Bitcoin crash coming (4 Viewers)

[DrStrange]

Where are the bulls? Diamond hands and all of that? The prices have been ~~ halved in a very short time.

Should the faithful be buying the dip? Or, should panic rule the day? I can't help but observe that this isn't the first time Bitcoin's price has crashed. And in each case it came roaring back to reach new highs.

Fly your flags! Let's hear from the bulls < and bears >

OK Boomer ------> DrStrange

PS I stand with Warren Buffet who declares Bitcoin and the rest of the crypto as "rat poison". I wouldn't buy any of these coins as an investment or for speculation. But I do have an open mind as to their potential for certain sorts of payments. < bitcoin looks pretty good as a way to pay ransom for example. > Not optimistic, but willing to see how things work out.

PPS Paul Krugman's piece this week regarding Crypto was pretty interesting to me. https://www.nytimes.com/2021/05/20/opinion/cryptocurrency-bitcoin.html

 

[Rhodeman77]

I have been a big supporter of ADA and bought more today when the price went even lower. I have it staked and am earning about 5% interest (paid as more ADA). It is a crypto that has a lot of real world potential and future applications. It has recently partnered with Ethiopia to help with its educational system.

I am not a fan of Bitcoin, but since it it was the first and is the biggest it will be around for a while. But eventually it’s lack of utility will make it less viable than other cryptos.

A friend made this comparison:
Bitcoin=Friendster
ETH=MySpace
ADA=Facebook

I choose to own the FB of crypto.

 

[Geremie]

Where are the bulls? Diamond hands and all of that? The prices have been ~~ halved in a very short time.

Should the faithful be buying the dip? Or, should panic rule the day? I can't help but observe that this isn't the first time Bitcoin's price has crashed. And in each case it came roaring back to reach new highs.

Fly your flags! Let's hear from the bulls < and bears >

OK Boomer ------> DrStrange

PS I stand with Warren Buffet who declares Bitcoin and the rest of the crypto as "rat poison". I wouldn't buy any of these coins as an investment or for speculation. But I do have an open mind as to their potential for certain sorts of payments. < bitcoin looks pretty good as a way to pay ransom for example. > Not optimistic, but willing to see how things work out.

PPS Paul Krugman's piece this week regarding Crypto was pretty interesting to me. https://www.nytimes.com/2021/05/20/opinion/cryptocurrency-bitcoin.html

 

[Darson]

I'm aiming for 5% of my assets in crypto. This is a buying opportunity for me. I have definitely been converted to a crypto believer.

The biggest thing my crypto guide told me is not to look at crypto as a short term play. Buy and HODL and don't look at it for years.

Over the last 2 years, even with this crash, Bitcoin is up 275%. Over the last 5 years, it's up 6000%. It's a high risk high reward punt.

 

[Darson]

Fly your flags! Let's hear from the bulls < and bears >

OK Boomer ------> DrStrange

PS I stand with Warren Buffet who declares Bitcoin and the rest of the crypto as "rat poison". I wouldn't buy any of these coins as an investment or for speculation. But I do have an open mind as to their potential for certain sorts of payments. < bitcoin looks pretty good as a way to pay ransom for example. > Not optimistic, but willing to see how things work out.

PPS Paul Krugman's piece this week regarding Crypto was pretty interesting to me. https://www.nytimes.com/2021/05/20/opinion/cryptocurrency-bitcoin.html

Doc, I have been educating myself on this crypto thing a bit over the last few weeks. What is very "ok boomer" is that the majority of information is in youtube videos and sub-reddits - no sensible places where you can read a big pile of information, its more piecemeal. Just like with any other potential investment there is a plethora of believers and nay-sayers. Even in the crypto space there is a fight between believers in the various coins.

A great example are my two friends who are heavy into crypto:
- one is a Bitcoin bull (has 80% in Bitcoin and 20% in others but every 6 months or so, if the others overtake bitcoin, he rebalances back into Bitcoin). Note that he only goes into Bitcoin and never the other way
- the other has made a lot of money on Bitcoin but thinks it's not the future and has put his money in Ethereum and Cardano

Some people talk about Metcalfe's law and how it applies to crypto. Essentially the value of a network increases with the square of the number of nodes (or users for crypto). This bears out for everything from telephone lines to facebook.

So the first bull case is that the more people who get into crypto, the greater the value. Many coins have limited supply (Bitcoin is capped at 21 million) so linear growth in users results in a exponential growth in value. Bitcoin is analogous to gold. You can't take a gold brick and buy a car so its utility is similar and its main use is as a store of value. BTCmarket cap is currently $730B and launched in 2009.

