The Rise of Crypto Could Trigger a Financial Crisis, Global Watchdog Warns (businessinsider.com) 105
An anonymous reader quotes a report from Markets Insider: Wall Street institutions' growing connections to crypto markets could threaten financial stability and cause a credit crunch-style financial crisis, global regulators have warned. The Financial Stability Board said (PDF) "ongoing vigilance" of institutional investors such as big banks and hedge funds is needed as they deepen their involvement in the $1.9 trillion crypto market. "If the current trajectory of growth in scale and interconnectedness of crypto-assets to these institutions were to continue, this could have implications for global financial stability," the FSB said in a report published Wednesday.
The FSB was concerned the volatility in cryptocurrency markets -- even though crypto makes up just a fraction of global assets -- could feed through as digital and traditional finance become more interconnected. "If financial institutions continue to become more involved in crypto-asset markets, this could affect their balance sheets and liquidity in unexpected ways," it said. The regulator compared the risk from a crypto event to the credit crunch that sparked the 2008 financial crisis. "As in the case of the US subprime mortgage crisis, a small amount of known exposure does not necessarily mean a small amount of risk, particularly if there exists a lack of transparency and insufficient regulatory coverage," it said.
It noted that "systemically important" banks and other financial firms are increasingly keen to play a role in and gain exposure to crypto assets. Systemically important institutions are ones which, if they failed, could set off a financial crisis. The overall value of the cryptocurrency market grew 3.5 times in 2021 to $2.6 trillion as institutional interest soared, the FSB noted. Its worth has fallen in the early months of 2022 as prices slumped.
The FSB was concerned the volatility in cryptocurrency markets -- even though crypto makes up just a fraction of global assets -- could feed through as digital and traditional finance become more interconnected. "If financial institutions continue to become more involved in crypto-asset markets, this could affect their balance sheets and liquidity in unexpected ways," it said. The regulator compared the risk from a crypto event to the credit crunch that sparked the 2008 financial crisis. "As in the case of the US subprime mortgage crisis, a small amount of known exposure does not necessarily mean a small amount of risk, particularly if there exists a lack of transparency and insufficient regulatory coverage," it said.
It noted that "systemically important" banks and other financial firms are increasingly keen to play a role in and gain exposure to crypto assets. Systemically important institutions are ones which, if they failed, could set off a financial crisis. The overall value of the cryptocurrency market grew 3.5 times in 2021 to $2.6 trillion as institutional interest soared, the FSB noted. Its worth has fallen in the early months of 2022 as prices slumped.
Systematic capitalism (Score:2, Informative)
Oh, yes, I'm sure that's true. Wouldn't want to cut out the middle man.
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To them this is just another way to take the money of the "small investors".
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Oh, yes, I'm sure that's true. Wouldn't want to cut out the middle man.
Yes absolutely. You do *NOT* want to cut out a middle man in a financial transaction since that middle man can and often is regulated to the benefit and protection of your money.
I know that's not what you're going for, but your post is precisely why so many people get outright fucked (not going to mince my words there) by playing around with crypto.
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I think it's a bit naive to think that middle men protect you. They protect themselves and those upstream. You're downstream. How many government bailout have historically flowed down to individual borrowers and investors?
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I think it's a bit naive to think that middle men protect you.
I think you didn't read my post. It's not the middle men who protect you, it's the fact that middlemen can be regulated. It's government regulatory bodies and legal systems that protect you.
Here's a hint for you: You engage in business with someone you've never met before to buy something online and have it shipped to you. Do you
a) Send bitcoin to some random address they tell you?
b) Stuff cash into an envelope and send it to some random POBox?
c) Transfer money to an escrow service because you don't trust t
Re: Systematic capitalism (Score:2)
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By regulated, you mean they get a fine less than the profit made by their criminal activity.
No, I don't give a fuck if my middle man is profiting or engaging in illegal activity. By regulated I mean they are held liable for transactions and to ensure that money ends up were it is and that a level of fraud prevention is invoked. Losing money due to crypto fraud is about as "newsworthy" as a firearm death in Chicago, compare that to the number of people who have been left without money because their bank has gone bankrupt, or because someone stole their Visa card.
In financial transactions a regulate
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Oh, yes, I'm sure that's true. Wouldn't want to cut out the middle man.
