The Cryptocurrency Thread

[37andhappy]

Join dates are accurate. And yes, in his intro thread, he claimed to be 37 in 2008. So, today at least 50 if that's true.

And of course, age should not be pertinent to the discussion. Hopefully no one is swayed by or dismissive of arguments, based on the age of the person making them.

Thanks Aerides, yes correct, and fully agree with your comments. My age (not sure if considered "young" here?) is irrelevant to the properties of Bitcoin being discussed (much as it may be a topic of interest to some). We should focus the discussion on the properties of Bitcoin (as opposed to the properties of a particular poster on the topic of Bitcoin).

 

[37andhappy]

Hi 37 and happy,

I appreciate your posts. I learned more about bitcoin from it.
I agree with your writing in the most recent post. However, your statement below make it sound like preparing for doomsday scenario.

"And by the way, have exposure to BTC via a listed ETF or index fund will not provide the gains or protection that owning BTC directly will provide should some types of scenarios come to fruition"

This is the quote from your post.

Thanks Freedom, and very welcome.

Regarding the "prepper" comment, don't worry, I'm not one of those guys, in the sense that I am locked up in some remote cabin with guns and ammo and canned tuna, almost "hoping" for the end of the world to occur.

But I have seen enough in history, including my own family history, to see how unexpected circumstances, trends, social and political movements, can "wipe out" the wealth of an entire family or class of people due to lack of diversification or lack of protective options. Some extreme examples I do factor in as slim (but not impossible) possibilities when looking at "wealth survival" include:

- a country's banking system (or a significant player in that system) entirely collapsing due to technology failure. For example, imagine (lets say during a time of war) if nefarious foreign actor released (or activated) a series of steps to delete financial data, deactivate or impair IT systems, etc in another country. There as so many possibilities and ways to do this. We are operating on highly integrated IT systems, parts of which are 40+ years old. So imagine if you literally cannot access your bank accounts, bank literally has no record (or incorrect records of the assets its holds for you), everything seizes up and nothing can be electronically transacted via our traditional electronic banking system. Small chance, but would be absolutely devastating.

- a country deciding to compulsory acquire the private assets of certain listed companies (or the companies themselves). Certainly possible during a time of war or economic collapse, and has happened in the past

- a ETF you hold (or private fund you are in) collapses, either due to fraud, misuse of derivatives.

- a government decides to suddenly impose significant tax on wealth held in stocks, funds (or on their dividends). Very easy to do, and very easy to enforce and impose.

- a total "lockdown" on the ability to transfer money outside of the country (with the host country rapidly declining economically or very undesirable to remain located in). Easy to impose to the extent you control the banks and have oversight of electronic transactions.

I could go on with such scenarios, which again, are not likely, but which the chances of them occurring are not zero either. Don't get me wrong - unlike the prepper I do not want (or secretly "hope") such things to occur, but I do want to be protected in case they do. Nor is this my main reason for having some allocation to BTC, but they certainly are positive properties that play into my reasoning for having a non-zero allocation.

I'm not a gold-bug prepper either by the way - indeed, I am very much an equities type of guy - but I also see the merit in holding a small allocation of gold. Indeed, my BTC journey was actually what finally convinced me to also allocate a little to gold, which is a trend I think other BTC holders may adopt also over time (with gold being viewed, and in certain ways functioning, as the analogue version of Bitcoin).

 

[Markola]

^^^^^ I didn’t mean to implicate you with my “prepper” comment, 37and Happy, as I recall you said that crypto is only a small % of your portfolio. I meant that if you type in “Bitcoin” on YouTube, it looks like a freak show there by kids proclaiming the end of civilization, LOL.

Yes, I’m starting to appreciate that banking systems look entirely differently to people in the developing world, hence the appeal of creating an alternative, decentralized system run on a transparent ledger and a globally-accepted currency.

