Here's a statement of the obvious: The opinions expressed here are those of the participants, not those of the Mutual Fund Observer. We cannot vouch for the accuracy or appropriateness of any of it, though we do encourage civility and good humor.
Anything is dangerous in the wrong (or uninformed) hands.
In crypto's case, IMO it's just another vehicle to invest in. I would trust Bitcoin or Etherium versus any number of 's--tcoins' out there as something that might be fun to invest/trade/speculate in. (Heck, I toyed with the idea of rolling my own coin as a lark once.) That said, don't get me started on 'NFTs' -- which truly are horsesh--t ideas that if you buy them, you deserve to lose all your shirts on.
Crypto's past year reminds me of the housing crisis - bubble, mania, things only go up, you can't lose, tons of hideous corporate sponsorships, even worse counterparty risks, black-box systems, etc, etc. But of course, retail investors during the pandemic with extra cash in a ZIRP climate wanted yield, 'needed' something to do, and they speculated hard w/o thinking things through.
And then there's the 'tech-bro' arrogance factor. I mean, how the heck do you run a billion-dollar crypto exchange/brokerage using QuickBooks as your accounting software? smh....
I went into crypto viewing it akin to L3 debt - it was money that if I lost it all, I could still sleep that night. I made some nice profits yield farming, but punched out in April last year when my investing gizzard got an often-accurate queasy feeling. So thankfully, I didn't lose anything. But then again, I did my homework and knew what I was getting into ... how many people throw money into the markets (stocks, bonds, futs, options, crypto, etc) not knowing anyhting except that it MIGHT make them richer?
In terms of crypto, I'm reminded of this early part of the 'The Big Short' when Steve Carrell's team is researching if there's a housing bubble -- and especially the stripper conversation he has, which starts ~3:50: (yes, the scene in this video link is safe-for-viewing.)
It helps to understand the difference between investment and speculation when saying crypto is “just another vehicle to invest in.” Can something be an investment that produces no cash flow as a business or institution, produces no product, pays no dividends, and has no physical presence to be a “real asset?” If all you’re doing is betting something will go up in price, hoping someone else will pay more for it—someone who less euphemistically would be called “the greater fool”—then that seems like speculation to me, i.e., gambling.
The difference is if a viable business’s stock price collapses, it is still a viable business that produces products people consume and profits investors can enjoy. Such a business can be taken private or pay a dividend, so it still has a value even if speculators think it doesn’t.
The same can’t be said of crypto. It exists based on belief. While one could say the dollar does too as “fiat money,” that isn’t actually true as there is a massive, very real government behind it that has taxing, interest rate and tariff authority to defend its value. Crypto was invented by some guy whose identity we still don’t know and is being promoted by libertarians who basically want to sabotage nation states, avoid taxation and have an untraceable currency for crimes.
I don't think that crypto was designed as an investment vehicle, but it seems that that is what it has turned into. I have always wondered where the money actually goes when you buy crypto? Are there clearing houses that take care of the buying and selling? And what about the fact that anybody can create crypto? Euphemistically known as mining. Personally I wouldn't go near it under any circumstances.
In absence of Congressional action(s), cryptos are now being choked by the US regulations/investigations/enforcements. They are also being starved of oxygen/US-banking-ties. These stopgap measures will just lead to further haphazard crypto growth overseas. But as was seen by last year's crypto debacle, that has some ways to draw in and harm the US public. As the Fed is also working on its CBDC/digital-dollar, time to put in some legislation is now.
It’s odd because I often hear from the usual pundits that any attempts to tax people or regulate industry are socialist and anti-American, but I can’t think of anything quite so anti-American on the right wing as crypto. Its existence is an attempt to undermine and circumvent the U.S. dollar, and what could be more American than our sawbucks? Our currency is arguably the most powerful representation of America worldwide, and if the dollar fails as the world reserve currency it doesn’t bode well for us as a superpower.
Perhaps that is the actual value of crypto as an investment— it represents a belief and perhaps even a hope that America will fail. I don’t think it’s an accident by the way that Russia has become intensely interested in crypto. It is a nation state and currency weapon of mass destruction, like investing in a missile pointed at the dollar. The problem with even that thesis is America has ample financial and legal means to defend itself against crypto. One of them is interest rates. A lot of investors want dollars now so they can buy T-bills, CDs and money markets yielding almost 5%. You get 0% on your crypto investment, and any entity issuing yield-paying debt on crypto would be of dubious credit quality versus the government which has taxing authority to pay its bills, the financial terrorists in Congress notwithstanding.
Then there are the legal defenses. As Yogibearbull rightly pointed out, it wouldn’t be too hard for regulators to clamp down on crypto for attempting to muscle in on the dollar. Moreover, if blockchain technology is the most interesting and valuable aspect of crypto—and I believe it is—it wouldn’t be too hard to use that technology for our existing all-American much beloved dollar.