So instead of a somewhat stable, stable and regulated bank, you prefer a crypto-"currency" exchange that may get robbed at any time or where the operators may simply take the money and run? That does seem excessively dumb.
more the like dollar implosion (Score:1, Insightful)
will trigger a financial crisis.
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"OOM!"
print a trilliion
somehow - - - somewhere - - - something went awry
we just hurdd, after outmanoevering the Talib, Joe is now a putin expert and in two days europe will speak russian
i
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will trigger a financial crisis.
Probably. And it is long overdue.
So what? (Score:4, Insightful)
Not like the financial system was immune to "crisis" before crypto came along.
Re:So what? (Score:5, Insightful)
Not like the financial system was immune to "crisis" before crypto came along.
They think the market works like Wile-E-Coyote. Financial markets can't fall as long as nobody looks down.
Wile E. Coyote, Crypto Genius (Score:2)
Damn it, now I can't get this image of crypto-bros out of my head.
Thank you.
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And crypto is similar, they think it can never fail as long as they keep believing hard enough.
The Wile-E-Coyote Effect is limited (Score:2)
They think the market works like Wile-E-Coyote. Financial markets can't fall as long as nobody looks down.
That's exactly what happened in the 2000 Tech bubble. It didn't collapse until investors looked down and realized there was nothing supported it. The illusion vanished and they went SPLAT like Wile E Coyote. What was interesting that the collapse of the Web-Tech-Communications-Optics sector did not spread to the market at large. Those investors looked down and saw ground under their feet, so they didn't panic. It could happen to crypto, too, because its main support seems to be an investment bubble. The go
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Cryptos crash >50% every 1-3yrs, so I wouldn't be too worried. The floor seems to rise despite the constant uncertainty, and adoption and chatter both continue to rise unabated
Meanwhile, the major markets faced a near-crash this month when the Fed mentioned the possibility of raising borrowing rates to 0.25%. It's been so long, it might be hard to find the floor when stocks finally pull back.
Re:So what? (Score:5, Insightful)
Yea but if you recall, the last big financial crisis was about the banks gambling inappropriately with your money on insolvent bulk real estate commodities. I think the fear here is that the next one will be caused by them gambling inappropriately with your money on insolvent bulk crypto commodities. Hand-waving away the implications of this aren't going to make anything better for anyone.
I've been saying this for a while (Score:4, Interesting)
People need to realize that the people who run Wall Street are by and large well connected scam artists and salesman. They're not financial geniuses. Their skill isn't picking companies and picking the winners and losers their skill is flim-flam. These are the same people who thought Elizabeth Holmes was a genius because she talked in a low voice like a little boy does when he's trying to imitate Batman.
And these people decide whether you're going to have a job next week or whether your house is going to get repossessed. And people wonder why I say we should take that power away from them...
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There's a scene in "Wolf of Wall Street":
https://www.youtube.com/watch?... [youtube.com]
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The scene seems to have the goal of leaving people feeling like they are being taken advantage of when buying stock. The implication is that since stock prices constantly fluxuate, there is no value in owning stock, and the only value is what the brokers make in sales commissions. So the brokers are the only winners, and we are all being taken for a ride.
Much like the gold rush, where the only people who got rich were the ones that sold the shovels.
Well, back here in the real world, ownership of the means
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You shouldn't need a broker to tell you what stocks to buy anyway, you should read something like "Personal Finance for Dummies" and figure it out for yourself.
That's like trying to "figure out" roulette.
There's a famous experiment with a monkey throwing darts at a list of stocks. Look it up.
Owning stock is the most popular of the popular of activities in which rich people engage, to become and remain rich.
Owning stocks mostly works if you have large amounts of money to invest, ie. when you're already rich.
I'd like to see you get rich on the stock market by starting with $10.
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Well, if they are scam artists, it explains their interest in crypto currencies.
Re: I've been saying this for a while (Score:2, Troll)
And it's hardening to see people coming around to this realization. The first few times I pointed it out I got massively down modded. Lately I can usually get at least a plus one mod instead of getting minused down to flame bait or something. .
Maybe if you didnâ(TM)t post about your weird sexual arousals, theyâ(TM)d mod different?
Re: I've been saying this for a while (Score:2)
Re: I've been saying this for a while (Score:2)
But you can fix that if you do your doody.