Here’s a question for the group: How should we think about wallets? I’m still reading about recent hacks, e.g. AscendEX ($80M stolen), Bitmart ($200M stolen) even several years after Mt. Gox. I’m inclined to keep mine in a Coinbase Wallet, thinking they have the bucks and staff to devote to security.

 

[MichaelB]

If you look at the value of M2 that is 20 trillion dollars in USD, if Bitcoin only manages to replace 1/2 of that level the value of Bitcoin will need to be 10 times greater than it is today, if that occurs it is much more likely to supplant many other currencies as well. More than likely it will be at least 20 trillion in value so Bitcoin will become by necessity to work as replacement between 1 and 2 million dollars each.

Gold has a value of 8 trillion dollars, but since the world is not on a gold standard the price as a reserve currency has been depressed but replacing only gold as it stands today would be a 6-8X move. This to me does not seem to be a logical stopping point as if Bitcoin were to achieve this level of acceptance the digital applications are too valuable to stop there so I myself am looking for 1-2 million ultimately.

Now this is not new this has been the possibility since I first heard of bitcoin when it was $8 but didn't look at really till it hit $100. As the value grows the likelihood of hitting a million dollars ultimately becomes far more likely not less, a 5% allocation means it would protect your entire portfolio value if this were to occur. There is a definite possiblity it could go to zero, but based on everything I am following the path to 1-2million per bitcoin is occurring.

Now I wish I had come to this conclusion when I first heard of bitcoin and could easily have purchased 3,000 bitcoins without batting an eye and having 150 million right now. But I have to settle with my purchases between $7,000 and $30,000.

I first tried seriously to hold a thread on Bitcoin in 2017 with the price in a one way ticket to 18K from the 8K during the 5 weeks from where I started the thread, in the thread I did note that an 80% drop would be NORMAL for this type of investment, and that did equal the bottom of a drop in bitcoin. But Bitcoin itself has grown far more accepted since 2017. However 95% of the posts were derisive of the idea of bitcoin, though I could tell from the tenor of posts that bitcoin ignorance, denial and mischarecterization were the source of most of the conversation posted on the thread. It was a very civil thread though.


I stand by my comment where I stated USD being increased in value in society from 4 trillion to 12 trillion in 12 years is considered prudence but a 5X jump in bitcoin is seen as a bubble is not logical.

https://www.early-retirement.org/forums/f44/bitcoin-worlds-30th-largest-currency-89521.html#post1971036

Thanks for taking the time to respond to my post, and also for sharing your projections.

It seems to me that bitcoin, or any other financial instrument, cannot be both a currency / means of payment and also a risk asset. It can be one or the other, but not both.

You show concern about excessive $$ liquidity, and that’s not unreasonable. Isn’t it possible, though, that this same excess liquidity is one of the factors driving up the price of bitcoin, along with all financial assets? If that is so, a contraction in liquidity would have a sharply negative effect on bitcoin price.

 

[Markola]

Per my question to the board above about best practices with virtual wallets, as if on cue, CNN put out a story today about ongoing hacks and thefts, the security risks of wallets connected to the internet, and protections to look for:

https://www.cnn.com/2021/12/12/tech/crypto-exchange-hacks-explainer/index.html

Also, someone kindly PM’d me with resources about offline wallets, which I reviewed. No doubt those are safer but I find the technology intimidating. I plan on Coinbase being my exchange, and Coinbase has online wallets. Coinbase is a publicly-traded, American company with thousands of employees, and it leans in proactively to regulation, so I have a degree of comfort that they are best-positioned to make their hot wallets secure with encryption. Their policy states that they have crime insurance against theft and cyber security breaches. However, any breach or loss due to my own handling of my credentials is my responsibility.

 

[Running_Man]

Thanks for taking the time to respond to my post, and also for sharing your projections.

It seems to me that bitcoin, or any other financial instrument, cannot be both a currency / means of payment and also a risk asset. It can be one or the other, but not both.

You show concern about excessive $$ liquidity, and that’s not unreasonable. Isn’t it possible, though, that this same excess liquidity one of the factors driving up the price of bitcoin, along with all financial assets? If that is so, a contraction in liquidity would have a sharply negative effect on bitcoin price.

