Cryptocurrency Blood Bath

[Au165]

Interesting watching the market today as the whole sector takes a pretty good size hit. I play around in the space and have made a decent amount of money, just figured I'd start a thread for anyone else who does the same to discuss.

A lot of people have attributed this to scares in the Asian markets, but that all seems to be unfounded. I think the real issue is the realization that 90% of the cryptos are actually intricate pump and dump scams that are similar to what we see in pink sheet stocks, but it's unregulated so it's really not illegal technically.

[fredtoast]

Top of this page has an ad for crypto currency right now.

As for the reason in the fluctuation I see the same as always. All the "experts" have a theory about why the market moved the way it did, but the only come up with these explanations AFTER the market has moved. The truth is that they have no idea how the market is going to perform and when it takes a sudden drop or rise they just come up with some random reason.

[Nebuchadnezzar]

I remember when you could buy a single BitCoin for pennies, something like .18 cents back in 2009 or 2010. I also remember thinking that I had some money and should invest maybe $500.00 to $1000.00 and see what happens.

I never thought it would go anywhere and now I'm kicking myself. I don't know if I would have been able to buy back then though.

As for the cost now, I think once more and more places start accepting BitCoin, it will level out and become a somewhat steady currency but with how this thing fluctuates so drastically, it's going to take some time.

[XenoMorph]

the guy that made Dogecoin as a joke said it just hit a 2 billion market cap.

[SunsetBengal]

(01-16-2018, 07:01 PM)XenoMorph Wrote: the guy that made Dogecoin as a joke said it just hit a 2 billion market cap.

That's impressive.

On another note, I was falling asleep to an episode of COPS, the other night.  One of the suspects being arrested was wearing a Pot Coin T-shirt.  It gave me a chuckle, but I've seriously considered in investing into the marijuana stocks.

[Au165]

It appears a relatively well known crypto Ponzi scheme, Bitcconnect, has shut down. The crazy thing is people still lost hundreds of millions and it was an obvious Ponzi scheme. People in an attempt to get rich quick will literally believe anything, and it is sad. They used classic MLM strategy of using influencers on YouTube to push it and their referral link to make money. I hope the YouTubers go down for being complicit in this.

[WeezyBengal]

Bitcoin and all cryptos sound sketchy as hell. Im staying far away. Sounds like a matter of time before those markets come crashing down.

[CKwi88]

A few people are going to make an absurd amount of money. A few more people will make modest gains. A lot of people are going to lose a lot of money.

[Au165]

(01-17-2018, 12:13 PM)WeezyBengal Wrote: Bitcoin and all cryptos sound sketchy as hell. Im staying far away. Sounds like a matter of time before those markets come crashing down.

The internet and .com bubble were "sketchy" too at first but after the initial collapse of all the pop up companies it now is every day life. The technology behind bitcoin and most cryptos in general is solid and and getting better. You will see block chain and similar technologies used going forward in other avenues of our every day life eventually. Where bitcoin and other cryptos fall apart as a currency is their volatility. You can't have a currency that is so volatile otherwise no one will use it or accept it. It has become more of a wealth container to most which actually damages the use of it in a functional manner. 

What made Bitconnect different is they created a coin as an escape plan for their ponzi scheme investing business. They promised people crazy returns on their bitcoins they loaned them because of a "proprietary" trading bot that would use their coins to play the ups and downs in the bitcoin market making everyone money. Well as most can see from that explanation it is the script of basically every ponzi scheme in the world. The coin was simply the way they paid people out from their scam and so by doing that they were able to double dip selling the coins and taking the investments. One red flag you should always look at when dealing in crypto is coins that are "preminned" meaning the company can release them freely into the market, that was the case here. Bitcoin and many other coins require people to mine the coins in order to control the influx of coins into the market. This decentralized process of creating currency is actually one of the tenets of crypto being a good currency in the future.


The reality is there are coins that have tangible uses and are still in line with the original vision of decentralized transaction tools. These are the things I tend to invest in because they have actual used even outside of being every day currency, but many many many coins have no use and are inf act scams. Buyer beware, treat all of them as investments your willing to lose though as an unregulated market can always get sideways quick.

[fredtoast]

(01-17-2018, 12:32 PM)Au165 Wrote:  One red flag you should always look at when dealing in crypto is coins that are "preminned" meaning the company can release them freely into the market, that was the case here. Bitcoin and many other coins require people to mine the coins in order to control the influx of coins into the market. This decentralized process of creating currency is actually one of the tenets of crypto being a good currency in the future.

If there is nothing backing the currency why does it matter how many there are?

And I thought there was supposed to be a limit to the number of bitcoins that couled be mined.

[Au165]

(01-17-2018, 04:13 PM)fredtoast Wrote: If there is nothing backing the currency why does it matter how many there are?

And I thought there was supposed to be a limit to the number of bitcoins that couled be mined.

