OT: Ray, how's your Bitcoin investment going?

[Tony T]

What is YFI?
It went from a high of 95,000 about a week ago to 28,000 today.

[verticaldoug]

Originally Posted by MattTuck

Bitcoin is not controlled by a government or individuals that can be corrupted, or try to influence its supply for political purposes. In that regard it is a new version of a very old idea -- precious metals. If you used gold or silver in ancient times, there was no easy way to create more of it... you had to mine it, or go to war to pillage it.

Speculation is as old as the hills. I think crypto eco-system is already corrupted by stablecoins. Stablecoins make no sense, serve no purpose except to provide a potential avenue for shadow banking to inject fraud in to the system.

Tether looks like a simple con where 'corporates' issue commercial paper to Bitfinex, Bitfinex issues tether to the corporate and Bitfinex holds some unknown credit exposure hoping for repayment. No USD ever changes hands in more Tether issuance in my opinion. The 'corporate' can use the tether to speculate in crypto. In a rising market this works, you are just leveraging. In a falling market, it collapses. It acts a lot like Archegos borrowing money to buy more shares of a few companies by posting shares of the same companies. However, when shares starting falling, the lender (Bank) ask for more collateral, Archegos had none and everything imploded.

For Bifinex, when the commercial paper comes due and the borrower doesn't have sufficient funds to repay, what will bitfinex do? Just extend and pretend in roll over the paper? The whole crypto ecosystem probably has a lot more leverage built into the price than anyone realizes.

That's how I see this.

Honestly, I cannot tell if cryptocurrency 'use cases' are actually a currency use case, or suppose to function more like a APP use case which you pay money to use.

[MattTuck]

For those interested in Ray Dalio's opinion...

https://www.zerohedge.com/markets/i-...more-efficient

So what is the solution? To Dalio it means owning a diversified portfolio.

"Why does it need to be one or the other?...You want a properly diversified portfolio.... Question is...do you have enough diversity of these alternative currencies?" Why? Because in a surprisingly pragmatic view on fiat he stated simply that "all currencies have died."

He said he owns bitcoin, and prefers that to owning a bond, although when discussing payment efficiencies, he echoed Goldman: "it seems like Ethereum"

And picking a page out of the JPMorgan bitcoin price target, Dalio advised to keep track of the market capitalization of bitcoin – now $1 trillion – relative to the $23 trillion for bonds and $5 trillion for gold (excluding jewelry and central bank holdings).

"For gold, if you take out central banks and jewelry, you have a little over $5tn, so diversification between those things (bitcoin and gold), it's like 80/20."

This is also why JPMorgan has a roughly $140,000 price target on bitcoin: that's where the market cap of gold and bitcoin (i.e. digital gold) is roughly in balance.

Finally, wrapping up his extremely bullish view on bitcoin, Dalio said that "these things come along once in a lifetime....in order to understand what is going to happen over the next 1,2,3,4,5 years, you need to study what happened [in the 1930s]... If you take your wealth....how do you protect it against all of those things...if you can find that, there will be a whole lot of demand for it."

“Bitcoin’s greatest risk is its success,” Dalio cautioned in conclusion.

“One of the great things, I think, as a worry is the government having the capacity to control almost any of them, including bitcoin, or the digital currencies,” he said.

“They know where they are, and they know what’s going on.”

[cnighbor1]

Here is my take on investing in anything for profit
If you decide to invest in any risky stock, business etc. and it results in very large profits way beyond anyone expectations, what have you done to your physic. Now your in, " I can win at risky endeavor's mindset" , but can you repeat it again, and again?
Or will nearly the profits disappear leaving you with a lot less cash that you went in with?
I doubt you will be able to repeat past wins and in the end be less wealthy n the end
Charles

[Clean39T]

Originally Posted by cnighbor1

Here is my take on investing in anything for profit
If you decide to invest in any risky stock, business etc. and it results in very large profits way beyond anyone expectations, what have you done to your physic. Now your in, " I can win at risky endeavor's mindset" , but can you repeat it again, and again?
Or will nearly the profits disappear leaving you with a lot less cash that you went in with?
I doubt you will be able to repeat past wins and in the end be less wealthy n the end
Charles

So what you're saying is....

You got to know when to hold 'em. Know when to fold 'em. Know when to walk away. Know when to run?

[MattTuck]

Breaking news: Bitcoin is officially a new asset class. So says Goldman Sachs.

https://finance.yahoo.com/news/bitco...Y&guccounter=2

[BobbyJones]

Future breaking news:
Joe Public bails out Goldman Sachs.... again!

Joking. Maybe.

[jimcav]

Originally Posted by cnighbor1

Now your in, " I can win at risky endeavor's mindset" , but can you repeat it again, and again?
Charles

was a large lesson from my reading "Into the Wild". You get lucky in a risky endeavor(s) and think you have skills, which you don't.

[54ny77]

Well gosh, maybe they'll even introduce a product to sell thats backed by the asset class. Both in cash form as well as adding some synthetic leverage to it. Because they've never done that before....