Re:So what? (Score:5, Interesting)
Historically, "banks gambling inappropriately with people's savings" were a common cause of economic crashes. They were why Glass-Steagall reforms were instituted after the Great Depression crashes, to separate investment-banking and the speculative BS-markets from commercial savings banking.
And yeah, the insolvent bulk real-estate setup was basically a ponzi scheme in which worthless loans that never should have been issued were laundered a few times and then sold with fantastical claims of worth to gullible people down the line.
It's virtually identical to how crypto"currencies" operate. An initial group of people make out like bandits by owning the "premining" portion. The next few people down the line make out like bandits as more and more suckers are brought in to the wider lower layers.
Eventually, the scheme is going to collapse, but to keep things going before that happens, you get into the pump-and-dump era. The mid-level groups are trying to still "make money" out of the lower-level marks while the "whales" from the beginning are cashing out. Only with the cryptocurrencies it's even easier, because most of the "whales" own enough to do some quiet slow-sales, then do a large drop that tanks the price of the "coin", then re-buy once the drop hits low spot and pocket whatever the difference from their sell-off and re-buy is. Insider trading and commodity manipulation, completely unethical and illegal by most interpretations of the law, though the trick is getting some senile septuagenarian judge to understand that it's no different if you say "cryptocurrency" instead of "energy contracts" (ENRON), "cattle futures", or "penny stocks" to what they're doing in the manipulation and scam.
So... where in the ponzi scam life cycle are we now? Bitcoin sellers/pushers/con-artists are screaming that new rounds of suckers need to "buy" and "HODL". Simultaneously the same sellers/pushers/con-artists are quietly selling off at pump phases, then only buying in again during the post-dump-phase crash cycles while those who "bought" at the high price point ("dump phase") lose their shirts each cycle. If you see a Bitcoin seller/pusher/con-artist screaming at you to "HODL", you can be 100% sure that (a) they're a con artist, (b) you're the mark, and (c) they're doing the exact opposite (selling) of what they're telling you to do ("buy and hodl") right now.
If we we're comparing Bitcoin to Madoff, it's 2007. We are hardcore into the pump-and-dump phase of the Bitcoin Ponzi.
Look to history and pay attention to what happened in 2008...
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The main difference with crypto is that they're not playing with anything useful, and it is quite expected to fail over and over and over with the consequences being only with the people playing the game.
Re: So what? (Score:3)
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Yea but if you recall, the last big financial crisis was about the banks gambling inappropriately with your money on insolvent bulk real estate commodities. I think the fear here is that the next one will be caused by them gambling inappropriately with your money on insolvent bulk crypto commodities. Hand-waving away the implications of this aren't going to make anything better for anyone.
Of course, the actual solution would be to regulate banks investing in crypto, not to regulate crypto itself, but why waste a perfectly good pretext to destroy something which stands in the way of the Brave New Cashless World where every transaction happens (or not) at the discretion of Big Brother?
Re: So what? (Score:2)
Re: So what? (Score:2)
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BTW, yours sounds like more of argument for cash, i.e. anonymous & untraceable for the ordinary consumer, than for a very open & traceable telecommunications system that is monitored & facilitated by a handful of corporate exchanges.
Sure, except the leftists are steering us full steam ahead toward cashless future (for exactly these reasons), don't they? Give 10-20 years before they start talking openly about outlawing cash, maybe 10 more before it actually happens. Heck, it's already happening, just look at civil forfeiture. Also, even today, you can't exactly run an internet shop or an online service, and expect your customers to send you cash in envelopes. And dunno about you, but I'd rather live in a world where the sea level is 5 c
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Not like the financial system was immune to "crisis" before crypto came along.
Yea, not point trying to fix the problem. Let's just make it worse instead. What could go wrong?
What kind of argument is that? (Score:2)
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If we already know there's things that will cause disasters why would we want more things that can cause disasters?
Us? We don't want it.
Unfortunately for us, the people running the show do want it because it moves our money into their pockets. They'll do everything in their power to make it happen.
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So what? Not like the financial system was immune to "crisis" before crypto came along.
The report is saying that financial institutions will get into crises (I guess like they did with subprime mortgages), and we need to watch out for such crises, and their involvement with crypto is the seeds of another such crises. In other words, agreeing with you, but emphatically not "so what?".