What is the US Dollar to many countries? It is an asset they hold. When the FEDERAL RESERVE held negative interest rate bonds in their account they called them ASSETS under their financials.

I also agree that liquidity issues could cause a massive drop in bitcoin price, again it could be up to 80% drop and it would not be unusual. The Japanese YEN fell from 350 to 70 against the USD over 20 years from 1975 to 1995. Currencies have large fluctuations.

George Soros under the Quantum Fund made 1 Billion dollars by shorting the British pound which dropped 25% in less than 2 months. Quantum Fund also made billions investing against Thai Baght and Japanese YEN. Eventually netting George Soros 100 Billion dollars. It is actually easier to get wealthier investing in currencies as you can borrow against one currency using another as an asset to support the borrowing of the other asset.

 

[37andhappy]

Per my question to the board above about best practices with virtual wallets, as if on cue, CNN put out a story today about ongoing hacks and thefts, the security risks of wallets connected to the internet, and protections to look for:

https://www.cnn.com/2021/12/12/tech/crypto-exchange-hacks-explainer/index.html

Also, someone kindly PM’d me with resources about offline wallets, which I reviewed. No doubt those are safer but I find the technology intimidating. I plan on Coinbase being my exchange, and Coinbase has online wallets. Coinbase is a publicly-traded, American company with thousands of employees, and it leans in proactively to regulation, so I have a degree of comfort that they are best-positioned to make their hot wallets secure with encryption. Their policy states that they have crime insurance against theft and cyber security breaches. However, any breach or loss due to my own handling of my credentials is my responsibility.

Regulated exchanges such as Coinbase and Gemini and their wallets are extremely safe to keep coins with. Very high standards of IT and industry-standard protocols. Same will apply with US banks, who will essentially outsource their custody to first tier custodian service providers (with you having a contractual claim against the bank). Most of my friends who are in the space hold smaller amounts with exchanges or with companies such as crypto.com (enabling them to spend BTC in micro amounts auto-converted into fiat currency as needed) but keep the majority in cold storage accessible via a device such a Trezor or Ledger.

 

[Markola]

Coinbase says that it keeps 98% of clients’ coin on the exchange in cold storage, and the other 2% is insured, ie. no wallet really necessary, right? If there is a breach of their systems, investors are made whole. I’m only liable if there’s a loss or theft of my credentials. See some pretty convincing analysis at https://finbold.com/guide/is-coinbase-safe/

That all sounds pretty secure to me, and think I’d feel safer with the built in protections on the regular exchange rather than having to manage complicated credentials in a wallet or a standalone gadget that could be stolen, lost, damaged or quickly become obsolete like every single other gadget in my life. In fact, this article mentions a recent hack into the Ledger gadgets. But I’m a noob and probably not thinking correctly.

 

[OverThinkMuch]

- a ETF you hold (or private fund you are in) collapses, either due to fraud, misuse of derivatives.

While I agree with your larger point, I think an ETF collapsing due to fraud is nearly impossible. Almost all ETFs hold stocks, and not derivatives. Besides the ETF company, there's a number of authorized institutional investors involved with every ETF. A fraud would need to involve everyone on that list.

The most famous case of Madoff involved just one company. There was no second custodian of assets, which allowed the fraud to be directed by Madoff. That's how frauds occur - one company without others involved. Most brokers like Vanguard have both the investment fund (Vanguard Total Stock Market) and a separate custodian who holds the assets. I'm not aware of that mechanism failing - it's at worst exceedingly rare for a fraud to involve multiple companies. That's why I'd say a stock ETF (most of them) collapsing due to fraud is nearly impossible.

 

[joesxm3]

Some people think GLD does not have 100% of its gold and I seem to recall SLV changing its perspective to say it may not track the spot price in volatile markets. I guess that is tracking error, not fraud, but I bet the same applies to a bitcoin ETF.

