Alright mods, you can go ahead and close this economy now
December 21, 2017 8:59 AM Subscribe
The Long Island Ice Tea Corporation is exactly what it sounds like: a company that sells people bottled iced tea and lemonade. But today the company announced a significant change of strategy that would start with changing its name to "Long Blockchain Corporation."
I was in the grocery store yesterday in Sacramento and two teenage grocery store clerks were discussing their bitcoin investments with enthusiasm. Not sure what to say beyond than.
posted by latkes at 9:04 AM on December 21, 2017 [3 favorites]
posted by latkes at 9:04 AM on December 21, 2017 [3 favorites]
The Long Island Ice Tea Corporation is exactly what it sounds like: a company that sells people bottled iced tea and lemonade.
I guess that depends on what you consider a Long Island Iced Tea.
posted by Strange Interlude at 9:05 AM on December 21, 2017 [14 favorites]
I guess that depends on what you consider a Long Island Iced Tea.
posted by Strange Interlude at 9:05 AM on December 21, 2017 [14 favorites]
Not Block Island Block chain Corp? :)
posted by thefool at 9:05 AM on December 21, 2017 [13 favorites]
posted by thefool at 9:05 AM on December 21, 2017 [13 favorites]
I could use a real Long Island Iced Tea after all this blockchain/bitcoin nonsense.
posted by SansPoint at 9:06 AM on December 21, 2017 [4 favorites]
posted by SansPoint at 9:06 AM on December 21, 2017 [4 favorites]
I assume they're doing some kind of scheme where they artificially inflate their stock prices and then try to divest before the -coin bubble bursts.
posted by tobascodagama at 9:11 AM on December 21, 2017 [3 favorites]
posted by tobascodagama at 9:11 AM on December 21, 2017 [3 favorites]
It's a company that sells people bottled iced tea and lemonade at a massive loss, with "profits" of -200% funded by $70M of investor capital. In the bitcoin world they'll fit right in.
posted by miyabo at 9:11 AM on December 21, 2017 [13 favorites]
posted by miyabo at 9:11 AM on December 21, 2017 [13 favorites]
It's yet another penny stock pump-n-dump scam. It was a $4M company before this change. There's also some other weird SEC filings.
posted by Nelson at 9:18 AM on December 21, 2017 [11 favorites]
posted by Nelson at 9:18 AM on December 21, 2017 [11 favorites]
It was a penny stock before... now it's a satoshi stock....
posted by miyabo at 9:22 AM on December 21, 2017 [3 favorites]
posted by miyabo at 9:22 AM on December 21, 2017 [3 favorites]
We humans really are that stupid, aren't we? It's so depressing. By this point, you'd think everyone could spot the signs of bubbles and other easy-rich schemes. But if you don't yet know to run screaming when you see the words "paradigm shift" used non-ironically outside an academic paper…you're beyond help. I'm sorry, but I'll have no fucks to give when you start crying about your latest scheme's crash.
posted by los pantalones del muerte at 9:23 AM on December 21, 2017 [15 favorites]
posted by los pantalones del muerte at 9:23 AM on December 21, 2017 [15 favorites]
Reminds me of the .com era when companies would shove "LINUX" into their S-1, and then IPO on E-Trade siphoning off the cash of amateur investuspeculators.
posted by RobotVoodooPower at 9:26 AM on December 21, 2017
posted by RobotVoodooPower at 9:26 AM on December 21, 2017
los pantalones del muerte: Problem is, when it collapses, ordinary people like us end up on the hook for it.
God, investors are fucking lemmings...
posted by SansPoint at 9:28 AM on December 21, 2017
God, investors are fucking lemmings...
posted by SansPoint at 9:28 AM on December 21, 2017
I don't... what? No, seriously--what?
posted by Automocar at 9:32 AM on December 21, 2017 [5 favorites]
posted by Automocar at 9:32 AM on December 21, 2017 [5 favorites]
It's been par for the course for boiler room penny stock trash companies to change names to latch on to the trend of the moment. Years back, I recall a slew of microcaps change their names to some variation of medical marijuana. The ones that luck out will have an OTC ticker symbol close to the name of a better-known company to take advantage of rash buyers. Case in point, the Google acquisition of Nest.
posted by dr_dank at 9:38 AM on December 21, 2017 [7 favorites]
posted by dr_dank at 9:38 AM on December 21, 2017 [7 favorites]
latkes: I was in the grocery store yesterday in Sacramento and two teenage grocery store clerks were discussing their bitcoin investments with enthusiasm. Not sure what to say beyond than.
Some thoughts from Joe Kennedy and Bernard Baruch might be in order:
posted by clawsoon at 9:38 AM on December 21, 2017 [13 favorites]
Some thoughts from Joe Kennedy and Bernard Baruch might be in order:
JOE KENNEDY, a famous rich guy in his day, exited the stock market in timely fashion after a shoeshine boy gave him some stock tips. He figured that when the shoeshine boys have tips, the market is too popular for its own good, a theory also advanced by Bernard Baruch, another vested interest who described the scene before the big Crash:That article was written in 1996. The NASDAQ quadrupled in the following four years before collapsing. So... who knows? How big is the supply of greater fools this time around?
"Taxi drivers told you what to buy. The shoeshine boy could give you a summary of the day's financial news as he worked with rag and polish. An old beggar who regularly patrolled the street in front of my office now gave me tips and, I suppose, spent the money I and others gave him in the market. My cook had a brokerage account and followed the ticker closely. Her paper profits were quickly blown away in the gale of 1929."
posted by clawsoon at 9:38 AM on December 21, 2017 [13 favorites]
Reminds me of the .com era when companies would shove "LINUX" into their S-1, and then IPO on E-Trade siphoning off the cash of amateur investuspeculators.
Yup. The now-defunct Vancouver Stock Exchange apparently had loads of these kinds of penny-stock pump-and-dumps in that period. I recall hearing of gold mining/exploration companies re-branding as some kind of nebulous dot-com business and getting the same kind of action.
posted by mhum at 9:40 AM on December 21, 2017 [1 favorite]
Yup. The now-defunct Vancouver Stock Exchange apparently had loads of these kinds of penny-stock pump-and-dumps in that period. I recall hearing of gold mining/exploration companies re-branding as some kind of nebulous dot-com business and getting the same kind of action.
posted by mhum at 9:40 AM on December 21, 2017 [1 favorite]
Reminds me of the .com era when companies would shove "LINUX" into their S-1, and then IPO on E-Trade siphoning off the cash of amateur investuspeculators.
Can someone put together a parody of Chase the Chuck Wagon where you instead chase a cartoon blockchain to earn diminishing rewards of bitcoin?
And can it have a kill screen where all your bitcoins are lost because some seedy cabal of foreign miners take control of the ledger?
posted by RonButNotStupid at 9:40 AM on December 21, 2017 [1 favorite]
Can someone put together a parody of Chase the Chuck Wagon where you instead chase a cartoon blockchain to earn diminishing rewards of bitcoin?
And can it have a kill screen where all your bitcoins are lost because some seedy cabal of foreign miners take control of the ledger?
posted by RonButNotStupid at 9:40 AM on December 21, 2017 [1 favorite]
How big is the supply of greater fools this time around?
Saw a feature on bitcoins last night on BBC World News. Reporter bought $20 worth, went to a rare coffee shop that had a bitcoin ATM and accepted it as payment.
posted by ZeusHumms at 9:42 AM on December 21, 2017 [1 favorite]
Saw a feature on bitcoins last night on BBC World News. Reporter bought $20 worth, went to a rare coffee shop that had a bitcoin ATM and accepted it as payment.
posted by ZeusHumms at 9:42 AM on December 21, 2017 [1 favorite]
The Long Island Blockchain & Tulip & Beanie Baby & Polybagged Comic Book Corporation.
posted by Iridic at 9:42 AM on December 21, 2017 [21 favorites]
posted by Iridic at 9:42 AM on December 21, 2017 [21 favorites]
God, at least with Tulip Bulbs, you could plant them and get a pretty flower. A comic book you can read and enjoy. Beanie Babies are cute and fluffy.
What can you do with a bitcoin? It's not even a physical good.
posted by SansPoint at 9:48 AM on December 21, 2017 [6 favorites]
What can you do with a bitcoin? It's not even a physical good.
posted by SansPoint at 9:48 AM on December 21, 2017 [6 favorites]
As far as I can tell, half the people investing are very well aware of this all being an unstable bubble. The game for them is to get in and get out right before the crash, or to weather the crash and see it through, hoping to ride the wave after the crash.
I played some with crypto currency this last month. I got exceptionally lucky and doubled my initial investment, after which I cashed out my initial investment. All signs point to this being unsafe and insane. It's unregulated gambling, pure and simple.
There's a lot of people who don't believe that this is a bubble, or even that it's gambling. People who've put everything into crypto currency. Retirements, life savings, former stock portfolios, their kids' education funds. They're banking on this being the future, but if and when this crashes down, it's going to look very, very bleak.
posted by Philipschall at 9:56 AM on December 21, 2017 [5 favorites]
I played some with crypto currency this last month. I got exceptionally lucky and doubled my initial investment, after which I cashed out my initial investment. All signs point to this being unsafe and insane. It's unregulated gambling, pure and simple.
