The Cryptocurrency Thread 2

[laurence]

I remember when Time Warner bought AOL for a brazillion dollars, just because a big company does it doesn't mean it isn't a mistake. Quarterly numbers and FOMO are real at every level. I agree with others, crypto doesn't solve any existing problems. I don't want my "currency" to bounce up and down in value by 50% per year.

I have a friend who bought land in Kentucky and he's farming Bitcoin with a huge warehouse full of GPU servers. He needs 3 more years to break even he said, then he'll be selling pickaxes to gold miners during the yukon rush...

 

[Markola]

I’ve decided to post occasional articles from mainstream sources chronicling institutional and major-investor adoption for anyone here who is intrigued by, and has an open mind about, the emerging digital assets class. Feel free to ignore my posts, because I’m no longer going to argue with the vocal majority here who seem cemented in dismissive, nit-picky opposition (probably betraying some degree of FOMO given how actively determined they are to deny the existence of every single tree in the obvious forest). I can’t help them but will offer to the quiet minority of interested members for their enjoyment occasional resources I think are credible and enlightening.

My personal conviction is that critical mass has formed for Bitcoin, in particular, such that we are on the precipice of the next major digital transformation of global society: The disruption of money itself. Accordingly, I have researched Bitcoin a lot and have taken an early adopter stake on the riskier, potentially more rewarding, leading edge of the adoption bell curve. You do you.

I posted one such recent paper from Fidelity Investments in #365 above about how digital asset technology works, and why the Fidelity Digital Assets division thinks the original Bitcoin is preferable to the tens of thousands of alt coins.

The following is a new paper from Wells Fargo Research Institute to its qualified investor clients, helping them overcome some of their understandable fear, uncertainty and doubt (FUD) and offering them a private placement.

https://saf.wellsfargoadvisors.com/.../Investment_Strategy/cryptocurrency020722.pdf

 

[laurence]

I’ve decided to post occasional articles from mainstream sources chronicling institutional and major-investor adoption for anyone here who is intrigued by, and has an open mind about, the emerging digital assets class. Feel free to ignore my posts, because I’m no longer going to argue with the vocal majority here who seem cemented in dismissive, nit-picky opposition (probably betraying some degree of FOMO given how actively determined they are to deny the existence of every single tree in the obvious forest). I can’t help them but will offer to the quiet minority of interested members for their enjoyment occasional resources I think are credible and enlightening.

https://saf.wellsfargoadvisors.com/.../Investment_Strategy/cryptocurrency020722.pdf

The fact that Wells Fargo, who sells crypto funds publishes a paper saying you should buy crypto funds is surprising how....? I heard this kind of language from a lady who tried to get me to invest in her copper wristband MLM....there are websites for cyrpto fanboys if you really want people to agree with you...

I have spent the last 20 years in cyber security, I make no pretense at a crystal ball of market fluctuations but while blockchain technology holds promise, the current generation of "proof of work" crypto (of which Bitcoin is the most prominent) is a....very problematic model. Putting aside the money laundering, human trafficking, and environmental disaster that is the bitcoin biz, the decentralized and non custodial nature of bitcoin is rampant with risk for fraud and theft - you lose your keys you lost your bitcoin. And don't think a major financial institution is not at risk for this, they may have hired a team to protect theirs but they also have a big target on their back. All this baked in risk for something that does not act like a currency and holds no intrinsic value - it's only worth what someone else want to pay for it. Heck at least with the Dutch tulip craze you could plant your bulb and enjoy the flowers.

The vision I see posted by crypto proponents, of a borderless democratic currency, power to the people etc. seems to ignore the fact that the entirety of world governments are going to just let their fiat currency, fractional lending model get turned on it's head. Brother if that happens there won't be any need for bitcoin, just guns, ammo and rations...

But why don't you share a screen shot of your buy in price on bitcoin? Let's all celebrate when you reap your rewards over the coming months and years. What did you buy in at and when? How much do you hold? What percentage of your portfolio is it?

 

[joesxm3]

But why don't you share a screen shot of your buy in price on bitcoin? Let's all celebrate when you reap your rewards over the coming months and years. What did you buy in at and when? How much do you hold? What percentage of your portfolio is it?

So 20 years in cyber-security and you ask him to put a screen shot of his crypto account on the public Internet?