Because it's like stocks in this aspect. Stocks with large out standing shares have serious issues when it comes to the ability for key figures to quickly liquidate shares, or in this case coins.

There are and they are actually limited to how quickly they can be mined however Bitcoin is only one of the thousands of crypto currency. Many follow similar structures, but some use a "premined" structure that essentially just makes them penny stocks. The premined structure is what Bitconnect and some other's use and that is the red flag I am referencing. 

[fredtoast]

I actually have a decent understanding of economic principles, but I have no idea how these crypto curriencies work.

Someday I need to take a little time to read up about it. But I just don't understand how you can make money from thin air with nothing of value.

[Au165]

(01-17-2018, 06:06 PM)fredtoast Wrote: I actually have a decent understanding of economic principles, but I have no idea how these crypto curriencies work.

Someday I need to take a little time to read up about it.  But I just don't understand how you can make money from thin air with nothing of value.

If you consider them "money" then it is difficult to grasp, but if you consider them as a couple different things it's not so confusing. If you think of them as a store of wealth, which is how many have treated bitcoin then it makes some sense. If you consider them as vessels for exchanging wealth, think of them as relatively friction less and easy ways to transfer large sums of money quickly with little red tape, then they have value. If you consider them as a way for emerging country citizens to fight hyperinflation from their own country by easily being able to convert their local currency to something not affected by their own government, then it has value. If you consider the value of block chain technology and other related tech, then you can see the value some coins bring in tracking ownership. 

I alluded to it earlier, but crypto currencies as currencies in the classical sense don't really make much sense. They have value in the same way many stocks that don't pay out dividends have value. A lot of stocks provide little monetary return other than being tied to a company. You can say stocks provide ownership in a company, however if you don't get a dividend and you don't have enough to equate to a controlling stake do you really have anything other than that tie? Crypto currently is basically speculative trading of a "commodity" probably more so than a currency. In the future the hope is that the tech is used in many other arenas as there is great value in a decentralized ledger that basically proves out a lineage. They have discussed crypto could be the future of stocks as it would cut down on almost all backroom paper work associated with an IPO and would make actual trading a lot easier. 

We are probably still a decade away from crypto as a currency and even then it'll probably take a nation taking it on and building their own crypto currency. There are a lot of advantages to it, but like many things in it's infancy it'll take time to work through growing pains. 

[fredtoast]

(01-18-2018, 09:49 AM)Au165 Wrote: If you consider them "money" then it is difficult to grasp, but if you consider them as a couple different things it's not so confusing. If you think of them as a store of wealth, which is how many have treated bitcoin then it makes some sense. If you consider them as vessels for exchanging wealth, think of them as relatively friction less and easy ways to transfer large sums of money quickly with little red tape, then they have value. If you consider them as a way for emerging country citizens to fight hyperinflation from their own country by easily being able to convert their local currency to something not affected by their own government, then it has value. If you consider the value of block chain technology and other related tech, then you can see the value some coins bring in tracking ownership. 

I alluded to it earlier, but crypto currencies as currencies in the classical sense don't really make much sense. They have value in the same way many stocks that don't pay out dividends have value. A lot of stocks provide little monetary return other than being tied to a company. You can say stocks provide ownership in a company, however if you don't get a dividend and you don't have enough to equate to a controlling stake do you really have anything other than that tie? Crypto currently is basically speculative trading of a "commodity" probably more so than a currency. In the future the hope is that the tech is used in many other arenas as there is great value in a decentralized ledger that basically proves out a lineage. They have discussed crypto could be the future of stocks as it would cut down on almost all backroom paper work associated with an IPO and would make actual trading a lot easier. 

We are probably still a decade away from crypto as a currency and even then it'll probably take a nation taking it on and building their own crypto currency. There are a lot of advantages to it, but like many things in it's infancy it'll take time to work through growing pains. 

I guess I should take the time to educate myself instead of just asking you, but who gets to keep the US dollars that people pay for bitcoins?  Where does that money go?  If I am "storing my wealth" where is it stored?

Stocks are backed by the assets and/or income flow of a company.  That is what gives them value.  The performance of the company or projected performance determines if the stock rises or falls in value.  What gives bitcoins value and why does it go up and down so dramatically?

[Au165]

(01-18-2018, 10:13 AM)fredtoast Wrote: I guess I should take the time to educate myself instead of just asking you, but who gets to keep the US dollars that people pay for bitcoins?  Where does that money go?  If I am "storing my wealth" where is it stored?

Stocks are backed by the assets and/or income flow of a company.  That is what gives them value.  The performance of the company or projected performance determines if the stock rises or falls in value.  What gives bitcoins value and why does it go up and down so dramatically?