There's a lot of people who don't believe that this is a bubble, or even that it's gambling. People who've put everything into crypto currency. Retirements, life savings, former stock portfolios, their kids' education funds. They're banking on this being the future, but if and when this crashes down, it's going to look very, very bleak.
posted by Philipschall at 9:56 AM on December 21, 2017 [5 favorites]
Saw a feature on bitcoins last night on BBC World News. Reporter bought $20 worth, went to a rare coffee shop that had a bitcoin ATM and accepted it as payment.
posted by ZeusHumms
There's one at Bennu here in Austin.
posted by fiercecupcake at 9:59 AM on December 21, 2017 [1 favorite]
posted by ZeusHumms
There's one at Bennu here in Austin.
posted by fiercecupcake at 9:59 AM on December 21, 2017 [1 favorite]
Reporter bought $20 worth
That seems like a bad idea.
posted by ckape at 10:01 AM on December 21, 2017 [2 favorites]
That seems like a bad idea.
posted by ckape at 10:01 AM on December 21, 2017 [2 favorites]
I come from a position of not understanding a single word of this post, but wanting to. Please correct me if I'm wrong:
A random company is changing its name, but the thing that has everyone up in arms is that this is the first step towards said company jumping on the bitcoin bandwagon. Do I have that right?
If so - why is this frightening people? How would the real economy be affected by what happens on Bitcoin? that's, like, not real money, right?
also, if they're continuing their real-world activities, wouldn't that be sort of a safety net? Or is that the fear, that later on they'll say "screw ice tea, we're going to be all bitcoin all the time"?
posted by EmpressCallipygos at 10:03 AM on December 21, 2017
A random company is changing its name, but the thing that has everyone up in arms is that this is the first step towards said company jumping on the bitcoin bandwagon. Do I have that right?
If so - why is this frightening people? How would the real economy be affected by what happens on Bitcoin? that's, like, not real money, right?
also, if they're continuing their real-world activities, wouldn't that be sort of a safety net? Or is that the fear, that later on they'll say "screw ice tea, we're going to be all bitcoin all the time"?
posted by EmpressCallipygos at 10:03 AM on December 21, 2017
Problem is, when it collapses, ordinary people like us end up on the hook for it.
Oh, don't get me wrong, I gots me plenty of anger on hand. I've got a full tank of angry—goddam cisterns full of angry at the fuckers behind this crap. It's sympathy I'm lacking at this point for those who keep falling for it. We've been concocting bubbles nonstop for the past 20 fucking years. Learn, damn it. It's not gonna be different this time people, no matter what you may think.
posted by los pantalones del muerte at 10:09 AM on December 21, 2017 [1 favorite]
Oh, don't get me wrong, I gots me plenty of anger on hand. I've got a full tank of angry—goddam cisterns full of angry at the fuckers behind this crap. It's sympathy I'm lacking at this point for those who keep falling for it. We've been concocting bubbles nonstop for the past 20 fucking years. Learn, damn it. It's not gonna be different this time people, no matter what you may think.
posted by los pantalones del muerte at 10:09 AM on December 21, 2017 [1 favorite]
There's a lot of people who don't believe that this is a bubble, or even that it's gambling. People who've put everything into crypto currency.
Whole countries, too. There are state-sponsored mining concerns throughout Asia trading carbon for money as we speak. I suspect one of the reasons North Korea can afford to run a first world nuclear program while weathering punishing sanctions is that they've gone in huge on bitcoin (both generating it and stealing it) and they have the mass infrastructure to launder some of their holdings into negotiable currencies while holding back the rest as an ever-appreciating nest egg.
I pray it's a bubble, and I pray it pops soon and utterly.
posted by Iridic at 10:12 AM on December 21, 2017 [2 favorites]
Whole countries, too. There are state-sponsored mining concerns throughout Asia trading carbon for money as we speak. I suspect one of the reasons North Korea can afford to run a first world nuclear program while weathering punishing sanctions is that they've gone in huge on bitcoin (both generating it and stealing it) and they have the mass infrastructure to launder some of their holdings into negotiable currencies while holding back the rest as an ever-appreciating nest egg.
I pray it's a bubble, and I pray it pops soon and utterly.
posted by Iridic at 10:12 AM on December 21, 2017 [2 favorites]
If so - why is this frightening people?
Bitcoin is effectively a Ponzi scheme. A lot of people know this, and Metafilter's pretty content to ridicule the sorta folks who are all-in on this stuff.
The problem is that we've got a company that is ostensibly a beverage company seeing its stock triple just by changing their name to reference this stuff.
The bubble is so, so much more obvious than previous ones like the housing market, and yet people are just not learning lessons at all.
Everyone seems to think they'll find a bigger fool, and we've seen that people aren't content to take their lumps and losses, but rather they somehow find ways to screw the American public when things go poorly.
posted by explosion at 10:13 AM on December 21, 2017 [14 favorites]
Bitcoin is effectively a Ponzi scheme. A lot of people know this, and Metafilter's pretty content to ridicule the sorta folks who are all-in on this stuff.
The problem is that we've got a company that is ostensibly a beverage company seeing its stock triple just by changing their name to reference this stuff.
The bubble is so, so much more obvious than previous ones like the housing market, and yet people are just not learning lessons at all.
Everyone seems to think they'll find a bigger fool, and we've seen that people aren't content to take their lumps and losses, but rather they somehow find ways to screw the American public when things go poorly.
posted by explosion at 10:13 AM on December 21, 2017 [14 favorites]
EmpressCallipygos: "A random company is changing its name, but the thing that has everyone up in arms is that this is the first step towards said company jumping on the bitcoin bandwagon. Do I have that right?
"
Random company issues a press release claiming to be focused on the blockchain caluclations that make bitcoin et. al. possible, stock suddenly soars. Tomorrow's headlines will be something like "Random company stockholders cash out, company doesn't actually do dick with blockchain anything"
posted by caution live frogs at 10:13 AM on December 21, 2017 [3 favorites]
"
Random company issues a press release claiming to be focused on the blockchain caluclations that make bitcoin et. al. possible, stock suddenly soars. Tomorrow's headlines will be something like "Random company stockholders cash out, company doesn't actually do dick with blockchain anything"
posted by caution live frogs at 10:13 AM on December 21, 2017 [3 favorites]
So, a bubble tea company?
posted by plastic_animals at 10:14 AM on December 21, 2017 [76 favorites]
posted by plastic_animals at 10:14 AM on December 21, 2017 [76 favorites]
I think the thing that has me hung up is that Bitcoin is "not real money" in my head, and I keep falling down on how it would affect actual markets. So it feels like i'm listening to people on Wall Street freak out about Chuck E Cheese tokens or something.
How would this be impacting the actual economy? that's the part I don't understand.
posted by EmpressCallipygos at 10:15 AM on December 21, 2017 [1 favorite]
How would this be impacting the actual economy? that's the part I don't understand.
posted by EmpressCallipygos at 10:15 AM on December 21, 2017 [1 favorite]
Emerging blockchain technologies are creating a fundamental paradigm shift across the global marketplace.Exactly as Nostradamus predicted!
posted by Kirth Gerson at 10:15 AM on December 21, 2017 [2 favorites]
How would this be impacting the actual economy? that's the part I don't understand.
It probably won't ever impact the actual economy. A small number of people will go broke when the crash comes. I don't think there's enough invested to trigger any larger effect.
posted by miyabo at 10:20 AM on December 21, 2017
It probably won't ever impact the actual economy. A small number of people will go broke when the crash comes. I don't think there's enough invested to trigger any larger effect.
posted by miyabo at 10:20 AM on December 21, 2017
A comic book you can read and enjoy.
Sure, if you want to destroy your investment and spend your retirement years eating cat food from the tin.
posted by nickmark at 10:28 AM on December 21, 2017 [1 favorite]
Sure, if you want to destroy your investment and spend your retirement years eating cat food from the tin.
posted by nickmark at 10:28 AM on December 21, 2017 [1 favorite]
It's of course all a bubble, but I guess I should admit I probably sold my 50 bitcoins for $350 a little bit early...
Anyway, 6 years later I'm curious if the Grass Hill Alpacas farms made a lot of money on their socks for 35 bitcoins thing.
posted by Nonsteroidal Anti-Inflammatory Drug at 10:30 AM on December 21, 2017 [2 favorites]
Anyway, 6 years later I'm curious if the Grass Hill Alpacas farms made a lot of money on their socks for 35 bitcoins thing.
posted by Nonsteroidal Anti-Inflammatory Drug at 10:30 AM on December 21, 2017 [2 favorites]
It probably won't ever impact the actual economy. A small number of people will go broke when the crash comes. I don't think there's enough invested to trigger any larger effect.
That's what I thought too, but the tone of the other comments in here is a little catastrophic so I thought I was missing something.
posted by EmpressCallipygos at 10:33 AM on December 21, 2017
That's what I thought too, but the tone of the other comments in here is a little catastrophic so I thought I was missing something.
posted by EmpressCallipygos at 10:33 AM on December 21, 2017
I keep falling down on how it would affect actual markets.
The real economy does not have a lot of exposure to bitcoin yet because there aren't too many places where you can use it for good, services, debts, and taxes. There are a few places where you can buy coffee with bitcoin, as in ZeusHumms' example, and there's a more developed (and infinitely shadier) market on the "dark web," but people who hold bitcoin tend to be reluctant to spend it for two reason: a lengthy, costly transaction process, as indicated by ckape's link; and because speculators keep driving the price to stupid new heights. Theodolite asked the key question earlier this month:
Maybe this is a dumb question but why would I spend $100 worth of bitcoins on dark web molly or whatever if it might be worth $1000 in a few months?
