or I.
That doesn't make them not speculators. Speculation comes with risk.
If schools are teaching ordinary people to put a significant fraction of their net worth into speculative investments, the solution is better schools, not banning things.
You appear to be stating that cryptocurrencies could hypothetically exist and Do Things beyond fraud and speculation without many mainstream people using or caring about them.
While this is (again, hypothetically) true, I don't think it refutes my claim that the only reason cryptocurrency crashes don't affect the general economy is because most people don't use them (and the few uses they do have are almost entirely negatives). Indeed; I think what it does is posit a world where most people don't use cryptocurrencies...and crashes could still affect the general economy, through the medium of the (hypothetical) non-scammy, non-speculative uses of cryptocurrencies. Because unless you're proposing a system where people just keep trading around the same tokens, which have absolutely no ability to pay rent, buy food, or otherwise improve their lives outside of these very niche "P2P social media" areas, you're not talking about a currency. You're talking about some kind of a "social media score".
I wonder how accurate this article will look in 10 years.
Think of some stablecoin being used on the scale of Treasury bills, and then going to 0.
This is primarily why I think crypto is here to stay in one form or the other unless either majority of the population is convinced its worthless ( as a speculative or money transfer tool ) for one reason or there is another reason to kill it ( if I had to guess, I would bet on environmental since it seems to have most sway now ).
[1]https://www.federalreserve.gov/paymentsystems/fedach_yearlyc... [2]https://www.barchart.com/crypto/quotes/%5EBTCUSD/technical-a...
edit: some additional disclaimers in brackets
https://www.forbes.com/sites/javierpaz/2022/08/26/more-than-...
Not really. Their economy was in crisis which is one of the main reasons they tried to secede. Slave labor could not compete with free labor.
If as you say "Slave labor could not compete with free labor" then why didn't they (the slave-owning class) switch to free labor ASAP?
It's impossible to care about 'the economy' because it doesn't exist. It's grist to economics' lit-crit, and as such there are as many imagined 'economies' as there are critics, but none maps on to natural kinds. One day there might be a science of some of the phenomena currently scrutinised by economists. It will be a branch of the ecological sciences.
It's long been clear to me that the theoretical end of the economics spectrum doesn't supervene over real physical systems. It's a technically fancy adumbration of fictions (money etc). Historically-informed political economy is, of course, a different matter.