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Author Topic: cryptocurrency collapse  (Read 2317 times)

Battlemaster

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cryptocurrency collapse
« on: July 08, 2022, 12:43:17 PM »
So it looks like cryptocurrency has collapsed.

How unsurprising.

From the first mention of bitcoin I honestly could not get it. It had all these terms seelng it, like 'untraceable! ' and 'private'!  and 'secret! '.

What I never understood and what all the 'explanations ' of cryptocurrency never really explained was a simple issue:

Where was the wealth coming from?

A poor man gathers cans and bottles along a highway. He takes them to a recycler. He is paid. He works at gathering a resource someone is willing and able to pay for. A man gathers chemicals, makes crystal meth, sells it. He produces a commodity people are willing and able to pay for. A prosititue... You know.

Now a man mines bitcoin. He, uh, he runs algorithms that wear out his computer and eat electricity ,and he makes numbers, then ??? Profit!  Where did tbe wealth come from? What resource or good was sold?  What service was preformed?

I heard vague explanations that never seemed to touch that issue. I stopped asking finally. I decided it was a particularly convoluted and crafty ponzi/pramid scheme.  Part of it's success was too many people had begun to see the intrawebz as some sort of modern magic that could defy physics, that some sort of tron like cyberspace virtual reality existed, somehow, some where that just made money appear out of computer activity.

Well, the bubble just burst. A few people made big money, a few made a little, most lost money.

Just like a pyramid scheme...
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Pat

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Re: cryptocurrency collapse
« Reply #1 on: July 08, 2022, 05:16:34 PM »
First of all, you're late to the party. The price of bitcoin crashed about a month ago, and it's trending up for the past week. Secondly, it's still above $20,000. Two years ago, it was half that. Five years ago, it was 1/10th that. It's still way above previous peaks. That's a sign of volatility, not a collapse.

Where was the wealth coming from?
Your question doesn't make any sense.

Money isn't wealth. It's a medium of exchange.

KindaMeh

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Re: cryptocurrency collapse
« Reply #2 on: July 08, 2022, 06:31:24 PM »
So, apparently the government issued a vague response to crypto lately and might be developing a digital dollar type deal or more digital assets or more crypto regulation or something. NGL, even with it being summarized I’m not sure what they plan on doing exactly. But it’s probably relevant to this discussion somehow and sharper minds can look into and try to interpret it. https://www.politico.com/newsletters/digital-future-daily/2022/07/08/treasury-unveils-its-global-crypto-response-sort-of-00044762


First of all, you're late to the party. The price of bitcoin crashed about a month ago, and it's trending up for the past week. Secondly, it's still above $20,000. Two years ago, it was half that. Five years ago, it was 1/10th that. It's still way above previous peaks. That's a sign of volatility, not a collapse.

Where was the wealth coming from?
Your question doesn't make any sense.

Money isn't wealth. It's a medium of exchange.


I guess this is good information I didn’t really know, like that bitcoin is often that volatile and has been bouncing back slowly. I had heard that many bitcoin “investors” would HODL to prevent a bigger drop unless it fell below 9,000 or so, though IDK if that increases real market value. That said, though, a decentralized currency that’s private and cetera seems like it would be a good way to avoid government oppression, censorship and regulation, so I kinda get some of the interest in crypto and it’s inherent perks maybe. (Though I guess the flip side might be proportionally greater currency tendency towards crime, uninsured loss via hacking, and etcetera.) So I guess I can see why folks might be willing to believe in it and the code’s methods (which I do not understand) and thereby give it value, as a way to support a decentralized, more secretive alternative to centralized models, and protect against centralized mismanagement of currency and the like.

I’m not gonna lie though, I’m kinda like Battlemaster in that I don’t really get much about crypto and why crypto tokens, if more are mined via algorithms daily, albeit mostly at a decreasing rate(?), kept trending upwards in value so much not just against the dollar but in real terms if not due primarily to speculation. I kinda feel like a lot of people treated crypto like stocks, which seemed a bit weird to me, and I did admittedly feel that since support and purchasing for crypto boosts crypto’s value, there was maybe some degree of a conflict of interest in people  analyzing crypto whilst they were holding it. So I kinda mistrusted some of what was said for it at times.