That's exactly it. No one wants to be the sucker who settled for a 7000000000% return on their initial investment when a little patience would have garnered a 900000000000000% return.
But when the price of an asset that no one actually uses starts doubling every time you blink, it's a good sign that you have a bubble on your hands. And at this point the craze is starting to draw in naive investors who are turning over money that would otherwise pay for useful things like good, services, debts, and taxes to get their hands on a sweet fistful of magic Monopoly money.
posted by Iridic at 10:34 AM on December 21, 2017 [9 favorites]
The real economy does not have a lot of exposure to bitcoin yet because there aren't too many places where you can use it for good, services, debts, and taxes. There are a few places where you can buy coffee with bitcoin, as in ZeusHumms' example, and there's a more developed (and infinitely shadier) market on the "dark web," but people who hold bitcoin tend to be reluctant to spend it for two reason: a lengthy, costly transaction process, as indicated by ckape's link; and because speculators keep driving the price to stupid new heights. Theodolite asked the key question earlier this month:
Maybe this is a dumb question but why would I spend $100 worth of bitcoins on dark web molly or whatever if it might be worth $1000 in a few months?
That's exactly it. No one wants to be the sucker who settled for a 7000000000% return on their initial investment when a little patience would have garnered a 900000000000000% return.
But when the price of an asset that no one actually uses starts doubling every time you blink, it's a good sign that you have a bubble on your hands. And at this point the craze is starting to draw in naive investors who are turning over money that would otherwise pay for useful things like good, services, debts, and taxes to get their hands on a sweet fistful of magic Monopoly money.
posted by Iridic at 10:34 AM on December 21, 2017 [9 favorites]
By this point, you'd think everyone could spot the signs of bubbles and other easy-rich schemes
The thing with bubbles (and even outright pyramid schemes) is people really do get rich, right up until they don't.
posted by cj_ at 10:35 AM on December 21, 2017 [6 favorites]
The thing with bubbles (and even outright pyramid schemes) is people really do get rich, right up until they don't.
posted by cj_ at 10:35 AM on December 21, 2017 [6 favorites]
The bursting of the cryptocurrency bubble won't affect "the economy", because I think most of the big banks and mutual funds are smart enough to stay away without doing a LOT of hedging against the inevitability of a bubble burst.
However, when the bubble pops, it will affect a lot of people who have been suckered into investing their life savings into Bitcoin (they exist, I know of a few) by either cynical pump-and-dumpers or naive evangelists.
The bright side compared to the dot-com and real estate bubbles is that there are comparatively fewer people whose jobs and homes are on the line this time around. Fewer but not zero. (Previous Bitcoin articles have documented people who mortgaged their homes to "invest" in Bitcoin.)
posted by tobascodagama at 10:38 AM on December 21, 2017
However, when the bubble pops, it will affect a lot of people who have been suckered into investing their life savings into Bitcoin (they exist, I know of a few) by either cynical pump-and-dumpers or naive evangelists.
The bright side compared to the dot-com and real estate bubbles is that there are comparatively fewer people whose jobs and homes are on the line this time around. Fewer but not zero. (Previous Bitcoin articles have documented people who mortgaged their homes to "invest" in Bitcoin.)
posted by tobascodagama at 10:38 AM on December 21, 2017
Everyone seems to think they'll find a bigger fool,
To be fair, the last couple of years in America kind of supports the idea that there are plenty of bigger fools around.
posted by COD at 10:41 AM on December 21, 2017 [1 favorite]
To be fair, the last couple of years in America kind of supports the idea that there are plenty of bigger fools around.
posted by COD at 10:41 AM on December 21, 2017 [1 favorite]
It probably won't ever impact the actual economy. A small number of people will go broke when the crash comes. I don't think there's enough invested to trigger any larger effect.
That might depend on how far it goes up. Google says that total cryptocurrency valuation is over $600 billion as of a couple of days ago. In March of 2000, the NASDAQ reached a total valuation of $6 trillion before it popped, or about ten times as much. So it's not at that level yet, but it's working on it.
Like any bubble, it can spill over into the larger economy in a couple of ways. My impression is that spillover happens mostly via credit: Are people borrowing money to buy cryptocurrencies, or crypto mining operations, or stock in companies (like Long Island Iced Tea) that are into cryptocurrencies? Are loans being made with cryptocurrencies as security? If any of those things are happening (as they were with the 2000 stock market bubble and the 2007-2008 housing bubble and dozens more past bubbles), it can have a cascading effect throughout the economy if the bubble gets big enough before it bursts. I always recommend Manias, Panics and Crashes as a readable introduction to the subject.
If things get really bad, you can end up in a situation like that of Albania in the late 1990s, when the majority of the economy was running on Ponzi schemes.
What I don't know much about (but perhaps someone else can chime in) is what's happening in China. Much of the mining is happening there. There's some evidence that much of what's driving it is attempts to evade Chinese currency controls. In North America it might not be much more than the penny-stock-rollercoaster of the day, but it's possible that much more money is being borrowed for and against cryptocurrencies in China, and that could have unpredictable consequences if/when the bubble bursts.
posted by clawsoon at 10:45 AM on December 21, 2017 [5 favorites]
That might depend on how far it goes up. Google says that total cryptocurrency valuation is over $600 billion as of a couple of days ago. In March of 2000, the NASDAQ reached a total valuation of $6 trillion before it popped, or about ten times as much. So it's not at that level yet, but it's working on it.
Like any bubble, it can spill over into the larger economy in a couple of ways. My impression is that spillover happens mostly via credit: Are people borrowing money to buy cryptocurrencies, or crypto mining operations, or stock in companies (like Long Island Iced Tea) that are into cryptocurrencies? Are loans being made with cryptocurrencies as security? If any of those things are happening (as they were with the 2000 stock market bubble and the 2007-2008 housing bubble and dozens more past bubbles), it can have a cascading effect throughout the economy if the bubble gets big enough before it bursts. I always recommend Manias, Panics and Crashes as a readable introduction to the subject.
If things get really bad, you can end up in a situation like that of Albania in the late 1990s, when the majority of the economy was running on Ponzi schemes.
What I don't know much about (but perhaps someone else can chime in) is what's happening in China. Much of the mining is happening there. There's some evidence that much of what's driving it is attempts to evade Chinese currency controls. In North America it might not be much more than the penny-stock-rollercoaster of the day, but it's possible that much more money is being borrowed for and against cryptocurrencies in China, and that could have unpredictable consequences if/when the bubble bursts.
posted by clawsoon at 10:45 AM on December 21, 2017 [5 favorites]
However, when the bubble pops, it will affect a lot of people who have been suckered into investing their life savings into Bitcoin (they exist, I know of a few) by either cynical pump-and-dumpers or naive evangelists.
Here's the thing - to my uneducated ears, it sounds like this therefore means that I'm safe because I wouldn't touch bitcoin with a ten-foot shit-covered pole. However - I also wasn't in the housing market either, so I thought I would be safe for the same reason, and my financial health took a serious blow anyway during the recession.
So. Is this indeed going to be the kind of thing where "this will only affect the idiots into Bitcoin but everyone else is going to be okay", or is this going to be the kind of thing that's "it's a bubble but the brokers on Wall Street are going to try to get in on it and it's going to take everything down and start another recession"?
posted by EmpressCallipygos at 10:45 AM on December 21, 2017 [3 favorites]
Here's the thing - to my uneducated ears, it sounds like this therefore means that I'm safe because I wouldn't touch bitcoin with a ten-foot shit-covered pole. However - I also wasn't in the housing market either, so I thought I would be safe for the same reason, and my financial health took a serious blow anyway during the recession.
So. Is this indeed going to be the kind of thing where "this will only affect the idiots into Bitcoin but everyone else is going to be okay", or is this going to be the kind of thing that's "it's a bubble but the brokers on Wall Street are going to try to get in on it and it's going to take everything down and start another recession"?
posted by EmpressCallipygos at 10:45 AM on December 21, 2017 [3 favorites]
Apologies, I do realize I'm coming across as a little paranoid here. But ten years ago I asked a similar question about the impending recession and everyone assured me I'd be fine, and then...I wasn't. So I'm getting concerned.
posted by EmpressCallipygos at 10:47 AM on December 21, 2017 [2 favorites]
posted by EmpressCallipygos at 10:47 AM on December 21, 2017 [2 favorites]
los pantalones del muerte: "We humans really are that stupid, aren't we? It's so depressing. By this point, you'd think everyone could spot the signs of bubbles and other easy-rich schemes. But if you don't yet know to run screaming when you see the words "paradigm shift" used non-ironically outside an academic paper…you're beyond help. I'm sorry, but I'll have no fucks to give when you start crying about your latest scheme's crash."
The fact that someone could use the phrases "shifting focus", "leverage" and "paradigm shift" without irony and all in the same paragraph, makes me weep for humanity. That press release could have been generated by a Markov Chain script that had been fed a set of buzzwork bingo cards.
posted by octothorpe at 10:50 AM on December 21, 2017
The fact that someone could use the phrases "shifting focus", "leverage" and "paradigm shift" without irony and all in the same paragraph, makes me weep for humanity. That press release could have been generated by a Markov Chain script that had been fed a set of buzzwork bingo cards.
posted by octothorpe at 10:50 AM on December 21, 2017
EmpressCallipygos: Apologies, I do realize I'm coming across as a little paranoid here. But ten years ago I asked a similar question about the impending recession and everyone assured me I'd be fine, and then...I wasn't. So I'm getting concerned.
