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Comment by reidjs | Hacker News Reader

Words of warning for anyone choosing to dabble in the cryptocurrency space - anything that you “have” on an exchange account is owned by the owner of the exchange, not you.

This is because whoever knows the private key to a crypto wallet is the owner of the funds. Usually, exchanges don’t give you access to the private key(s). And even if they did give you access, it’s still not safe because there’s nothing stopping them from moving the funds to a different account without your knowledge.

I wouldn’t recommend buying crypto unless you at least have a decent understanding of public/private key crypto

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Another word of warning - don't take the advice of anyone who claims to know what they're talking about. I remember listening to a podcast where Kevin Rose said that people sitting with crypto in wallets were idiots when they can put it in BlockFi and earn interest at no risk. I was amazed. It seemed so obvious. I put my money in BlockFi and after a few weeks fortunately changed my mind. It seemed too easy. BlockFi are currently going through bankruptcy proceedings.

After dabbling in the technical side, I decided to wind down the wallet files that I probably wouldn't do a good job of securely storing and put everything in the biggest exchange instead.

10 years later, I'm still waiting on MtGox bankruptcy proceedings :o)

I don't really understand Japanese bankruptcy law, but the final notice I saw was that the amount of funds missing is insignificant. My guess is that something about the legal system there is allowing them to delay paying out the funds more or less indefinitely.

Naw, kinda the opposite. They “found” a significant amount of missing bitcoin. Then bitcoin skyrocketed in value.

Technically the creditors losses are “crystallized” at the time of bankruptcy and if the organization wanted to push it, could make the creditors whole and end up with the remaining value.

Sometimes this happens in real life where equity holders end up getting some payments post-bankruptcy liquidation.

As I understand it, mtgox is going to go through a procedure to pay out the excess to the creditors anyway, which probably further delayed things.

Many bankruptcies take a significant period of time. Even Bernie Madoff creditors continue to receive distributions from the estate.

well thanks for the explanation. I see now there is a claim that payments commence by Oct 2023. So we will wait and see about that one.

You are very patient

Everyone I know who had funds on MtGox at the time of bankruptcy, ended up selling their claim (most to Fortress), for a pretty good amount, in fact more in USD than what their BTCs were worth at the time of bankruptcy

Who ended up better off? The claim seller or claim buyer?

(Obviously there’s an element of risk and discounting of future returns, but I’m sure the claims buyers know what they’re doing. They’re not in the business of taking Ls)

It all depends

If the people that sold needed the money, they are for sure better off, even if they got less money than waiting

Additionally, it’s impossible to know if they invested it in something that gave them better returns than waiting

Fortress might know what they are doing, but for sure they can’t exactly predict the price of BTC or that there would be a pandemic and the behavior of the markets during the pandemic

Potentially someone that sold in late 2019 and put their money into TSLA, NVIDIA or even Moderna, might have made more money than and unknown figure they could get when the bankruptcy proceedings finally pay out. If they exit(ed) the market at the right time

I think it’s a good trade for both sides, no need to have a winner and a loser

Sure, but you're assuming that the claim seller knew more about future average returns than the buyer. Chances are they didn't, or even if they did, took too little after the buyer's commission and still lost out.

But hey, sometimes the hedge fund has a better job acquiring "dumb" money and pays more than claims are worth just so they can get their cut.

Crypto remains utter gibberish. There are no fundamentals. Supply and demand are both pure imagination. It exists in a market of pure herd mentality. It was created as currency and never as an investment asset. Any gains or losses in value are purely coincidental.

Yup. If you read Bitcoins white paper again, you realize that it proposes a micro transaction system for the web. And it has failed absolutely as that. And without a natural demand for it, the speculation around it is gibberish. It is waiting for a future that nobody, not even the people that have bought in, is working for. Since how can people HODL a "currency", and at the same time that currency attain status as a common mean of exchange? And it's usage as a hedge or value conservation is even more laughable. During an economic crisis, people are looking for work, for ways of putting food on the table. Assets like gold maintain their value due to the natural demand from jewelry and industry. Nobody is looking for internet funny money during a crisis. If you look at it's price history graph, it basically follows the stock market hype and fear periods, without any of the fundamentals of companies actually producing value that sustains stocks in the long run.

If you look at criticism from the early days of bitcoin, the economic perspective was their model would instantly breed deflation. That's essentially what's happened. A currency that massively increases in value is the exact opposite of what you ever want to happen to a currency.

> Nobody is looking for internet funny money during a crisis.

Ransomware victims would disagree!

It has not failed for web microtransactions -- goin just fine for darkweb hosting, drugs, and other shadyness. admittedly its mostly Monero at this point...

It's not good at anything. As a currency it's completely broken, who wants a currency that fluctuates to this extent and which may fold overnight? Simultaneously, outside of a couple explosive events which I'd argue will never repeat, it's a terrible investment. That's not even touching the moral ambiguity of a "currency" being used largely by some of the worst state and private actors in the world.

Surely you see /some/ non-epsilon value to /someone/ in non-interdictable transactions and an "asset" that you actually have to put me through thermo-rectal cryptanalysis to get your hands on.

You may not think particularly highly of ISIL or North Korea, but they still bid in the global marketplace! North Korean counterfeit 100's are of /very/ high quality and accepted globally.

Alls I'm saying is that Markowitz' portfolio diversification strategy is still viable.

What does the crypto have to do with it?