 Also, while fiat currency seems weird and going off the gold standard was probably a bad idea from what I’ve heard, since we abandoned the tie in to real value of gold, don’t physical central currencies have a more stable base? I dunno, maybe currencies only exist on faith to begin with, but I’m admittedly more skeptical of currencies that aren’t currently accepted widely, don’t have physical materials that can set floor  price (?), as well as potentially not having the faith people put in their governments and the economic influence of the same  to prop them up. To say little of potentially being on the future receiving end of government regulation/limitations that I feel could make it lose some of its edges like untraceability and current legality in many places.

 To what extent do we think crypto is likely to emerge as a new currency form with wider adoption, should it, and what did the recent drops in the currencies mean in practical terms? Do we expect government reactions, or impacts following this semi-recent 2 trillion dollar dip? I feel like there are definitely things to talk about following the drop, though I may not necessarily be the best person to understand them.

Pat

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Re: cryptocurrency collapse
« Reply #3 on: July 08, 2022, 07:15:39 PM »
A lot of the weirdness with crypto is that we haven't seen the emergence of a new form of currency since... well, before history started. Nobody's sure how to value it, or how widely it will be used, so it's been going through a speculative boom phase. All other examples of currency evolved from previous versions -- the dollar for instance was originally worth 247.5 grains of gold. It was 100% backed by gold and redeemable by anyone, then they untethered it from gold and made the private holding of gold illegal, then they returned to the gold standard but only between central banks, then they allowed private individuals to hold gold again, then they made the dollar fiat, then they began to lower the reserve standards, and on and on. Before that, currencies probably started as commodities like wheat that were widely available and accepted, but settled on gold (more than any other currency) because it was more durable and transportable. But crypto is just crypto.

Don't overemphasize mining. There are 21 million bitcoins, and there never will be any more. It's not an infinitely inflatable currency, like the US dollar, which has lost 98% of its value since the start of the last century. That's one of the key selling points, the government can't tax the poor by just creating more bitcoin out of thin air. That potentially makes it more stable a store of wealth than fiat currencies. More stable even than gold, which could end up with significant inflation if there was a major new strike, someone started to mine asteroids, or even a fleet of lost Spanish galleons was found.

Also, bitcoin and crypto in general isn't "untraceable" in any real sense. The blockchain is literally a public ledger of every transaction ever made. It's only untraceable, if you don't know who controls which wallet. And the government has plenty of ways of finding that out.
« Last Edit: July 08, 2022, 07:19:24 PM by Pat »

KindaMeh

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Re: cryptocurrency collapse
« Reply #4 on: July 08, 2022, 07:50:04 PM »
A lot of the weirdness with crypto is that we haven't seen the emergence of a new form of currency since... well, before history started. Nobody's sure how to value it, or how widely it will be used, so it's been going through a speculative boom phase. All other examples of currency evolved from previous versions -- the dollar for instance was originally worth 247.5 grains of gold. It was 100% backed by gold and redeemable by anyone, then they untethered it from gold and made the private holding of gold illegal, then they returned to the gold standard but only between central banks, then they allowed private individuals to hold gold again, then they made the dollar fiat, then they began to lower the reserve standards, and on and on. Before that, currencies probably started as commodities like wheat that were widely available and accepted, but settled on gold (more than any other currency) because it was more durable and transportable. But crypto is just crypto.

Don't overemphasize mining. There are 21 million bitcoins, and there never will be any more. It's not an infinitely inflatable currency, like the US dollar, which has lost 98% of its value since the start of the last century. That's one of the key selling points, the government can't tax the poor by just creating more bitcoin out of thin air. That potentially makes it more stable a store of wealth than fiat currencies. More stable even than gold, which could end up with significant inflation if there was a major new strike, someone started to mine asteroids, or even a fleet of lost Spanish galleons was found.

Also, bitcoin and crypto in general isn't "untraceable" in any real sense. The blockchain is literally a public ledger of every transaction ever made. It's only untraceable, if you don't know who controls which wallet. And the government has plenty of ways of finding that out.

So a lot of the speculation and weirdness would likely to some extent die off once it actually becomes a more directly exchangeable currency that is more widely accepted, provided this happens. Though new crypto currencies would still be speculative in nature. Likewise presumably as with any currency faith would still be important, just less likely to go off track because...

Inflation is theoretically capped, so to speak, as well as ever decreasing, at least for bitcoin and not counting how new cryptocurrencies means inflation to some degree, due to how bitcoin mining works(?). Or at least assuming resources and tech don't suddenly backtrack, there should maybe even be deflation as more resources are uncovered and tech makes them more usable? Which I guess inflation hurts the poor if they're trying to save, don't have a ton of debt, and can't outpace inflation on their investments as well as potentially being hurt by its effects on things like variable rate mortgages and the like, or on their wages not rising fast enough to keep up? (Not sure I get inflation as a tax on the poor, intrinsically, but I think I may kind of get some of it?)