Plenty of people think that the tech parts of the regular stock market are in a bubble right now, so you've got that to worry about, too, and it's much bigger and more tightly tied into the larger economy. How long can companies like Uber and Twitter keep losing billions of dollars a year before investors decide that the whole thing is a sham and rush for the exits? People have been asking that question for the past 5 years at least.
That's what we don't know: How long? There's always a supply of greater fools, but at some point they run out of money.
But if you knew that a crash was coming, what would you do differently? Does the diagnosis make any clinical difference?
posted by clawsoon at 10:56 AM on December 21, 2017 [3 favorites]
Plenty of people think that the tech parts of the regular stock market are in a bubble right now, so you've got that to worry about, too, and it's much bigger and more tightly tied into the larger economy. How long can companies like Uber and Twitter keep losing billions of dollars a year before investors decide that the whole thing is a sham and rush for the exits? People have been asking that question for the past 5 years at least.
That's what we don't know: How long? There's always a supply of greater fools, but at some point they run out of money.
But if you knew that a crash was coming, what would you do differently? Does the diagnosis make any clinical difference?
posted by clawsoon at 10:56 AM on December 21, 2017 [3 favorites]
In his Extraordinary Popular Delusions and the Madness of Crowds, Charles Mackay describes the emergence and spread of a relatively new financial structure in the early 18th century- the joint-stock company. In one chapter, he lists a number of companies that speculators attempted to float during the South Seas Bubble. Among them were the following:
6. For effectually settling the island of Blanco and Sal Tartagus.posted by TheWhiteSkull at 11:00 AM on December 21, 2017 [13 favorites]
9. For improvement of lands in Great Britain. Capital, four millions.
10. For encouraging the breed of horses in England, and improving of glebe and church lands, and for repairing and rebuilding parsonage and vicarage houses.
13. For purchasing lands to build on. Capital, two millions.
14. For trading in hair.
17. For carrying on an undertaking of great advantage, but nobody to know what it is.
19. For furnishing funerals to any part of Great Britain.
27. For purchasing and improving a manor and royalty in Essex.
28. For insuring of horses. Capital, two millions.
30. For a grand dispensary. Capital, three millions.
32. For improving the art of making soap.
33. For a settlement on the island of Santa Cruz.
36. For a wheel for perpetual motion. Capital, one million.
37. For improving of gardens.
38. For insuring and increasing children's fortunes.
41. For importing walnut-trees from Virginia. Capital, two millions.
46. For trading in and improving certain commodities of the produce of this kingdom, &c. Capital, three millions.
55. For lending money on stock, annuities, tallies, &c.
56. For paying pensions to widows and others, at a small discount. Capital, two millions.
59. For purchasing and improving the fenny lands in Lincolnshire. Capital, two millions.
61. The Bottomry Company.
63. For carrying on a trade in the river Oronooko.
66. For employing poor artificers, and furnishing merchants and others with watches.
68. Another for the improvement of our breed of horses.
69. Another for a horse-insurance.
71. For insuring to all masters and mistresses the losses they may sustain by servants. Capital, three millions.
73. For bleaching coarse sugars, without the use of fire or loss of substance.
76. For extracting silver from lead.
79. For making iron with pit coal.
82. For taking up ballast.
83. For buying and fitting out ships to suppress pirates.
85. For rock-salt.
86. For the transmutation of quicksilver into a malleable fine metal.
But if you knew that a crash was coming, what would you do differently?
"What can I do to protect myself from such a crash" is precisely the question I'm asking, my friend.
posted by EmpressCallipygos at 11:03 AM on December 21, 2017 [1 favorite]
"What can I do to protect myself from such a crash" is precisely the question I'm asking, my friend.
posted by EmpressCallipygos at 11:03 AM on December 21, 2017 [1 favorite]
61. The Bottomry Company.
Was that what, a franchised sex club?
posted by thelonius at 11:03 AM on December 21, 2017 [5 favorites]
Was that what, a franchised sex club?
posted by thelonius at 11:03 AM on December 21, 2017 [5 favorites]
EmpressCallipygos: "What can I do to protect myself from such a crash" is precisely the question I'm asking, my friend.
I believe that the standard answer is "a well-balanced portfolio" (and "don't sell in a panic"). But since very few of us generate as much money from our investments as we do from our employment, an additional answer is probably "keep making friends with people who might have future job leads for you and/or a couch they'll let you sleep on". Spread both your financial and social capital around so that at least some of it escapes an unpredictable crash.
As for me, I'm putting all my money into genetically-modified grapefruit futures.
(Funny enough: A buddy of mine wants to spend a big chunk of his retirement savings to build a crypto mining operation. He's asking me to do power and cooling calculations for a 6000 sq ft data center that he wants to get up and running in the laughably short timeframe of the next couple of months.)
posted by clawsoon at 11:17 AM on December 21, 2017 [6 favorites]
I believe that the standard answer is "a well-balanced portfolio" (and "don't sell in a panic"). But since very few of us generate as much money from our investments as we do from our employment, an additional answer is probably "keep making friends with people who might have future job leads for you and/or a couch they'll let you sleep on". Spread both your financial and social capital around so that at least some of it escapes an unpredictable crash.
As for me, I'm putting all my money into genetically-modified grapefruit futures.
(Funny enough: A buddy of mine wants to spend a big chunk of his retirement savings to build a crypto mining operation. He's asking me to do power and cooling calculations for a 6000 sq ft data center that he wants to get up and running in the laughably short timeframe of the next couple of months.)
posted by clawsoon at 11:17 AM on December 21, 2017 [6 favorites]
If any of those things are happening (as they were with the 2000 stock market bubble and the 2007-2008 housing bubble and dozens more past bubbles)
Those, however, happened with (non-penny) stocks in the one case, and bonds issued by all the major banks in the other. At this time, at least, we don't have the Arkansas State Firefighters' Pension Fund in bitcoin, or the collateral for major banks' commercial paper in bitcoin. Under present circumstances, at least, Bitcoin collapse is much more likely to be a secondary chain of events in a larger downturn (because you know the instant there's any sort of significant tech decline, people will be trying to pile out, because it's all "tech," right?) than a massive vector of contagion underlying the downturn.
posted by praemunire at 11:21 AM on December 21, 2017 [4 favorites]
Those, however, happened with (non-penny) stocks in the one case, and bonds issued by all the major banks in the other. At this time, at least, we don't have the Arkansas State Firefighters' Pension Fund in bitcoin, or the collateral for major banks' commercial paper in bitcoin. Under present circumstances, at least, Bitcoin collapse is much more likely to be a secondary chain of events in a larger downturn (because you know the instant there's any sort of significant tech decline, people will be trying to pile out, because it's all "tech," right?) than a massive vector of contagion underlying the downturn.
posted by praemunire at 11:21 AM on December 21, 2017 [4 favorites]
praemunire: Under present circumstances, at least, Bitcoin collapse is much more likely to be a secondary chain of events in a larger downturn (because you know the instant there's any sort of significant tech decline, people will be trying to pile out, because it's all "tech," right?) than a massive vector of contagion underlying the downturn.
Agreed. It's more the fuse than the powder at this point.
posted by clawsoon at 11:23 AM on December 21, 2017 [2 favorites]
Agreed. It's more the fuse than the powder at this point.
posted by clawsoon at 11:23 AM on December 21, 2017 [2 favorites]
I'm slightly more concerned by the Chicago Mercantile Exchange opening trading in bitcoin futures, but I'm guessing that most of the contracts being written right now hinge not on if the bubble will collapse, but when.
posted by TheWhiteSkull at 11:28 AM on December 21, 2017 [3 favorites]
posted by TheWhiteSkull at 11:28 AM on December 21, 2017 [3 favorites]
Attack of the Fifty Foot Blockchain and it’s a fun and illuminating read.
The secret of the bitcoin market — to the extent that it’s even a secret — is that you can’t get dollars out of the exchanges, and the exchanges are probably not solvent. In the long run, all exchanges are hacked and/or there is some kind of exit scam where insiders run off with coins or money.
posted by chrchr at 11:41 AM on December 21, 2017 [10 favorites]
The secret of the bitcoin market — to the extent that it’s even a secret — is that you can’t get dollars out of the exchanges, and the exchanges are probably not solvent. In the long run, all exchanges are hacked and/or there is some kind of exit scam where insiders run off with coins or money.
posted by chrchr at 11:41 AM on December 21, 2017 [10 favorites]
I'm slightly more concerned by the Chicago Mercantile Exchange opening trading in bitcoin futures
Hopefully 43% margin is high enough.
(doubtful)
(Crudely speaking the margin requirement is how much of a sufficiently fast move it would take for the exchange to have to tap into its own capital to pay winners while waiting for the losers to pony up.)
posted by PMdixon at 11:46 AM on December 21, 2017
Hopefully 43% margin is high enough.