Which side of cyber-security do you work in, the dark side?

 

[laurence]

So 20 years in cyber-security and you ask him to put a screen shot of his crypto account on the public Internet?

Which side of cyber-security do you work in, the dark side?

I work for a Prince in Nigeria...

 

[Markola]

It seems polite on this forum to at least read the Wells Fargo article that I posted before writing 4 paragraphs to dismiss it.

 

[captain3d]

It is good to see Wells Fargo has changed its policy from the one banning any crypto transactions back in 2018

https://cointelegraph.com/news/us-bank-wells-fargo-bans-crypto-purchases-with-its-credit-cards

“Customers can no longer use their Wells Fargo credit cards to purchase cryptocurrency. We’re doing this in order to be consistent across the Wells Fargo enterprise due to the multiple risks associated with this volatile investment. This decision is in line with the overall industry.”

 

[MichaelB]

Another Federal Reserve Bank paper has been released. This one is a blog post by the New York Fed (here) titled “The Future of Payments is not Stablecoins”. The main point is even if distributed ledger technologies become more common, private issuance of stablecoins may not be a good idea as they will either tie up too much liquidity or add too much risk. The NY Fed paper goes on to propose tokenized deposits as their preferred option.

This is another step by the Fed to recognize potential value and use in blockchain technology (they call it DLT, distributed ledger technology) and acknowledge one of the critical drivers is the need for improvements in payment processing. At the same time, it does not see crypto assets as potential candidates for payment processing, calling them too volatile. It also doesn’t see major participants outside the regulatory system.

It’s possible this is one reason Facebook abandoned Diem, it’s stablecoin initiative.

 

[joesxm3]

To paraphrase laurence, the fact that the fed who controls the fiat system publishes a paper saying that they should remain in control and supports a digitized version of the fiat money printing factory is surprising, how?

That being said, it is a good point and it will be interesting to see how things go with the central banks trying to control the crypto direction. Invest Answers was remarking that Putin seems to be embracing crypto and might be plotting a way to break free of the SWIFT system. IA was worried that if Putin pushes to hard it might cause a knee jerk reaction against crypto by the US regulators.

Thanks for posting the article.

 

[explanade]

There are probably a lot of entities which benefit from current payment processing.

 

[Markola]

^^^ Yes, such as Visa and American Express, which charge merchants 2-4% and take several days to settle, plus charge userious interest to people who don’t pay their bill monthly.

I have no idea what transfer instruments will win out in the coming decade, whether stable coins, CBDC’s or something built on Bitcoin’s Lightning network, but blockchain technology makes certain legacy financial systems that we all assume “work well enough” ripe targets for disruption. The NY Fed clearly doesn’t know either - they just know that something big is coming and are trying to pick the best horse to advance their interests.

Good? Bad? Depends on your perspective. Western Union might already be dead and not know it, thanks to Strike. https://strike.me/en/

 

[MichaelB]

There are probably a lot of entities which benefit from current payment processing.

Sure, the current financial ecosystem. Banks, credit card processors, payment intermediaries. Also developed country governments, because they manage a complex regulatory system that is used for policy development and implementation.

At the same time, there is a sizable financial ecosystem, comprised of hedge funds, private equity, and venture capital, that is clearly interested in advancing this alternate system. They want the freedom to act outside of the regulatory system. I think this group controls around $11T, so there’s real money here.

Distributed ledger technology is exciting but it is not robust or scalable. This is a challenge that needs to be overcome, and the magnitude is not trivial.

 

[Markola]

^^^^^ I wouldn’t be so sure about any scalability cap on Bitcoin. The new decentralized, open-sourced Lightning Network built on top of the Bitcoin network can facilitate mind-boggling numbers of instant transactions, possibly making the alt coins irrelevant. It is not robust yet, true, because it is brand new, but the technology is now in place to scale Bitcoin. Applications are being developed and will roll out soon to join the Strike app I noted above.

https://lightning.network/

 

[braumeister]

I thought the Wells Fargo document cited above had some good remarks.
From the summary:

Cryptocurrency investment options today, however, are still maturing and we advise patience. For now, we suggest the consideration of only professionally managed private placements. We do not recommend any of the other current investment options, such as mutual funds, ETFs, grantor trusts, and individual cryptocurrency speculation.