The bigger question might be, will crypto be deemed accceptable only if it's a 'legitimate' digital currency controlled by a central bank? If so, to many that would defeat the purpose of crypto being a global currency existing outside the soverieign system ... which I think is why a decent chunk of people, even in America (ie, preppers, doomsayers, some fringe folks, etc) might gravitate toward it, even if it's considered potentially 'anti-American.'
We're still in the very early innings of this game. But once again, technology has evolved much more quickly than policy, so this regulatory/legal conundrum is quite understandable, if not expected.
Ah, @Old_Joe. You're using too much logic, there. I maybe could swallow a "digital dollar." But isn't that what we already do, whenever we pay for something online? Fake "currencies" taste like wormwood and smell like durian to me. In East Asia, durian is banned from taxis and public transportation, for that very reason: it smells so bad. *Great performances and a compelling story in "The Big Short." **A stinky wet, grey day here in "Paradise." February has been a wet, grey month.
Comments
In crypto's case, IMO it's just another vehicle to invest in. I would trust Bitcoin or Etherium versus any number of 's--tcoins' out there as something that might be fun to invest/trade/speculate in. (Heck, I toyed with the idea of rolling my own coin as a lark once.) That said, don't get me started on 'NFTs' -- which truly are horsesh--t ideas that if you buy them, you deserve to lose all your shirts on.
Crypto's past year reminds me of the housing crisis - bubble, mania, things only go up, you can't lose, tons of hideous corporate sponsorships, even worse counterparty risks, black-box systems, etc, etc. But of course, retail investors during the pandemic with extra cash in a ZIRP climate wanted yield, 'needed' something to do, and they speculated hard w/o thinking things through.
And then there's the 'tech-bro' arrogance factor. I mean, how the heck do you run a billion-dollar crypto exchange/brokerage using QuickBooks as your accounting software? smh....
I went into crypto viewing it akin to L3 debt - it was money that if I lost it all, I could still sleep that night. I made some nice profits yield farming, but punched out in April last year when my investing gizzard got an often-accurate queasy feeling. So thankfully, I didn't lose anything. But then again, I did my homework and knew what I was getting into ... how many people throw money into the markets (stocks, bonds, futs, options, crypto, etc) not knowing anyhting except that it MIGHT make them richer?
In terms of crypto, I'm reminded of this early part of the 'The Big Short' when Steve Carrell's team is researching if there's a housing bubble -- and especially the stripper conversation he has, which starts ~3:50:
The difference is if a viable business’s stock price collapses, it is still a viable business that produces products people consume and profits investors can enjoy. Such a business can be taken private or pay a dividend, so it still has a value even if speculators think it doesn’t.
The same can’t be said of crypto. It exists based on belief. While one could say the dollar does too as “fiat money,” that isn’t actually true as there is a massive, very real government behind it that has taxing, interest rate and tariff authority to defend its value. Crypto was invented by some guy whose identity we still don’t know and is being promoted by libertarians who basically want to sabotage nation states, avoid taxation and have an untraceable currency for crimes.
Perhaps that is the actual value of crypto as an investment— it represents a belief and perhaps even a hope that America will fail. I don’t think it’s an accident by the way that Russia has become intensely interested in crypto. It is a nation state and currency weapon of mass destruction, like investing in a missile pointed at the dollar. The problem with even that thesis is America has ample financial and legal means to defend itself against crypto. One of them is interest rates. A lot of investors want dollars now so they can buy T-bills, CDs and money markets yielding almost 5%. You get 0% on your crypto investment, and any entity issuing yield-paying debt on crypto would be of dubious credit quality versus the government which has taxing authority to pay its bills, the financial terrorists in Congress notwithstanding.
Then there are the legal defenses. As Yogibearbull rightly pointed out, it wouldn’t be too hard for regulators to clamp down on crypto for attempting to muscle in on the dollar. Moreover, if blockchain technology is the most interesting and valuable aspect of crypto—and I believe it is—it wouldn’t be too hard to use that technology for our existing all-American much beloved dollar.
The bigger question might be, will crypto be deemed accceptable only if it's a 'legitimate' digital currency controlled by a central bank? If so, to many that would defeat the purpose of crypto being a global currency existing outside the soverieign system ... which I think is why a decent chunk of people, even in America (ie, preppers, doomsayers, some fringe folks, etc) might gravitate toward it, even if it's considered potentially 'anti-American.'
We're still in the very early innings of this game. But once again, technology has evolved much more quickly than policy, so this regulatory/legal conundrum is quite understandable, if not expected.
Not at all. Just because some people choose to refer to it as an "investment" doesn't make it so.
Quite a number of Americans choose to believe that the 2022 election was "stolen" and that Trump actually won. That doesn't make it so.
Quite a number of Chinese citizens choose to believe that the entire South China Sea belongs to China. That doesn't make it so, either.
I maybe could swallow a "digital dollar." But isn't that what we already do, whenever we pay for something online? Fake "currencies" taste like wormwood and smell like durian to me. In East Asia, durian is banned from taxis and public transportation, for that very reason: it smells so bad.
*Great performances and a compelling story in "The Big Short."
**A stinky wet, grey day here in "Paradise." February has been a wet, grey month.