(doubtful)
(Crudely speaking the margin requirement is how much of a sufficiently fast move it would take for the exchange to have to tap into its own capital to pay winners while waiting for the losers to pony up.)
posted by PMdixon at 11:46 AM on December 21, 2017
I shall call my new company Riot in Cell Blockchain C.
what do you mean, what do we do?
posted by evilDoug at 12:14 PM on December 21, 2017 [3 favorites]
what do you mean, what do we do?
posted by evilDoug at 12:14 PM on December 21, 2017 [3 favorites]
I've been wondering why I've been watching clips from the movie Margin Call.
posted by maxwelton at 12:17 PM on December 21, 2017 [1 favorite]
posted by maxwelton at 12:17 PM on December 21, 2017 [1 favorite]
Imagine how much more popular Minecraft would be if they implemented chains.
posted by Mr.Encyclopedia at 12:30 PM on December 21, 2017
posted by Mr.Encyclopedia at 12:30 PM on December 21, 2017
Wait, I thought this was a joke. I mean, it is a joke, but I thought it was *just* a joke.
I did have to triple-check that Ars Technica doesn't have some kind of Onion-style parody spin-off, yeah.
What I don't know much about (but perhaps someone else can chime in) is what's happening in China. Much of the mining is happening there. There's some evidence that much of what's driving it is attempts to evade Chinese currency controls.
This is the thing I don't know nearly enough about as well. It does seem like cryptocurrencies are filling a genuine purpose over there, as opposed to in the US where most of the folks deep into -coins are basically just goldbugs. But with the BTC transaction costs so high, I assume that most of the Chinese mining revolves around alternative coins to begin with, presumably ones that don't share some of BTC's deficiencies as an actual spendable currency. I know that Ethereum was really popular over the past year, for instance, at least enough to distort the video card market. (The Bitcoin algorithm last I checked is more efficiently run on purpose-build FPGAs than general purpose GPUs, but that's not true of some altcoins.)
posted by tobascodagama at 12:34 PM on December 21, 2017
I did have to triple-check that Ars Technica doesn't have some kind of Onion-style parody spin-off, yeah.
What I don't know much about (but perhaps someone else can chime in) is what's happening in China. Much of the mining is happening there. There's some evidence that much of what's driving it is attempts to evade Chinese currency controls.
This is the thing I don't know nearly enough about as well. It does seem like cryptocurrencies are filling a genuine purpose over there, as opposed to in the US where most of the folks deep into -coins are basically just goldbugs. But with the BTC transaction costs so high, I assume that most of the Chinese mining revolves around alternative coins to begin with, presumably ones that don't share some of BTC's deficiencies as an actual spendable currency. I know that Ethereum was really popular over the past year, for instance, at least enough to distort the video card market. (The Bitcoin algorithm last I checked is more efficiently run on purpose-build FPGAs than general purpose GPUs, but that's not true of some altcoins.)
posted by tobascodagama at 12:34 PM on December 21, 2017
It does seem like cryptocurrencies are filling a genuine purpose over there, as opposed to in the US where most of the folks deep into -coins are basically just goldbugs.
Does evading capital controls count as genuine?
posted by PMdixon at 1:46 PM on December 21, 2017
Does evading capital controls count as genuine?
posted by PMdixon at 1:46 PM on December 21, 2017
Genuine in an abstract homo economicus kind of sense, even if it's illegal behaviour.
posted by tobascodagama at 1:53 PM on December 21, 2017 [2 favorites]
posted by tobascodagama at 1:53 PM on December 21, 2017 [2 favorites]
I'm slightly more concerned by the Chicago Mercantile Exchange opening trading in bitcoin futures, but I'm guessing that most of the contracts being written right now hinge not on if the bubble will collapse, but when.
Who will be the Michael Burry this time? Although to be fair, in sussing out the when, he had the advantage of having mortgage bond prospectuses to read (which he did in exquisite detail), so he knew exactly when the garbage adjustable-rate loans therein would hit their reset date and be pretty much guaranteed go into default because the originators had handed them out to people with no chance of keeping up with the payments once the initial rates went bye-bye.
He said this in 2006:
Most of these subprime mortgage pools will likely see maximum foreclosures a little over two years into the life of the pool. The reason is that most subprime mortgages included in these pools – typically 80% of the mortgages in the pools – are adjustable rate mortgages. As a result, the mortgage pool will experience its most significant stress when the initial teaser rate period ends on its set of adjustable rate mortgages. Generally, this period ends on average 20-24 months from the date of issuance of the mortgage pool.
posted by mandolin conspiracy at 1:55 PM on December 21, 2017
Who will be the Michael Burry this time? Although to be fair, in sussing out the when, he had the advantage of having mortgage bond prospectuses to read (which he did in exquisite detail), so he knew exactly when the garbage adjustable-rate loans therein would hit their reset date and be pretty much guaranteed go into default because the originators had handed them out to people with no chance of keeping up with the payments once the initial rates went bye-bye.
He said this in 2006:
Most of these subprime mortgage pools will likely see maximum foreclosures a little over two years into the life of the pool. The reason is that most subprime mortgages included in these pools – typically 80% of the mortgages in the pools – are adjustable rate mortgages. As a result, the mortgage pool will experience its most significant stress when the initial teaser rate period ends on its set of adjustable rate mortgages. Generally, this period ends on average 20-24 months from the date of issuance of the mortgage pool.
posted by mandolin conspiracy at 1:55 PM on December 21, 2017
mandolin conspiracy: Who will be the Michael Burry this time? Although to be fair, in sussing out the when, he had the advantage of having mortgage bond prospectuses to read (which he did in exquisite detail), so he knew exactly when the garbage adjustable-rate loans therein would hit their reset date and be pretty much guaranteed go into default because the originators had handed them out to people with no chance of keeping up with the payments once the initial rates went bye-bye.
A curious thing about that, though: In the end, it wasn't the subprime borrowers who defaulted en-masse; it was prime borrowers with second mortgages. The fear of subprime borrowers is what set off the panic, though.
One can half-imagine the same thing happening in this case: Cryptocurrencies act as the fuse that starts the explosion, but in the end it's respectable money-losing tech companies on respectable exchanges which turn out to be the duds and cryptocurrencies turn out to be all that they're claimed to be.
I doubt it, but maybe.
posted by clawsoon at 3:18 PM on December 21, 2017 [3 favorites]
A curious thing about that, though: In the end, it wasn't the subprime borrowers who defaulted en-masse; it was prime borrowers with second mortgages. The fear of subprime borrowers is what set off the panic, though.
One can half-imagine the same thing happening in this case: Cryptocurrencies act as the fuse that starts the explosion, but in the end it's respectable money-losing tech companies on respectable exchanges which turn out to be the duds and cryptocurrencies turn out to be all that they're claimed to be.
I doubt it, but maybe.
posted by clawsoon at 3:18 PM on December 21, 2017 [3 favorites]
That's a pretty plausible scenario. I think the likelihood that it comes to pass depends a lot on how long it takes for either bubble to burst. The longer BTC stays high, the stronger the illusion of stability, the more panic will be triggered when it finally crashes, the more likely the burst brings down other overvalued stocks.
posted by tobascodagama at 5:53 PM on December 21, 2017
posted by tobascodagama at 5:53 PM on December 21, 2017
Everyone seems to think they'll find a bigger fool
To be completely fair, I am bigger now than I was when I bought $600 worth of BTC to play with before MtGox made off with all the proceeds.
Well, with most of the proceeds. If I recall correctly there's still a wallet lying around somewhere under many layers of backups of crashed and obsolete machinery that has about 0.06 BTC left in it. God only knows how I'd go about connecting that with any current software even if I do manage to dig it out.
posted by flabdablet at 7:08 PM on December 21, 2017 [1 favorite]
To be completely fair, I am bigger now than I was when I bought $600 worth of BTC to play with before MtGox made off with all the proceeds.
Well, with most of the proceeds. If I recall correctly there's still a wallet lying around somewhere under many layers of backups of crashed and obsolete machinery that has about 0.06 BTC left in it. God only knows how I'd go about connecting that with any current software even if I do manage to dig it out.
posted by flabdablet at 7:08 PM on December 21, 2017 [1 favorite]
For a technology that's supposed to be decentralized and not require intermediaries, it's interesting how much cryptocurrencies seem to depend on exchanges.
posted by clawsoon at 8:00 PM on December 21, 2017 [7 favorites]
posted by clawsoon at 8:00 PM on December 21, 2017 [7 favorites]
Who will be the Michael Burry this time?
I believe it will crash in a much less predictable way, this time. The flaw in decentralized cryptocurrencies is that the security guarantees on the transaction history are based on economic assumptions which don't apply to sovereign nations. The big cryptocurrency crash will come when some country decides that BTC or whatever is enough of a threat their sovereignty to justify assembling the computational resources necessary to rewrite the transaction history. The US could do this without even noticing the cost. China could do it by simply expropriating the mining equipment under its jurisdiction.
Once someone has gotten those resources together, they can simply erase all the transactions on the blockchain from the last two hours or so, once a day. The ledger will cease to be be a reliable medium of exchange, and the price will go to zero.
There are a couple of ways you could make money if things play out that way. One is to invest in cryptocurrencies which enforce some kind of authentication and accountability on miners/validators. Those currencies will do well in such a crisis. The other is to bet against the big coins. If I could buy 5-year, deep out-of-the-money puts on BTC, I would be pretty interested.
posted by Coventry at 8:40 PM on December 21, 2017 [3 favorites]
I believe it will crash in a much less predictable way, this time. The flaw in decentralized cryptocurrencies is that the security guarantees on the transaction history are based on economic assumptions which don't apply to sovereign nations. The big cryptocurrency crash will come when some country decides that BTC or whatever is enough of a threat their sovereignty to justify assembling the computational resources necessary to rewrite the transaction history. The US could do this without even noticing the cost. China could do it by simply expropriating the mining equipment under its jurisdiction.