Because the bitcoin are "mined" the miners would get the money on new bitcoin similar to a company on an IPO. After that the person who you paid in order to buy the bitcoin would get it, in most cases it is done through an exchange similar to Forex trading so they'd get a fee similar to a brokerage. The storage of wealth is the same as buying gold, you are buying something that has no expiration and has upward pressure of value or at least relatively flat pressure. 

Are they? If the company liquidates and I have common stock (obviously preferred shares are different) do I get anything? Probably not. If that's the case then it truly isn't "backed" by the assets or income of the company but rather loosely tied to it. The reality is market cap for most companies far exceeds it's tangible value when looking at it's books. It is a fallacy to believe that common shares of stock without dividends are anything more than loose associations to companies and their performance. You are saying a piece of paper is worth something for no other reason than it has the name of a company on it and someone is willing to give you money for it. That company isn't going to do anything for you because you hold that piece of paper, so it doesn't qualify it as a service. You can't use that piece of paper to buy anything (only through exchanging it to someone else for real currency) so it isn't a currency. That paper doesn't "do" anything of real value for you to qualify it as a good (at least no more than a line on a ledger entitling you to digital currency). So why does it really have value? The answer is because everyone agrees it does.

Volatility is similar to a lot of stocks, things like news and large buyers can cause heavy movement one way or the other. There are also things called forks which would be similar to stock splits, with a slight difference that it can sometimes create sub coins with different "rules". As to value, I already explained that in the last post. Value is derived from the people. It could be because a bunch of people simply agreed it does, or it could be because they value some of it's uses. The fact it is decentralized is one of the driving factors of it's adoption in emerging countries for the inflation fighting use.

[*michaelsean*]

I read a sort of bitcoin for dummies article once, and I was still completely lost. I hope it never becomes a part of everyday life or I’ll be in trouble.

[fredtoast]

(01-18-2018, 10:28 AM)Au165 Wrote: Are they? If the company liquidates and I have common stock (obviously preferred shares are different) do I get anything? Probably not. If that's the case then it truly isn't "backed" by the assets or income of the company but rather loosely tied to it. The reality is market cap for most companies far exceeds it's tangible value when looking at it's books. It is a fallacy to believe that common shares of stock without dividends are anything more than loose associations to companies and their performance. You are saying a piece of paper is worth something for no other reason than it has the name of a company on it and someone is willing to give you money for it. That company isn't going to do anything for you because you hold that piece of paper, so it doesn't qualify it as a service. You can't use that piece of paper to buy anything (only through exchanging it to someone else for real currency) so it isn't a currency. That paper doesn't "do" anything of real value for you to qualify it as a good (at least no more than a line on a ledger entitling you to digital currency). So why does it really have value? The answer is because everyone agrees it does.

Actually if a corporation with assets liquidates and you hols common stock you do have a claim against the assets.  The fact that stock prices are based more on earning potential than asset value does not mean the stock has no value.

And even a "loose association" is a basis for value.  There is something you can look at to determine if it is a good investment.  If someone was thinking of investing in Bitcoin what factors would they look at to determine what the value of Bitcoin will be next year?  There has to be something that sets the value other than just "people agreeing".  What effects the opinion of these people that agree on the price of Bitcoin?  If I buy one does my opinion matter?

[Au165]

(01-19-2018, 01:28 PM)fredtoast Wrote: Actually if a corporation with assets liquidates and you hols common stock you do have a claim against the assets.  The fact that stock prices are based more on earning potential than asset value does not mean the stock has no value.

And even a "loose association" is a basis for value.  There is something you can look at to determine if it is a good investment.  If someone was thinking of investing in Bitcoin what factors would they look at to determine what the value of Bitcoin will be next year?  There has to be something that sets the value other than just "people agreeing".  What effects the opinion of these people that agree on the price of Bitcoin?  If I buy one does my opinion matter?

You only have a claim after preferred share holders and creditors. If the company is insolvent they are simply canceled. If they come out of it they will be over diluted bought back and reissued under a new name.

As for the rest, you are ignoring basic economic theory if you don't believe value is derived from people agreeing on a set value. How each get there is up to them but in the end value is whatever the parties have set it to be. A market that forms around anything is built on this principal.

As to Bitcoin (Crypto more broadly) feel free to read up on it. It's kind of it's own case study borrowing principals from FOREX and Stocks. Anything more at this point in regards to value will just be going round and round. There is some interchangeable use of price and value being used that may be causing some of the confusion.

[Goalpost]

Both the Sacramento Kings and Dallas Mavericks accept bitcoin for season ticket payments.

I'm sort of clueless about bitcoin. I know in the past month it's peak value was almost cut in half, but has rebounded a bit, far off its highs though.

[fredtoast]

(01-19-2018, 02:23 PM)Au165 Wrote: As to Bitcoin (Crypto more broadly) feel free to read up on it.

But isn't the best way to learn about a complex subject to get into a debate on the internet before you have any clue about the basic principles?