I wouldn't recommend giving your hard earned money to people in an unregulated market.

If we didn't have banking regulations, bankers would run off with your money - and when they did - you'd be left with nothing.

At least with FDIC & SIPC - you're not left with nothing when they run off.

> If we didn't have banking regulations, bankers would run off with your money

> What does the crypto have to do with it?

The fact that crypto doesn't have those regulations.

No built-in regulation perhaps, but many jurisdictions are starting to regulate it, for good reason.

I haven’t heard of this, this is good news! Crypto is such a scam on its face.

Can you share the jurisdictions that are starting to regulate it?

What crypto people want to mean by "regulate it", and what everyone else means, are unrelated.

Crypto people want it to mean, "We continue to do what we want to do, but claim to follow regulations." Meanwhile everyone else means, "You follow KYC and AML regulations properly. So you shut down criminals. Can reverse transactions when ordered by a bank. And have sufficient knowledge of who you're dealing with to help law enforcement in a practical manner."

Crypto people respond, "But once it is cryptographically signed on the blockchain, it is final! And wallets are designed to be anonymous! We want to be regulated, with regulations that make sense for crypto!"

Sorry crypto. You can't have your cake and eat it too. Right now you're an attractive nuisance for criminal enterprises. There is no particular reason why society should want crypto to be part of the financial system. There are good reasons to shut down crimes like ransomware.

ah, so what we need are another self serving set of capitalists to convince Congress to create taxpayer funded insurance to cover mismanaged businesses, just like in 1933, to give LambdaComplex the assurance they need to move the goal post further

haven't seen that proposed yet, but stranger things have happened regarding what the FDIC covers

> What does the crypto have to do with it?

How do you regulate Bitcoin like you regulate dollars in the bank?

That's what crypto has to do with it.

But we have banking regulation. Which is exactly the point, compared to the unregulated crypto space.

The reason they don’t run off is they can make billions legally by not stealing your money.

> I wouldn't recommend giving your hard earned money to people in an unregulated market.

I'd extend it to regulated as well. As soon as we're deprived of the ability to own usable cash - we'll be left with mere illusion of ownership.

CBDC is the final step to modern slavery.

Maybe in the crypto sense but what about the legal sense? Are there regulations in this area? I know regulations are light in the crypto world so it's a genuine question.

Like my bank has my money as well. If possession is all that matters then they would own it too. But luckily there are laws that say that they don't and a bank CEO that withdraws customer funds before a bank collapse is going straight to prison.

It only matters if laws are enforced. Notice SBF's parents, despite all the involvement with FTX, are still running free.

Are they going to keep running free though? https://www.nytimes.com/2023/09/19/business/ftx-sam-bankman-...

nah. they're definitely under a microscope and may be nailed before too long.

courts move slow. how long did it take to see Elizabeth Holmes get convicted?

> anything that you “have” on an exchange account is owned by the owner of the exchange, not you

I heard that actually applies to normal banks too. Once you deposit your money, it’s now their money with a promise to repay you what you deposited.

Except bank have deposit protection scheme, so whatever happens you're covered thanks to the fact that they proved to respect a framework of regulations in order to make deposits covered

For U.S. banks, coverage is limited to $250k per bank-account-holder.

You are correct. I'd like to add, though--this is a soft cap. It's $250,000 per bank, per ownership category. You are insured up to $250,000 for each of the ownership categories at a single bank.

These are the ownership categories: -Single accounts (owned by one person). -Joint accounts (owned by more than one person). -Certain retirement accounts, including IRAs. -Revocable trust accounts. -Irrevocable trust accounts. -Corporation, partnership and unincorporated association accounts. -Employee benefit plan accounts. -Government accounts.

If you were to open a single account at Wells Fargo with 250k in it, you can also open a joint account with 250k and have it insured. Then, you can go to Bank of America and do that same thing.

Also, I'm not sure if America has ever enforced the cap, but it's safer to keep it under 250k per ownership category.

>This is because whoever knows the private key to a crypto wallet is the owner of the funds.

Even better, funds don't have to exist to show them on a screen. Numerous exchanges collapsed because the stated funds weren't in the exchange in the first place and what the traders actually traded was numbers in a MySQL database when the actual funds they sent to the exchanges were being bet on somewhere else.

The sad reality is, for most people in the trade crypto assets are whatever the screen says.

Both have their risks

For example, people that had their crypto on MtGox were still able to file claims for their funds in bankruptcy proceedings

And a lot of them have also been able to sell their claims, for more money than their BTC were worth when MtGox collapsed

At the same time, there’s plenty of stories of individuals loosing their keys, forgetting their paraphrase or getting hacked

Crypto can be pretty risky, regardless of how/where you store your funds

This isn't really correct, especially in New York which has strong consumer protection for crypto.

How many exchanges place their assets and management staff within NY's reach? Good luck getting Changpeng Zhao to show up and fork over his holdings.

Gemini, the subject of this story, for one.

That's one, and it collapsed. Ask its victims how useful NY's protections have been there thus far.

Gemini didn't collapse. the title of this article is clickvair and it purposefully confuses Gemini with Genesis which isn't the winkelvii exchange.

Are you thinking of Genesis? I was talking about Gemini, the exchange owned by the Winklevoss twins. It has not collapsed. (Disclosure: I am an active user.)

Genesis's lending operations are what collapsed.

>I wouldn’t recommend buying crypto

ftfy

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