Once someone has gotten those resources together, they can simply erase all the transactions on the blockchain from the last two hours or so, once a day. The ledger will cease to be be a reliable medium of exchange, and the price will go to zero.
There are a couple of ways you could make money if things play out that way. One is to invest in cryptocurrencies which enforce some kind of authentication and accountability on miners/validators. Those currencies will do well in such a crisis. The other is to bet against the big coins. If I could buy 5-year, deep out-of-the-money puts on BTC, I would be pretty interested.
posted by Coventry at 8:40 PM on December 21, 2017 [3 favorites]
flabdablet: "God only knows how I'd go about connecting that with any current software even if I do manage to dig it out."
I've seen estimates that something like 40% of bitcoins are lost forever.
posted by Chrysostom at 9:47 PM on December 21, 2017 [1 favorite]
I've seen estimates that something like 40% of bitcoins are lost forever.
posted by Chrysostom at 9:47 PM on December 21, 2017 [1 favorite]
Annnnnnd... Goldman Sachs Is Setting Up a Cryptocurrency Trading Desk. (Warning: Autoplaying video)
posted by clawsoon at 5:22 AM on December 22, 2017
posted by clawsoon at 5:22 AM on December 22, 2017
Well this is a good sign it's time to get out... right?
posted by caution live frogs at 6:30 AM on December 22, 2017 [3 favorites]
posted by caution live frogs at 6:30 AM on December 22, 2017 [3 favorites]
KEEP CALM AND PONZI ON
posted by flabdablet at 6:50 AM on December 22, 2017 [2 favorites]
posted by flabdablet at 6:50 AM on December 22, 2017 [2 favorites]
Well this is a good sign it's time to get out... right?
If you look at the price history, you might conclude that it's actually a good time to buy. There have been many iterations, now, of the price crashing, pundits concluding that the space is now dead, and then the price reaching new all time highs a year or three later.
posted by Coventry at 7:14 AM on December 22, 2017
If you look at the price history, you might conclude that it's actually a good time to buy. There have been many iterations, now, of the price crashing, pundits concluding that the space is now dead, and then the price reaching new all time highs a year or three later.
posted by Coventry at 7:14 AM on December 22, 2017
This isn't the bottom.
Take a look at the furor that's unfolding in /r/coinbase ...
posted by snuffleupagus at 8:31 AM on December 22, 2017 [1 favorite]
Take a look at the furor that's unfolding in /r/coinbase ...
posted by snuffleupagus at 8:31 AM on December 22, 2017 [1 favorite]
Context for that: Coinbase halts Bitcoin Cash transactions amidst accusations of insider trading. Coinbase has been the one seemingly legitimate exchange, a professional business instead of just a POG exchange. The linked Reddit posts suggests Coinbase is having stability or liquidity problems, too.
posted by Nelson at 8:34 AM on December 22, 2017 [2 favorites]
posted by Nelson at 8:34 AM on December 22, 2017 [2 favorites]
Well, when this noise with coinbase started last week, I make a large withdrawal. It showed up in my bank account on schedule, yesterday.
There's no denying we could be a long way from the bottom, though.
posted by Coventry at 8:54 AM on December 22, 2017
There's no denying we could be a long way from the bottom, though.
posted by Coventry at 8:54 AM on December 22, 2017
Coinbase, one of the biggest bitcoin marketplaces, says buying and selling temporarily disabled amid price rout. (Not really relevant to the original post except it's Bitcoin, but here I am anyway.)
posted by Nelson at 9:13 AM on December 22, 2017 [2 favorites]
posted by Nelson at 9:13 AM on December 22, 2017 [2 favorites]
Coventry: Or, you could wait until it bottoms out and then buy. Or, better yet, put that same amount of money into an Index fund, where it's safer.
---
All I want to know is this: are the Winkelvoss Twins Bitcoin bankrupt yet?
posted by SansPoint at 9:19 AM on December 22, 2017
---
All I want to know is this: are the Winkelvoss Twins Bitcoin bankrupt yet?
posted by SansPoint at 9:19 AM on December 22, 2017
By the way, git (the version control system) stores revision history in what is essentially a blockchain so if you're somewhat proficient with it, you can legitimately call yourself a blockchain expert.
posted by suetanvil at 9:24 AM on December 22, 2017 [2 favorites]
posted by suetanvil at 9:24 AM on December 22, 2017 [2 favorites]
are the Winkelvoss Twins Bitcoin bankrupt yet?
I agree it's a bubble, but bubbles are where the biggest trading opportunities happen. BTC would have to fall to 2.5% of its current value for the Winklevoss twins to be breaking even, and that's assuming they haven't taken profit.
posted by Coventry at 9:27 AM on December 22, 2017
I agree it's a bubble, but bubbles are where the biggest trading opportunities happen. BTC would have to fall to 2.5% of its current value for the Winklevoss twins to be breaking even, and that's assuming they haven't taken profit.
posted by Coventry at 9:27 AM on December 22, 2017
suetanvil: I don't even think the people who developed git are even somewhat proficient with it.
posted by SansPoint at 9:27 AM on December 22, 2017 [4 favorites]
posted by SansPoint at 9:27 AM on December 22, 2017 [4 favorites]
Nelson: (Not really relevant to the original post except it's Bitcoin, but here I am anyway.)
Although... the link that caution live frogs posted directly links the two stories:
Although... the link that caution live frogs posted directly links the two stories:
Yesterday, a beverage company called the Long Island Iced Tea Company renamed itself "Long Blockchain" and was rewarded somewhat hysterically with a nearly 3-fold increase in its stock price. This story, and others like it, has convinced some observers that we're seeing a repeat of the 1990s technology boom.posted by clawsoon at 9:33 AM on December 22, 2017
Actually the Winklevoss Twins are doing pretty great. They've been letting it ride and the wheel keeps hitting black.
Nazis are doing well, too. So are other folks who for whatever reason have been holding black market currency.
posted by Nelson at 9:34 AM on December 22, 2017
Nazis are doing well, too. So are other folks who for whatever reason have been holding black market currency.
posted by Nelson at 9:34 AM on December 22, 2017
Remy: Bitcoin Billionaire
the lyrics are pretty clever.
posted by snuffleupagus at 9:54 AM on December 22, 2017 [2 favorites]
the lyrics are pretty clever.
posted by snuffleupagus at 9:54 AM on December 22, 2017 [2 favorites]
I'm curious if the Grass Hill Alpacas farms made a lot of money...
As long as they didn't have any alpacas, which were a big bubble ($10,000+ -> $250 each). But if they lost their shirt, at least they can make a new one! Try that with a bitcoin.
If your office is anything like mine, you have a bitcoin guy talking up this stuff, showing off graphs on his phone, etc. My plan is to gauge bubble size on him. He's only in it half a paycheck or so right now, so I think a crash won't affect the wider economy much.
If he starts talking about a "business venture" and spawns a couple more bitcoin guys, I'll start worrying. Once the bitcoin panic hits they'll be in debt and will have to pull back spending to dig themselves out, possibly triggering a recession.
The stage 3 bitcoin guy leases a new luxury car and wonders how all the non-bitcoin-owners* will eat once the fiat currencies disappear. Time magazine will have a cover of a guy hugging a bitcoin. That's a definite recession when it pops, possibly 1929/2008 size.
*: Fill in the disparaging slang term everyone has heard of by then.
posted by netowl at 9:58 AM on December 22, 2017 [4 favorites]
As long as they didn't have any alpacas, which were a big bubble ($10,000+ -> $250 each). But if they lost their shirt, at least they can make a new one! Try that with a bitcoin.
If your office is anything like mine, you have a bitcoin guy talking up this stuff, showing off graphs on his phone, etc. My plan is to gauge bubble size on him. He's only in it half a paycheck or so right now, so I think a crash won't affect the wider economy much.
If he starts talking about a "business venture" and spawns a couple more bitcoin guys, I'll start worrying. Once the bitcoin panic hits they'll be in debt and will have to pull back spending to dig themselves out, possibly triggering a recession.
The stage 3 bitcoin guy leases a new luxury car and wonders how all the non-bitcoin-owners* will eat once the fiat currencies disappear. Time magazine will have a cover of a guy hugging a bitcoin. That's a definite recession when it pops, possibly 1929/2008 size.
*: Fill in the disparaging slang term everyone has heard of by then.
posted by netowl at 9:58 AM on December 22, 2017 [4 favorites]
There have been many iterations, now, of the price crashing, pundits concluding that the space is now dead, and then the price reaching new all time highs a year or three later.
You hear the one about the turkeys? One of them was a kind of philosopher. He observed that every time the farmer came to their enclosure, he brought food. He developed a theory that this was a Law Of Nature, and just before Thanksgiving, gave a presentation about it to the rest of the birds.
posted by thelonius at 10:26 AM on December 22, 2017
You hear the one about the turkeys? One of them was a kind of philosopher. He observed that every time the farmer came to their enclosure, he brought food. He developed a theory that this was a Law Of Nature, and just before Thanksgiving, gave a presentation about it to the rest of the birds.
posted by thelonius at 10:26 AM on December 22, 2017
netowl: *: Fill in the disparaging slang term everyone has heard of by then.