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Not like the financial system was immune to "crisis" before crypto came along.
I'm guessing you don't mind/care if you &/or the people around you (family, friends, neighbours, co-workers, shop assistants, etc.) losing their jobs, their healthcare, their homes, etc.. Fortunately, there are a lot of people who do & hopefully they can bring enough pressure to bear on the decision-makers to stop it from happening.
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Of course I do care, I just don't care to swallow the narrative that we have a stable financial system but for cryptocurrency.
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Fake crisis (Score:2)
Small bits of in inconvenience can be covered up. Bill Hwang a fined fraudster was allowed to continue investing and single handed Lu costs world banks $20 billion in a few
Crypto will absolutely affect the broader economy (Score:4, Insightful)
Libertarians will say that this time we're not going to bail those guys out but those guys have set themselves up as the linchpin for our entire economy and if we let them go they've set it up so when they go down we all go down and they know it. So yes we will bail them out.
We need to stop pretending that we're not going to do those bailouts and instead put regulations in place to prevent them from crashing our economies while also taking a significant portion of the absurd amounts of wealth they have not for the sake of some stupid woke social justice bullshit but because money is power and as long as those people have that much money and we have so little they can exercise enormous power over us and they can tell us what to do and we're going to do it because they have all the power.
I'll never understand why I can't get libertarians to understand money is power.
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Those insurance companies will just fold (Score:2)
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Why do you even care what Libertarians understand or don't understand? Election results are very clear -- Libertarians don't run this country. Democrats and Republicans do.
When the next bailout happens, you can comfort yourself with the understanding that money is power, while people with actual power write rules to take more of your money.
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In the process they lost the connection between lender and borrower, the resulting robo foreclosures crashing the market.
What connection? The problem was that the betting on real estate exceeding the actual value of the real estate.
Banks have $50-$100 trillion assets, easily. A trillion or two of loses may not be critical.
And how many trillions were lost in 2008? And how many businesses dependent on banks were lost in 2008? How many savings and retirements were wiped out in 2008? That is the problem. Banks losing money themselves is not the issue. The cascade effect is the issue. The only difference I see is now it is crypto and not real estate but it seems people forget that the behavior is the problem not the inst
Not wanting to repeat history, I see (Score:1)
The last 20s ended with a big crash [history.com], too. Anybody with two functional brain cells who has been watching the crypto market since the beginning could tell you that if this shit got too intertwined with the real economy, it would drag everything down during the next panic sell-off.
Or this is just the typical FUD cycle during a crypto bear market, so people with way more money than you can increase their HODLings. As soon as they're done buying, cue the pump stories about how BTC is going straight to $100,000
The Rise of Wordle (Score:2, Funny)
Wall Street institutions' growing connections to Wordle could threaten financial stability and cause a credit crunch-style financial crisis, global regulators have warned. The Financial Stability Word said (PDF) "ongoing vigilance" of institutional investors such as big banks and hedge funds is needed as they deepen their involvement in multi-million Wordle market. "If the current trajectory of growth in scale and interconnectedness of Wordle-assets to these institutions were to continue, this could have im
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The global money systems are fucked by design, so crypto is there to replace it
hahahahaha.
Who is willing to be paid in something so volatile?
Who is going to take out a loan in something so volatile?
Who is going to be stupid enough to lend to that person in something so volatile?
If the answer to al those questions is just scammers. Well there's your answer.
Re: That's the point (Score:2)
$DOGE vs S&P500 (Score:2)
Year-to-Date, Dogecoin has proven more stable than most S&P500
Just sayin'
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And the dollar is even better. Dogecoin is a joke, I hope people realize that?
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And the dollar is even better. Dogecoin is a joke, I hope people realize that?
It actually seems like they did not. Maybe should have named it "fuckyouovercoin"?
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Year-to-Date, Dogecoin has proven more stable than most S&P500 Just sayin'
Gloating about a cryptocurrency compared to a gambling system doesn't do anything to show that the cryptocurrency is a currency and not a gambling system.
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You know, so has the value of that packet of rice I have in my pantry. Still not a good idea to start using rice as a means of payment.