 

[explanade]

I wouldn’t put it past someone to find a way to collect transaction fees if crypto was used for a lot of the transactions that cards are used for.

If the banks get heavily involved that could reflect that they found a way to generate fees.

 

[Markola]

I thought the Wells Fargo document cited above had some good remarks.

From the summary:

You highlighted a few nits, which is typical, but the major points for anyone actually interested, according to the Wells Fargo authors, are:

“Key takeaways
The digital asset ecosystem has taken several quantum leaps forward since the creation of bitcoin in 2009, and cryptocurrency is now widely considered a viable investable asset. Novel utilities associated with the technology have been discovered, the global cryptocurrency market capitalization has skyrocketed, and there have been marked changes in the quality of digital asset offerings and institutional participation.

This topical report endeavors to first discuss the essential factors that investors should contemplate while seeking exposure to cryptocurrencies. It will then explore the various entities through which institutional investors may gain access to digital assets, while also highlighting the primary differentiators and drawbacks of each method.

Without an exchange-traded fund (ETF) approved by the U.S. Securities and Exchange Commission (SEC), investors seeking exposure to digital assets may either make a direct purchase through a crypto exchange or gain indirect access via mutual fund derivatives, a grantor trust, or a private placement fund.”

 

[explanade]

Interesting case, a couple stole $4.5 billion in bitcoin, bragged about it and then tried to move it through very schemes to hide it.

They believed their stolen gains were untraceable.

But the IRS and other forensic firms traced and recovered $3.6 billion.

https://arstechnica.com/information...ows-how-hard-it-is-to-launder-cryptocurrency/

 

[braumeister]

You highlighted a few nits, which is typical,

Far from highlighting nits, I simply quoted the article's summary.

But I realize you interpret it differently. I'll say no more.

 

[Mr._Graybeard]

Interesting case, a couple stole $4.5 billion in bitcoin, bragged about it and then tried to move it through very schemes to hide it.

They believed their stolen gains were untraceable.

But the IRS and other forensic firms traced and recovered $3.6 billion.

https://arstechnica.com/information...ows-how-hard-it-is-to-launder-cryptocurrency/

I've been tracking that case too but don't quite know what to make of it yet. Does it suggest that authorities eventually can track Bitcoin thefts? Not sure. The actual hack occurred in 2016 -- hopefully security has improved since then. Waiting for more facts to come out.

I don't believe the couple has been charged with the actual theft vs. attempts to launder the coin. They may just be pawns, and charges against them may be tools to get them to flip on the actual thieves.

 

[Gumby]

Money laundering, which is the charge against them, is a crime in and of itself, independent of the original theft. And it's one that can land you in prison for 20 years, and subject to asset forfeiture.

 

[Mr._Graybeard]

Money laundering, which is the charge against them, is a crime in and of itself, independent of the original theft. And it's one that can land you in prison for 20 years, and subject to asset forfeiture.

Absolutely, which is why a footsoldier might think of flipping on a boss if it meant a lighter sentence.

 

[Markola]

Far from highlighting nits, I simply quoted the article's summary.



But I realize you interpret it differently. I'll say no more.

If you’d quoted the entire Summary, rather than the three most cautionary sentences in the entire 8 page paper, it would have seemed more fair to my post. Here it is:

“Summary
For today’s investor trying to figure out if we are early or late to cryptocurrency investing, looking at technology investing in the mid-to-late 1990s seems reasonable. At that time, the internet hit a hyper-adoption phase and never looked back. Cryptocurrencies appear to be at a similar stage today. Cryptocurrency investment options today, however, are still maturing and we advise patience. For now, we suggest the consideration of only professionally managed private placements. We do not recommend any of the other current investment options, such as mutual funds, ETFs, grantor trusts, and individual cryptocurrency speculation. We are hopeful that greater regulatory clarity in 2022 brings higher quality investment options.”

Wells Fargo Research Institute has a variety of related papers here, FYI: https://www.wellsfargoadvisors.com/research-analysis/reports/cryptocurrency.htm

 

[Alan]

The moderator team has determined that the topic of cryptocurrency has been covered and exhausted, so this thread is closed and further discussion on this topic will be deferred until the team feels there has been material change and new discussion is warranted.