Fiaturds? Dollar deviationists? Craptocurrentoids?
posted by clawsoon at 10:44 AM on December 22, 2017
Fiaturds? Dollar deviationists? Craptocurrentoids?
posted by clawsoon at 10:44 AM on December 22, 2017
thelonius, read back. I would be the farmer in this thread, not one of the turkeys. I have a pretty precise idea about how the bubble may pop. There is probably still money to be made, though.
posted by Coventry at 10:59 AM on December 22, 2017 [1 favorite]
posted by Coventry at 10:59 AM on December 22, 2017 [1 favorite]
Unless the farmer is my inevitable impending annihilation, and the philosophy is the ignorance of that. In that case, yeah, I am usually a great big turkey.
posted by Coventry at 11:39 AM on December 22, 2017 [1 favorite]
posted by Coventry at 11:39 AM on December 22, 2017 [1 favorite]
A useless calculation: If Bitcoin aims to replace the money supply in just the United States, it would have to be valued, at minimum, at $500,000 or so per coin ($10 trillion M2 / 21 million bitcoins).
I wonder if Satoshi thought of that. Maybe he/she did; I have to admit that I have resisted reading the whitepaper, despite urging from colleagues.
posted by clawsoon at 11:46 AM on December 22, 2017 [1 favorite]
I wonder if Satoshi thought of that. Maybe he/she did; I have to admit that I have resisted reading the whitepaper, despite urging from colleagues.
posted by clawsoon at 11:46 AM on December 22, 2017 [1 favorite]
*: Fill in the disparaging slang term everyone has heard of by then.
There already is one: nocoiner.
posted by bonje at 12:01 PM on December 22, 2017 [1 favorite]
There already is one: nocoiner.
posted by bonje at 12:01 PM on December 22, 2017 [1 favorite]
clawsoon: I think an alternative currency doesn't need to replace a nation's entire economic activity to be a threat to national sovereignty. Drug markets and Chinese capital flight seem to demonstrate that. I think cryptocurrencies will be crushed long before they get that big. It's probably still at least a year or two off, though, and probably longer than that.
posted by Coventry at 12:16 PM on December 22, 2017
posted by Coventry at 12:16 PM on December 22, 2017
EmpressCallipygos: "What can I do to protect myself from such a crash" is precisely the question I'm asking, my friend.
One other way to think about it: A crash in the value of everything else is, at the same time, an increase in the value of cash. You could say that the value of housing and stocks went down in 2008, or you could say that the value of cash (and some other goods) went up. And that's not just a clever intellectual exercise: What happened in 2008 was a flight to liquidity, and cash was the most liquid of all. People were desperate to trade their other investments for cash.
The point of all that is that a well-balanced portfolio also includes cash. If you're poor, the cash gets you through hard times; if you're rich, the cash lets you buy up assets that everybody else is selling in a panic.
The position that you don't want to be in is not having enough cash to ride through the hard times. That's when people get forced to sell off their investments at low prices even if they're confident that the investments will rise in price later: They need cash now. That's the position you don't want to be in.
posted by clawsoon at 1:27 PM on December 22, 2017 [2 favorites]
One other way to think about it: A crash in the value of everything else is, at the same time, an increase in the value of cash. You could say that the value of housing and stocks went down in 2008, or you could say that the value of cash (and some other goods) went up. And that's not just a clever intellectual exercise: What happened in 2008 was a flight to liquidity, and cash was the most liquid of all. People were desperate to trade their other investments for cash.
The point of all that is that a well-balanced portfolio also includes cash. If you're poor, the cash gets you through hard times; if you're rich, the cash lets you buy up assets that everybody else is selling in a panic.
The position that you don't want to be in is not having enough cash to ride through the hard times. That's when people get forced to sell off their investments at low prices even if they're confident that the investments will rise in price later: They need cash now. That's the position you don't want to be in.
posted by clawsoon at 1:27 PM on December 22, 2017 [2 favorites]
Bitcoin is effectively a Ponzi scheme
All fiat currency is backed by the faith of those who use it for transactions. Even when its backed by precious metals, its still only as good as the value attached to said metal.
Which is why I only invest in giant stone coins from the island of Yap, for their ability withstand currency plunges, exchange theft and typhoons.
posted by MiltonRandKalman at 1:43 PM on December 22, 2017 [5 favorites]
All fiat currency is backed by the faith of those who use it for transactions. Even when its backed by precious metals, its still only as good as the value attached to said metal.
Which is why I only invest in giant stone coins from the island of Yap, for their ability withstand currency plunges, exchange theft and typhoons.
posted by MiltonRandKalman at 1:43 PM on December 22, 2017 [5 favorites]
All fiat currency is backed by the faith of those who use it for transactions.
Faith and an army.
Yo, Bitcoin! You and what army?
posted by clawsoon at 1:50 PM on December 22, 2017 [2 favorites]
Faith and an army.
Yo, Bitcoin! You and what army?
posted by clawsoon at 1:50 PM on December 22, 2017 [2 favorites]
I saw something on Reddit about just buying a bunch of Chucky Cheese coins and convincing fools that they're bitcoin. Seems like a good time of year for some outright fraud.
posted by aspersioncast at 1:55 PM on December 22, 2017
posted by aspersioncast at 1:55 PM on December 22, 2017
You have to use U.S. dollars to pay taxes. That is what supports the value of U.S. dollars. It’s got nothing to do with any kind of metal reserves.
posted by chrchr at 4:33 PM on December 22, 2017
posted by chrchr at 4:33 PM on December 22, 2017
I saw something on Reddit about just buying a bunch of Chucky Cheese coins and convincing fools that they're bitcoin. Seems like a good time of year for some outright fraud.
Here's a historical example of that. I just love this story.
posted by Slinga at 5:29 PM on December 22, 2017
Here's a historical example of that. I just love this story.
posted by Slinga at 5:29 PM on December 22, 2017
No, a Guy Didn't Scam $1 Million by Selling Chuck E. Cheese Tokens as Bitcoins
posted by chrchr at 5:30 PM on December 22, 2017
posted by chrchr at 5:30 PM on December 22, 2017
From the current US Politics thread:
localhuman: Either way though, at any one time there are upwards of 150,000 transactions pending on the BTC network, which while doing so is burning more electricity than the country of Denmark.
Thinking about it, could there be a version of BTC that somehow scales the block reward inversely to the amount of computational power expended to find the result? Is that technically enforceable (from 'proof of work' to 'show your work') and would it help, in terms of incentives and probabilities? Large miners could break up mining resources into smaller units to optimize for that scaling, but would it be as deterministic as the current arms race -- in terms of profit, or control of the network? And if not, would it encourage less hardware and less power consumption overall, in hopes of larger per block payouts? Making it more like.....the way social programs are paid for by lottery tickets.
I'm not mathy enough to have an immediate sense of whether it would end up working out the same way, even if auditing computational expenditure could be implemented.
posted by snuffleupagus at 8:36 AM on December 27, 2017
localhuman: Either way though, at any one time there are upwards of 150,000 transactions pending on the BTC network, which while doing so is burning more electricity than the country of Denmark.
Thinking about it, could there be a version of BTC that somehow scales the block reward inversely to the amount of computational power expended to find the result? Is that technically enforceable (from 'proof of work' to 'show your work') and would it help, in terms of incentives and probabilities? Large miners could break up mining resources into smaller units to optimize for that scaling, but would it be as deterministic as the current arms race -- in terms of profit, or control of the network? And if not, would it encourage less hardware and less power consumption overall, in hopes of larger per block payouts? Making it more like.....the way social programs are paid for by lottery tickets.
I'm not mathy enough to have an immediate sense of whether it would end up working out the same way, even if auditing computational expenditure could be implemented.
posted by snuffleupagus at 8:36 AM on December 27, 2017
Economically speaking, I doubt that it can work that way. If you could reliably make money buying lottery tickets, there would be large-scale, coordinated purchases of them. So I think centralization and professionalization would still occur.
Auditing of computational expenditure might be possible using zero-knowledge proofs, though. That those are feasible is kind of a new thing under the sun since after bitcoin was introduced, and the (IMO) coolest cryptocurrency work uses it.
posted by Coventry at 12:30 PM on December 27, 2017 [1 favorite]
Auditing of computational expenditure might be possible using zero-knowledge proofs, though. That those are feasible is kind of a new thing under the sun since after bitcoin was introduced, and the (IMO) coolest cryptocurrency work uses it.
posted by Coventry at 12:30 PM on December 27, 2017 [1 favorite]
As a fix for Bitcoin's power consumption, Ethereum is considering adopting "proof of stake".
In a proof of stake system, rewards for mining are randomly assigned to miners in proportion to the amount of coin they currently hold.
posted by chrchr at 1:11 PM on December 27, 2017 [2 favorites]
In a proof of stake system, rewards for mining are randomly assigned to miners in proportion to the amount of coin they currently hold.
posted by chrchr at 1:11 PM on December 27, 2017 [2 favorites]
There's also Burst (which is popping right now), which uses "proof of capacity" to verify that miners have committed data storage resources (as opposed to compute resources) in order to participate in the distributed consensus. In theory, reading data off a disk could be much more energy-efficient, though I don't know that it works out that way, because you still have an expensive computation to do once you get the data off.