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How many DOGE you want for that bag of rice ? :)
Good (Score:1)
Re:Good (Score:5, Insightful)
Crypto was meant to destroy the banking cartels.. Let it.
And yet the crypto exchanges are just becoming the new banks.
And will probably just be outcompeted or bought out by the old banks.
How did that solve anything?
Oh, and they are much less regulated too. So it's so much easier for all your crypto to be scammed or stolen away.
Just introduce some regulations you say. Well again, how did that solve anything? You're back to where you started.
At best you jut changed the banking overlords for a (possibly) different set of banking overlords.
And these ones may or may not have to follow any of the previously established rules.
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a) Banks are not "cartels". You can open a bank if you have a) the money and b) the expertise. The expertise can be bought.
b) The only thing crypto-"currencies" will do is destroy themselves.
No regulator will ever allow banks to do major investments in a fictional monopoly-type "currency". The only ones going bankrupt will be the usual morons that gambled with money they could not afford to lose.
Intentional Distraction? (Score:2)
Re: Intentional Distraction? (Score:3)
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Hmmm, all while ignoring other big causes of financial meltdowns, like banks gambling...
No, that's exactly the cause being discussed here.
The grand master plan of crypto (Score:4, Interesting)
The plan for all cryptocurrencies isn't what they want to make you think it is. It's more sinister than the egalitarian image the crypto boys portray for it.
After the 2008 financial meltdown, cryptocurrencies were born out of it, declared to be the means by which people could be freed from banks/governments, and promised to avoid any such future meltdowns from happening ever again.
But the crypto boys watched closely the result of that meltdown, and formulated their plan: create a new form of currency, and for it a new financial system detached from traditional ones (those burdened by "governments and regulations") - they called it "DeFi" for "Decentralized Finance", but its dirty little secret is that it's really "Deregulated Finance".
Their plan is to make this new money be adopted by the masses, so they start it off with a low price, then gradually increase it, by virtue of them just pulling numbers out of thin air for its value, until it catches the attention of the masses - then it gets more and more "valuable" from the collective faith of its given value ("network effect"), until traditional institutions and the typical "1%" billionaires start to notice and, greedy as they are, want in on the action too.
So now those that got in at the ground floor have gained all this "value" out of thin air, and once they're ready, they'll pull out all pretty much at once - that it'll create a sell-off panic, and a new meltdown is born! And because of their "De[regulated]Fi" system, the bros have already shifted all the risks away from themselves onto others, so they'll make out like bandits, leaving everyone else to "hodl" the bag.
But the bros were really observant about that last meltdown - and noticed all the "bailouts" the big banks got - so as they were shifting the risks to others, they increased their investments into what would get the next bailouts - so in the end they'll make out like bandits twice: the first time from suckering everyone else into their pump-and-dump scam, and again once they benefit from the bailouts that'll get handed out.
And there you have it folks, the real master plan of crypto.
--
Those who fail to accept it will mod the truth down to -1. -Prof. Feynman
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Ironic how it'll eventually cause another economic meltdown - the very thing it was born out of, and claimed to want to prevent.
There's a difference between "it will cause economic meltdown" and "people who have a vested interest in destroying it, claim it will cause economic meltdown".
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Here's an NFT of some Koolaid.
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On the other hand ... (Score:3)
Think of all the $500 Walmart gift cards [slashdot.org] that will be purchased to launder all the stolen crypto currencies ...
I've been saying this for a while now (Score:2)
Only halfway there. (Score:4, Funny)
My waiter was pumping crypto last night. Still not a peep from the taxi driver though, so we should be safe for now.
Yeah, and? (Score:2)
Wasn't that the whole point?!
cryptocurrency is a drop in the bucket (Score:1, Insightful)
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crap I meant to say 1.8 trillion USD. oh well I'll go back to yelling at cloud
Actually, no. The only real worth of crypt-"currencies" is the real money actually put in. Increases in "value" are completely fictional until somebody buys those "valuable" assets with real money. The whole thing is a gigantic bubble built on nothing.
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There are bigger problems in the financial system (Score:5, Insightful)
There are far bigger problems in the financial system than crypto.
There is the fact that banks are allowed to take the money belonging to ordinary Americans and use it to do high-risk things.
There is the fact that the agencies that decide how risky a given asset is are (despite the failures during the GFC) still allowed to declare stuff as being far less risky than it actually is.