Originally Posted by MattTuck

Breaking news: Bitcoin is officially a new asset class. So says Goldman Sachs.

https://finance.yahoo.com/news/bitco...Y&guccounter=2

[Clean39T]

Originally Posted by 54ny77

Well gosh, maybe they'll even introduce a product to sell thats backed by the asset class. Both in cash form as well as adding some synthetic leverage to it. Because they've never done that before....

[MattTuck]

Originally Posted by BobbyJones

Future breaking news:
Joe Public bails out Goldman Sachs.... again!

Joking. Maybe.

Well said. And, my post was a bit tongue in cheek because I have been arguing that bitcoin might be a totally new asset class.

I think the headline could easily be said as: "Goldman Sachs figures out how to profit from bitcoin."

[verticaldoug]

Remember, Goldman was very active in the mortgage backed market in 2008 even though they knew there was a lot of implicit fraud around NINJA loans.

Why would you expect any difference with Crypto? Markets may not repeat but they do rhyme.

[MattTuck]

Originally Posted by verticaldoug

Remember, Goldman was very active in the mortgage backed market in 2008 even though they knew there was a lot of implicit fraud around NINJA loans.

Why would you expect any difference with Crypto? Markets may not repeat but they do rhyme.

The vampire squid smells money and will extract as much as it can. But there are plenty of other banks, hedge funds and investors that will try to do the same. Just like they try to do in the gold market, bond market, stock market and yes, the MBS market.

If there is a market with sufficient volume, you can bet that someone will be trying to game the system, manipulate prices or get someone else to take on the risk. And there is no doubt bitcoin and other cryptos are in the targets of such speculators.

The question remains. What is the "right" allocation of capital to bitcoin? If it is 0.0% of global assets, then we're in a spectacular bubble. If it is 1% of global assets (360 trillion is the most recent figure I could find), then maybe we have 2-3x growth potential left.

It really depends on your view of whether you think crypto belongs in a portfolio the same way equities or fixed income or real estate do, and if so, how much to allocate. I think two rational people could agree that crypto is indeed an emerging asset class and deserves to be in a well diversified portfolio. At the same time, they could disagree on the amount. One individual might think it should be weighted at 0.5% of equity weight, and that person believes we're in a bubble. Another person thinks it should be weighted at 2% of equity weight, and that person is extremely bullish.

At the end of the day, the big difference I see between MBS and bitcoin is that MBS, while secured by physical property, were debt instruments backed by borrower's ability to pay their monthly payments -- and then sliced and diced and put back together to achieve certain risk profiles that investors wanted. The bitcoin system is like owning the actual house. If any investor wants to own bitcoin, they can do so directly and cheaply.

[tuscanyswe]

Originally Posted by MattTuck

Yes, there are all sorts of innovations and use cases for new coins. Ethereum is probably the furthest ahead in terms of adding features to the system. There are ways (and new ways are being developed all the time) to incorporate new features into an existing blockchain. Tezos got a lot of press for its approach to on chain governance (adding new features automatically to the blockchain) as opposed to miners having to make a human decision on which fork of the network to support (which happened with bitcoin a few years ago).

When these projects are released, they are not left alone to run for decades on the same code. They are being added to, debugged, and improved, and some of the improvements address concerns (such as a move from proof of work to proof of stake to reduce energy usage).

Sure a new coin could come along and blow everything else out of the water, but that seems unlikely for 2 reasons. First, to reach many of the "points of parity" to compete with existing coins, you'd need to replicate the work that thousands of developers and contributors put into these other coins. Believe it or not, that is not the hard part, because many of these systems are open source, you could "stand on the shoulders of giants" to get started. The hard part would be attracting capital and attention away from the leaders, and then attracting developer talent to develop your "points of differentiation", what makes your coin better? And, if it is so much better, why hasn't one of the bigger coins adopted that feature?

Surely, it is possible -- but not easy.

Cheers. I guess cryptos are for ppl with more cool than me .)

[verticaldoug]

Originally Posted by MattTuck

At the end of the day, the big difference I see between MBS and bitcoin is that MBS, while secured by physical property, were debt instruments backed by borrower's ability to pay their monthly payments -- and then sliced and diced and put back together to achieve certain risk profiles that investors wanted. The bitcoin system is like owning the actual house. If any investor wants to own bitcoin, they can do so directly and cheaply.

True, but if I own my house outright, the value went up on paper because of prices increases driven by people borrowing money who had no chance to repay. When they went bust, the value of my house went down. I was able to live in my house so still had some utility, I fail to see any utility in crypto.

I think bitcoin and other cryptos are like this because of stablecoins. If Tether is indeed being issued versus commercial paper with no dollars ever changing hands, it really isn't a dollar peg. It's more like the 1830's Era of Free Banking in the United States when you did not need a charter, and you could set up your own bank in a state and issue scrip. The Scrip was supposedly backed by some asset, but often wasn't leading to confusion and busts. This is precisely why the banking market was regulated at the national level and individual scrip banned.

I actually think the unregulated nature of crypto is a step backward into the era of robber barons.