I wouldn't recommend it as an investment, though.
posted by Coventry at 1:28 PM on December 27, 2017 [3 favorites]
I wouldn't recommend it as an investment, though.
posted by Coventry at 1:28 PM on December 27, 2017 [3 favorites]
Wait, wait, wait. "Proof of stake"? "Proof of capacity"? Are people just trying to patch their way out of the whole "uses as much energy as a small country" problem of "proof of work"? I mean, maybe these are really minor changes (although the link chrchr poste for "proof of stake" does not seem minor to me at all) to the underlying blockchain protocol... but if not, oh boy. Protocol design is no small thing at all. I mean, there's an aphorism in military circles that "amateurs talk tactics, professionals study logistics." An equivalent aphorism in crypto circles would substitute "encryption algorithms" for "tactics" and "protocols" for "logistics".
posted by mhum at 5:15 PM on December 27, 2017 [1 favorite]
posted by mhum at 5:15 PM on December 27, 2017 [1 favorite]
They're not minor changes at all... I think some relatively solid engineering has gone into them, though. Especially for proof of stake, which has been around for years and discussed at length by many people. (Burst, as with bitcoin, is of unknown provenance.)
"Relatively" because I think the foundational economic assumptions behind decentralized consensus mechanisms aren't generally true...
posted by Coventry at 6:13 PM on December 27, 2017 [2 favorites]
"Relatively" because I think the foundational economic assumptions behind decentralized consensus mechanisms aren't generally true...
posted by Coventry at 6:13 PM on December 27, 2017 [2 favorites]
Are people just trying to patch their way out of the whole "uses as much energy as a small country" problem of "proof of work"?
You ask that like you think it's a surprising idea.
Blockchain currencies are a reflection of their designers' inability to understand that trustworthy institutions are a fundamental requirement for any functioning money economy. The whole blockchain enterprise is a techbro cargo-cult attempt to make something superficially resembling trustworthy institutions emerge from distributed computing. Of course they're going to be consumed by the issue of which kind of bark is best for laying out their picture of a runway.
posted by flabdablet at 7:43 PM on December 27, 2017 [6 favorites]
You ask that like you think it's a surprising idea.
Blockchain currencies are a reflection of their designers' inability to understand that trustworthy institutions are a fundamental requirement for any functioning money economy. The whole blockchain enterprise is a techbro cargo-cult attempt to make something superficially resembling trustworthy institutions emerge from distributed computing. Of course they're going to be consumed by the issue of which kind of bark is best for laying out their picture of a runway.
posted by flabdablet at 7:43 PM on December 27, 2017 [6 favorites]
Anyone who thinks you need trustworthy institutions to have a functioning money economy would do well to read Götz Aly's financial history of the Third Reich Hitler's Beneficiaries, or just consider how trustworthy those institutions have been for African Americans over the course of US history, up to, at least, the mortgage crisis last decade.
posted by Coventry at 8:20 PM on December 27, 2017 [1 favorite]
posted by Coventry at 8:20 PM on December 27, 2017 [1 favorite]
Doesn’t that rather highlight what can happen when institutions are untrustworthy?
posted by chrchr at 8:29 PM on December 27, 2017 [4 favorites]
posted by chrchr at 8:29 PM on December 27, 2017 [4 favorites]
I think it shows that human institutions are untrustworthy, because they're founded more on raw power than broad legitimacy, and to operate efficiently they always end up ignoring huge swaths of people.
Not that I have any alternative... I think decentralized consensus mechanisms will fail precisely because they're not backed by any kind of raw power. But pious claims about the moral superiority of the current system are ridiculous.
posted by Coventry at 8:41 PM on December 27, 2017
Not that I have any alternative... I think decentralized consensus mechanisms will fail precisely because they're not backed by any kind of raw power. But pious claims about the moral superiority of the current system are ridiculous.
posted by Coventry at 8:41 PM on December 27, 2017
Exactly. My point is about a sustainably functioning money economy. Perhaps I should have made that explicit.
Bitcoin was a reaction to a general collapse in the trustworthiness of traditional financial institutions that led to the financial crisis of 2007. The techbros, as is their way, looked at the ensuing shitstorm and said "we can engineer something that works better than this".
But as is also the way of techbros, they had (and continue to have) no idea how complex their new problem domain actually was and is; and as is the way of self-perceived revolutionaries, when faced with faulty traditions they pursued the kind of disruption that they could understand and hopefully control as an end in itself, giving no time at all to any kind of historical analysis of how or why the traditional systems broke down.
Finance finally broke after decades of having the regulatory legs cut out from under it since Reagan and Thatcher. The cure is re-regulation, not some half-assed engineer's-disease attempt to replace the parts that weren't broken - i.e. cash - with something that's both more complicated and less usable.
posted by flabdablet at 8:47 PM on December 27, 2017 [3 favorites]
Bitcoin was a reaction to a general collapse in the trustworthiness of traditional financial institutions that led to the financial crisis of 2007. The techbros, as is their way, looked at the ensuing shitstorm and said "we can engineer something that works better than this".
But as is also the way of techbros, they had (and continue to have) no idea how complex their new problem domain actually was and is; and as is the way of self-perceived revolutionaries, when faced with faulty traditions they pursued the kind of disruption that they could understand and hopefully control as an end in itself, giving no time at all to any kind of historical analysis of how or why the traditional systems broke down.
Finance finally broke after decades of having the regulatory legs cut out from under it since Reagan and Thatcher. The cure is re-regulation, not some half-assed engineer's-disease attempt to replace the parts that weren't broken - i.e. cash - with something that's both more complicated and less usable.
posted by flabdablet at 8:47 PM on December 27, 2017 [3 favorites]
Deregulation is more a symptom of corruption than the disease itself. If you look at the first section of the bitcoin blockchain, it contains the text "The Times 03/Jan/2009 Chancellor on brink of second bailout for banks." So it was probably that sort of corruption which motivated the creation of bitcoin, and the idea that a fixed monetary policy could be mandated in software. Not a replacement for cash, a replacement for national currency as a tool of abusive state power.
Though, in the first place it's pretty bold of us to be speculating on the motives and attitudes of people we can't even identify.
posted by Coventry at 9:22 PM on December 27, 2017
Though, in the first place it's pretty bold of us to be speculating on the motives and attitudes of people we can't even identify.
posted by Coventry at 9:22 PM on December 27, 2017
Kodak shares have more than tripled since company announced its new cryptocurrency 'KodakCoin'
posted by clawsoon at 4:10 AM on January 12, 2018 [1 favorite]
posted by clawsoon at 4:10 AM on January 12, 2018 [1 favorite]
It really should have been Kodacoin and they should have got Paul Simon to do a new version of his song. Real missed opportunity on the part of Kodak's marketing team.
posted by tobascodagama at 8:09 AM on January 12, 2018 [3 favorites]
posted by tobascodagama at 8:09 AM on January 12, 2018 [3 favorites]
Is it pronounced "coda-coin" or "co-dack-coin"?
I wonder how ridiculous this will get before it's over. Surely there's a buggy whip maker or heritage railway company out there who's going to get into cryptocurrencies before it crashes.
posted by clawsoon at 8:32 AM on January 12, 2018
I wonder how ridiculous this will get before it's over. Surely there's a buggy whip maker or heritage railway company out there who's going to get into cryptocurrencies before it crashes.
posted by clawsoon at 8:32 AM on January 12, 2018
https://putablockchainonit.com/
Put a blockchain on it!
Double your stock price in a day. Hype your Series A. Pivot today.
Hi, we’re Blockchainifyly.
And we put blockchains on things.
posted by Coventry at 9:11 AM on January 12, 2018 [1 favorite]
Put a blockchain on it!
Double your stock price in a day. Hype your Series A. Pivot today.
Hi, we’re Blockchainifyly.
And we put blockchains on things.
posted by Coventry at 9:11 AM on January 12, 2018 [1 favorite]
Japan has a new cryptocurrency-themed J-pop band
posted by octothorpe at 11:26 AM on January 12, 2018 [1 favorite]
posted by octothorpe at 11:26 AM on January 12, 2018 [1 favorite]
Japan passed laws last April that recognize bitcoin as legal tenderHuh. Not what I expected to learn in an article about a J-Pop group.
posted by clawsoon at 11:48 AM on January 12, 2018 [1 favorite]
'KodakCoin'
What an utter branding fail.
Kodacoin. Like Kodachrome.
How do you have that kind of cultural coinage and fail to mine it?
posted by snuffleupagus at 9:59 PM on January 12, 2018 [2 favorites]
What an utter branding fail.
Kodacoin. Like Kodachrome.
How do you have that kind of cultural coinage and fail to mine it?
posted by snuffleupagus at 9:59 PM on January 12, 2018 [2 favorites]
To be a pedantic photo-geek, the blockchain nonsense is being done by Eastman Kodak which sold off its consumer film division (presumably with the rights to Kodachrome) to Kodak Alaris based in the UK.
posted by octothorpe at 8:43 AM on January 13, 2018 [1 favorite]
posted by octothorpe at 8:43 AM on January 13, 2018 [1 favorite]
Well, to be a pedantic law-geek the rights to the Kodachrome mark presumably don't extend to anything and everything using the Koda- prefix. :P
posted by snuffleupagus at 10:36 AM on January 13, 2018 [1 favorite]
posted by snuffleupagus at 10:36 AM on January 13, 2018 [1 favorite]
Actually I mostly take back what I said. I've been reading about Eastman Kodak <> Kodak Alaris and I'm now more confused about who owns what between the two of them.
posted by octothorpe at 4:02 PM on January 13, 2018
posted by octothorpe at 4:02 PM on January 13, 2018
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posted by SansPoint at 9:03 AM on December 21, 2017 [7 favorites]