 

[37andhappy]

While I agree with your larger point, I think an ETF collapsing due to fraud is nearly impossible. Almost all ETFs hold stocks, and not derivatives. Besides the ETF company, there's a number of authorized institutional investors involved with every ETF. A fraud would need to involve everyone on that list.

The most famous case of Madoff involved just one company. There was no second custodian of assets, which allowed the fraud to be directed by Madoff. That's how frauds occur - one company without others involved. Most brokers like Vanguard have both the investment fund (Vanguard Total Stock Market) and a separate custodian who holds the assets. I'm not aware of that mechanism failing - it's at worst exceedingly rare for a fraud to involve multiple companies. That's why I'd say a stock ETF (most of them) collapsing due to fraud is nearly impossible.

Risk is for sure low (not not impossible). Also, many ETFs are indeed synthetic and rely on derivatives to track. So things can go wrong. As for private hedge funds, as we both know, the risks of fraud are even higher.

 

[37andhappy]

Coinbase says that it keeps 98% of clients’ coin on the exchange in cold storage, and the other 2% is insured, ie. no wallet really necessary, right? If there is a breach of their systems, investors are made whole. I’m only liable if there’s a loss or theft of my credentials. See some pretty convincing analysis at https://finbold.com/guide/is-coinbase-safe/

That all sounds pretty secure to me, and think I’d feel safer with the built in protections on the regular exchange rather than having to manage complicated credentials in a wallet or a standalone gadget that could be stolen, lost, damaged or quickly become obsolete like every single other gadget in my life. In fact, this article mentions a recent hack into the Ledger gadgets. But I’m a noob and probably not thinking correctly.

I think that's likely correct. Coins stored with them are largely custodied in cold storage, with them then having enough of a float to meet daily trading liquidity. So yes very safe. The main thing to know though, is that this is their cold storage - that is they hold the private keys, and your claim to your coins is against them (so there is counterparty-risk here, much like when a bank holds "your money".). But either way, Coinbase are very safe, well regulated, and have state of the art security protocols. Same with Gemini by the way.

 

[Teacher Terry]

9 years ago my son mined bitcoins and we invested a small amount as did some of our friends. My son ran everything and we all made money. No one got rich but for the small amount we invested we couldn’t have made as much anywhere else. We also all knew upfront that we could have easily lost the small amount. My son had to hire a CPA that specializes in crypto to do the taxes because we all cashed out gradually through the years. Had we never taken out any profits we all would have had much more money in the end. Oops ��

 

[RVplusDog]

New crypto investment vehicle announced today. I will look at the stocks they own (rather than the ETF itself), probably, myself. But I’m sure many will buy into the ETF itself, as access to a managed & curated asset group:
“ A new exchange-traded fund (ETF) from crypto manager Valkyrie invests in companies with big bitcoin bags, according to a regulatory filing published Wednesday.

Balance Sheet Opportunities ETF, trading as VBB on Nasdaq, is long on MicroStrategy, Square, Tesla and other crypto industry bulls. An actively managed thematic ETF, it steers clear of bitcoin futures, sticking only to equities that invest in the coin.”

 

[OverThinkMuch]

Risk is for sure low (not not impossible). Also, many ETFs are indeed synthetic and rely on derivatives to track. So things can go wrong. As for private hedge funds, as we both know, the risks of fraud are even higher.

Many can have many meanings. I skimmed a list of the 100 largest ETFs, and only saw 100% stock ETFs. The top entry, SPY, has $440 billion, so the AUM column is in thousands:
https://etfdb.com/compare/market-cap/

I assume UPRO (3x S&P 500) is one of the largest derivatives ETFs, but it holds just $3.5 billion in assets (AUM).
https://etfdb.com/etf/UPRO/#etf-ticker-profile

I looked to falsify my assumption by searching for derivative ETFs, but UPRO is larger than all the entries on this list at etf.com:
https://www.etf.com/channels/derivative-etfs

My conclusion is that 95% or more of ETF assets are in 100% stock ETFs. I would say there are some derivative ETFs, but not many compared to the overall number of ETFS. And certainly a very small fraction in terms of assets invested.