 Provided nobody somehow breaks the system, which would be hard to do due to the decentralized model of the blockchain and the fact that everybody holds a record of transactions(?). Though I have heard inflation hit crypto as though it were a tech stock kinda, which was weird to hear, but that could just be because even bitcoin's not a fully realized currency yet. Though like you said, that may also mean that it may be in a bubble and going to be worth less than one would expect from current prices in future practice.

 The government could theoretically figure out accounts, based on what you're saying, then. And people could know every dollar you ever spent. (NGL, that kinda scares me a bit.) But not freeze funds. Which I suppose could be either good or bad depending on how you look at it.

I think I'm getting a little closer to understanding the topic now. Though I'm also seeing new questions crop up I think as I get closer to comprehension. Thanks for the info.
« Last Edit: July 08, 2022, 08:02:45 PM by KindaMeh »

Pat

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Re: cryptocurrency collapse
« Reply #5 on: July 09, 2022, 03:48:22 AM »
So a lot of the speculation and weirdness would likely to some extent die off once it actually becomes a more directly exchangeable currency that is more widely accepted, provided this happens. Though new crypto currencies would still be speculative in nature. Likewise presumably as with any currency faith would still be important, just less likely to go off track because...

Inflation is theoretically capped, so to speak, as well as ever decreasing, at least for bitcoin and not counting how new cryptocurrencies means inflation to some degree, due to how bitcoin mining works(?). Or at least assuming resources and tech don't suddenly backtrack, there should maybe even be deflation as more resources are uncovered and tech makes them more usable? Which I guess inflation hurts the poor if they're trying to save, don't have a ton of debt, and can't outpace inflation on their investments as well as potentially being hurt by its effects on things like variable rate mortgages and the like, or on their wages not rising fast enough to keep up? (Not sure I get inflation as a tax on the poor, intrinsically, but I think I may kind of get some of it?)

 Provided nobody somehow breaks the system, which would be hard to do due to the decentralized model of the blockchain and the fact that everybody holds a record of transactions(?). Though I have heard inflation hit crypto as though it were a tech stock kinda, which was weird to hear, but that could just be because even bitcoin's not a fully realized currency yet. Though like you said, that may also mean that it may be in a bubble and going to be worth less than one would expect from current prices in future practice.

 The government could theoretically figure out accounts, based on what you're saying, then. And people could know every dollar you ever spent. (NGL, that kinda scares me a bit.) But not freeze funds. Which I suppose could be either good or bad depending on how you look at it.

I think I'm getting a little closer to understanding the topic now. Though I'm also seeing new questions crop up I think as I get closer to comprehension. Thanks for the info.
Money is a widely accepted medium of exchange. Commodity monies, like bushels of wheat or rolls of fine cloth, have some degree of value external to their use as money. Even gold has value as jewelry and in certain industrial uses. But money also has a value in its use as the medium of exchange and the unit of account. That's why paper money has value, even when it's not backed by anything. And bitcoin, though the market's still in the process of finding the price of bitcoin, and deciding whether it will really become money. (It currently has some features of money, but it's not widely accepted enough yet.)

Bitcoin is ultimately a deflationary money, because it's finite. As the number of goods and services in the economy increase, so will the value of bitcoin, because the same number of bitcoin will be used to exchange a greater value of goods. This contrasts with fiat money, which because governments seem to be constitutionally incapable of keeping their hands out of the till even when it's harmful, is always increased at a rate exceeding the real growth of the economy, and thus is inflationary. Central bankers speak about deflation as if it were this existential threat, using justifications like Keynes' stickiness of wages, and saying it takes away some of their tools to manage the economy (it's hard to lower interest rates below zero). In contrast, Austrians have no problem with deflation, basically thinking of it as a reward for savers, and saying central banks shouldn't be meddling like that anyway.

Inflation is a tax on both income and savings. Traditional taxes target spending (like sales tax) or income (like interest or wages), but leave your bank accounts alone. But inflation chews away at the value of your savings, as well as the value of your wages. This primarily hurts the poor, because the poor tend to keep more of their money in things like bank accounts, whose interest rates don't keep up with inflation. In contrast, the wealthy tend to have their assets in investments, which tend to appreciate in real value (i.e. beat inflation).