There is the fact that the figure in $ attached to bits of paper (or rather these days to bits of data on a computer) doesn't actually reflect any kind of real-world value of the assets those bits of data are supposed to represent.
And there is the fact that lenders are still allowed to make loans to people who really shouldn't be getting a loan in the first place.
Bring back the rules that stop the banks using normal peoples money to do risky things, regulate the ratings agencies so they can't lie about how risky an asset is anymore and stop the lenders lending money to people who shouldn't be getting these loans and a lot of the problems will go away (or at least be confined to Wall Street instead of affecting the broader economy)
If the banks want to mess with crypto, so what. As long as they aren't doing it with normal peoples money, its perfectly fine IMO.
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There is the fact that banks are allowed to take the money belonging to ordinary Americans and use it to do high-risk things.
Then do not vote for stupid or corrupt assholes that allow that. Banks are regulated. They typically only do what they are allowed to. Here is a hint: The more right you vote, the less restrictions are put on the banks. You people do it to yourselves.
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There is the fact that the figure in $ attached to bits of paper (or rather these days to bits of data on a computer) doesn't actually reflect any kind of real-world value of the assets those bits of data are supposed to represent.
What is the real-world value of an asset? This is particularly questionable in regard to land upon which housing is built, as no labour or industry was involved in its production. It is just a case of occupying an area of the earth's surface that was already there, for free. Even in the case of manufactured durable goods, the real value is questionable. What about the real value of a designer hand bag, versus the real value of a fake hand bag, that resembles the real thing accurately in terms of materials a
They are scared of less ability to steal (tax). (Score:1)
All these stories just reaffirm one thing. Governments and the Central bank cartel are scared of losing their ability to steal (tax) so easily. That's it. If you have any ability to sift bull, from siht, then this will be abundantly clear to you. ...Let's all wait for the 'crypto is a ponzi scheme' crew to roll in. Sorry guys. You either (a) Don't get it and don't want to or, (b) Know full well that you got it in the early days and chose not to mine or buy, and are now very salty.
Belief is irrelevant. Th
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Well, no. You still have to pay any and all taxes incurred, whether you used real money or fake crypto-"currencies". If you do not, you will owe the payments once found out and you may got to prison in addition.
A crypto crash will not destroy the US economy... (Score:2)
It will destroy Russia's. Suddenly, all those wallets full of malware ransoms will become worthless.
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Not at all. The amount of ransoms paid in crypto-"currencies" is minuscule compared to the size of the Russian economy. Also, your reasoning is broken. Ctypto-"currency" paid as ransom only starts to make an impact on the receiver-side once it gets traded or converted to real money. Before that it is completely meaningless. Most of these ransom-"payments" did not get converted or traded so far as that is pretty traceable.
The blurry line between gambling and investing (Score:1)
Putting a large portions of ones net worth in an asset that nobody really understands – we still don’t know who invented this technology, why not? - goes against virtually every well established investment principle. To my mind buying crypto is more like gambling than investing.
The troll that created it will need a beachtowel (Score:2)
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... how fucking stupid our species can still be, even in the year 2022.
I think there is no connection to time or era. Most humans are fucking stupid and understand nothing about how things really work. Availability of information or education has no impact on that. These people _want_ to be stupid and like the feeling of superiority that gives them.
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Not really (Score:2)
There are lots of idiots with disposable money in the human race, but overall they are not that many. Hence we will see quite a few people going bankrupt and a very small number of people get rich that would not have otherwise. But that is it. Cryto-"currencies" are not currencies. They are monopoly-money plus delusions and greed. The excessive cost and effort and delays when transferring them already disqualifies all existing ones from use as "currency". The atrociously bad security and extreme risk of hav
Causation vs Correlation (Score:2)
It's like Tesla selling cars without the dealers ( (Score:2)
The role of financial middlemen is inevitably going to keep getting reduced now since technological solutions are now on the verge of being usable by everyone.
No amount of arguing about regulatory benefits of middlemen (!) is gonna matter because if no one else then banks themselves will do it under shareholder / wallstreet pressure.
So you will end up with much less need of real bankers / auditors / regulators for the narrow requirement of counter party guarantees or winding back transactions or KYC/AML, pr