 

[OverThinkMuch]

A new company, Terawulf (WULF), went public via SPAC this week. Their goal is to mine Bitcoin with green energy, with the CEO claiming to be experienced in the energy business. I didn't find much information online, since the company is so new.

But I won't be investing. Online I found the CEO is also CEO of a railway owing company... which mostly connects trains to a very large coal fired energy plant. That does not strike me as someone who is fit to champion green energy mining of Bitcoin.

 

[Markola]

^^^ There is a lot more capitalist creative destruction happening on top Bitcoin than I ever imagined before my recent introduction, and unlike most startups, the market for most of them is unregulated and automatically global. None of it affects or matters to the underlying Bitcoin currency, though.

Some leaders in the space, like Michael Saylor, the long time CEO of Micro Strategies, think the 2020s are the Bitcoin Decade. It sure seems well ahead of the pack of other, more specialized, digital currencies in terms of widespread, increasingly mainstream, adoption.

Micro Strategies and Michael Saylor have bought so much Bitcoin, and he is such a talented interpreter, theorist and proponent of it, I I have a feeling they will become household names, like Berkshire Hathaway and Warren Buffett.

 

[37andhappy]

^^^ There is a lot more capitalist creative destruction happening on top Bitcoin than I ever imagined before my recent introduction, and unlike most startups, the market for most of them is unregulated and automatically global. None of it affects or matters to the underlying Bitcoin currency, though.

Agreed, indeed if anything its supportive of BTC. And I agree, many people are not aware how much is going on in the layers above BTC as it gets integrated into all aspects of our financial system.

I think the first decade of BTC was one of establishing general awareness and dealing with with all the initial FUD, and this decade is more around to what extent BTC will be integrated into the global economy (and of course the many questions go with that). By 2030 BTC will be firmly understood and intrenched, and the questions will be far more on topics related to the role of Government and individual freedoms.

 

[37andhappy]

My 3 comments for the weekend to reflect on, consider, and discuss.

1 - Bitcoin exemplifies all that is good about America and what has made our nation so successful.

2 - Miami is going to give every single citizen of Miami a Bitcoin wallet with a small amount of Bitcoin loaded into it annually.

[mod edit]

 

[RobbieB]

And I thought San Francisco was "way out there"

 

[Markola]

Interesting developments in Miami. Re: #1, I agree that it is no surprise that Bitcoin and its ecosystem is emerging mostly from the United States’ culture of innovation but the demand for it is truly global:

When is the last time Paraguay made the news? Apparently, it produces 2/3 more hydropower than it uses, so its senate just approved a package of regulations aiming to attract Bitcoin mining.
[Mod edit]

My bet is that Bitcoin is the financial opportunity of our lifetimes. YMMV.

 

[MichaelB]

2 - Miami is going to give every single citizen of Miami a Bitcoin wallet with a small amount of Bitcoin loaded into it annually.

We’d love to see a source for this information.

 

[Aerides]

I think perhaps he meant this, which is not the same thing...quite..

a digital wallet with a dividend yield. Not specifically paid as BTC, and not annually. And all probably political pipe dreams.

What politicians say they will do != reality, almost all of the time.

https://www.forbes.com/sites/lisaki...wallets-for-bitcoin-dividend/?sh=7bc6db6950c8

 

[turbo89]

This may deserve its own thread, but what software is everyone using to organize crypto transactions throughout the year, for tax prep?

I’ve been keeping a log on my own… but I recognize there are software packages which would make life easier.

 

[captain3d]

GBTC hit an amazing -22% discount today when Bitcoin was at $46k allowing the purchase of Bitcoin at $37k via the fund.

When a Bitcoin ETF gets approved in the US GBTC is likely to be one of the first at which point the discount will disappear.

I can buy GBTC via TDAmeritrade. ETHE also hit -16% discount today.