Also, inflation doesn't happen instantly. It spreads out in waves. The people who get the newly created money first are able to spend it at the old value, before the market adjusts. And the people who get the money first are the financial industry (which explains their huge growth over the past generation), because it's their loans that create new money. They then loan this money out to businesses. Consumers only get the new money at the very end, when the businesses give it to them in the form of wages. Since the wealthy have more of their money in investments, while the poor rely more on wages, monetary inflation transfers real wealth from the poor to the rich.

Look at the charts showing when real wage growth stopped keeping up with growth in the overall economy (GDP), or when the rich's percentage of national wealth started to increase -- the curve changed almost exactly when Nixon took the US off the gold standard, and allowed central bankers to inflate the monetary supply willy-nilly.

Mistwell

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Re: cryptocurrency collapse
« Reply #6 on: July 09, 2022, 12:21:29 PM »
First of all, you're late to the party. The price of bitcoin crashed about a month ago, and it's trending up for the past week. Secondly, it's still above $20,000. Two years ago, it was half that. Five years ago, it was 1/10th that. It's still way above previous peaks. That's a sign of volatility, not a collapse.

Where was the wealth coming from?
Your question doesn't make any sense.

Money isn't wealth. It's a medium of exchange.

Yeah it has not "collapsed" it's just going up and down. It's down right now relative to a couple months ago, but up relative to a couple years ago. No idea where it will go but it's still a thing, for sure. I have a small amount of bitcoin, just because I think it's smart to diversify. If it disappeared tomorrow I would not be crying over it.

KindaMeh

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Re: cryptocurrency collapse
« Reply #7 on: July 09, 2022, 02:48:55 PM »
I often end up learning a fair bit on this site. Not just about RPGs but in general. Which may perhaps speak poorly of my knowledge going into these discussions, but still makes me feel good in the sense of making progress.

Kiero

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Re: cryptocurrency collapse
« Reply #8 on: July 10, 2022, 08:42:31 AM »
It's not a collapse, it's a shake-out. Only one or two coins have popped and new ones are being added all the time. The market is at about half what it was before the Ukrainian bollocks.
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Ghostmaker

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Re: cryptocurrency collapse
« Reply #9 on: July 10, 2022, 11:41:33 AM »
I often end up learning a fair bit on this site. Not just about RPGs but in general. Which may perhaps speak poorly of my knowledge going into these discussions, but still makes me feel good in the sense of making progress.
Any day you learn something new is a good day.

Also, I am leery of crypto and think NFTs are the biggest fucking scam since Dutch petunias.

Battlemaster

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Re: cryptocurrency collapse
« Reply #10 on: July 10, 2022, 02:20:25 PM »
I often end up learning a fair bit on this site. Not just about RPGs but in general. Which may perhaps speak poorly of my knowledge going into these discussions, but still makes me feel good in the sense of making progress.
Any day you learn something new is a good day.

Also, I am leery of crypto and think NFTs are the biggest fucking scam since Dutch petunias.

Another set of issues we agree on.
Fuck the fascist right and the fascist left.

Pat

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Re: cryptocurrency collapse
« Reply #11 on: July 10, 2022, 04:34:03 PM »
NFTs are nothing more than a distributed method of recording and transferring ownership. Which can be useful, but it's a boring infrastructure technology. The hype seems to be almost entirely focused on digital collectibles whose only value is being the first. Which is a very limited market, where a few insiders will become winners, and everyone else is a loser.

Daztur

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Re: cryptocurrency collapse
« Reply #12 on: July 10, 2022, 09:36:03 PM »
That's a sign of volatility

That potentially makes it more stable a store of wealth than fiat currencies. More stable even than gold

Hmmmmmm...
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Pat

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Re: cryptocurrency collapse
« Reply #13 on: July 10, 2022, 09:52:14 PM »
That's a sign of volatility

That potentially makes it more stable a store of wealth than fiat currencies. More stable even than gold

Hmmmmmm...
Do you have a problem grasping simple concepts?

Daztur

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Re: cryptocurrency collapse
« Reply #14 on: July 10, 2022, 10:07:59 PM »
That's a sign of volatility

That potentially makes it more stable a store of wealth than fiat currencies. More stable even than gold

Hmmmmmm...
Do you have a problem grasping simple concepts?

Well I guess volatile = stable is simple, whatever else it is...
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