The bear case for Bitcoin is that it's a huge energy hog. Its falling out of favour in places like China where they're burning lots of coal to run their bitcoin mines. This is similar to gold - miners dig more gold out of the ground to increase supply and they sell that gold to pay for their mining and to make a profit. Bitcoin works in the same way - the mining (validating transactions and maintaining the ledger) is rewarded in Bitcoin which they sell to pay their electricity bill and make a profit. The rewards from mining are through a "proof of work" model where the miner's computers have to solve a complex problem to win the right to validate the transactions and get the reward. Therefore people with larger mines will get more of the rewards. The key difference with gold is that if all the miners in the world stopped mining gold, the gold would still exist. If all the Bitcoin miners in the world stopped mining then there is no one left to maintain the ledger. And currently the bitcoin network consumes the same power as the whole of the Netherlands. It's a negligible fraction of this power consumption that's actually used to validate transactions, all the power is used to win the right to validate and get the reward.

Cardano is the 3rd largest coin by market cap and operates with a "proof of stake" model. Instead of doing complex calculations, holders "stake" their coin and deploy a server to buy a seat at the rewards table. The transaction validation and ledger activities go from staker to staker with rewards proportional to the amount of their stake. There's is no excess power used to win the right to the reward so it's very energy efficient which is the big bull case for Cardano at the moment. Cardano is trying to be the king and has first mover advantage in the low power consumption area. ADA (Cardano) went from nothing to $32B market cap to $3B and then to $50B currently. The swings are WILD and it's only been around for 3 years.

Ethereum is the 2nd largest coin by market cap and currently operates like bitcoin (proof of work) but is moving to a proof of stake model but with a fixed stake (currently 32 ETH). When this happens (in the next year or two) Ethereum may be the biggest network with the lower energy credentials. Ethereum also allows for deployment of things on top of the blockchain, allowing for things like smart contracts, decentralized finance and NTFs. ETH is currently $300B market cap and started in 2015.

Coming back to Metcalf's law - right now something like 100 million people on this planet own Bitcoin. That's nothing like the 2 billion users that facebook has. We're still in the very early stages of adoption and any one of the above coins or a new coin could overtake and become the dominant preferred crypto. Which one will be the winner? Not sure but the growth is exponential so even if you spread your bets, the winner will make up for it in returns given that it's still very early days.

 

[DrStrange]

So . . . . . we don't care if crypto tokens ever have any serious use. It is like gold - a store of value that has limited to no practical value. All that is needed is a billion believers? Because lets be serous now, there is really no reason to believe these sorts of digital creations are the replacement for government issued money. You can't really "spend' gold or silver in normal commerce any more than you can "spend" a crypto security.

Kind of like how Tinker Bell works -=- DrStrange

 

[mipevi]

Many crypto tokens do aim to solve real world problems, and those are the ones that grab my attention. While there are efforts to add more functionality to Bitcoin, to me it is more of a collector’s item and therefore analogous to gold in the crypto universe. And then there are a ton of coins I wouldn’t touch with a ten-foot pole LOL.

Decentralized finance is only one use case of crypto, and I agree with @DrStrange it’s probably going to have a tough time, facing significant pushback in countries with a well established traditional financing system. However there are many people living outside of such a system in third world countries, and that’s one of the things Cardano aims to help with.

As an example of a first world problem that crypto could be used for, Theta is looking to solve bandwidth and cost issues related to centralized data streaming.

 

[dajebriza]

It is a potential vision of the future that sees crypto becoming a world-wide instantaneously spendable asset. More and more people will become connected to the internet over the next few decades and they will be looking for an easier way to pay for things around the world. Yes, banks and traditional govt economic systems will resist, but the fact that crypto has become as big a commodity that it has outside of any govt support, does signal the possibility of its future use as a global currency.

And it is poised to be implemented without any major infrastructure changes. No money to be printed, transported, stored, distributed. No economic systems to account for it. No exchanges set up. It's all digital and already exists in virtual space. Our dollars are all mostly virtual at this point already, so people are getting more and more used to the concept of money having no physicality.

And with Elon Musk, who now owns several companies that could potentially becomes massive world-wide influencers (and is also supplying internet access to the darker parts of the world) pushing Crypto, that's a powerful ally in it's corner, potentially becoming bigger every year. And let's keep in mind, Elon has a background in electronic money systems (Paypal), so he sees the potential of Crypto as a major currency.

Yes, it's all a gamble, but why not gamble if you not only see opportunity but also believe in the future potential?

 

[ekricket]

Doc, I have been educating myself on this crypto thing a bit over the last few weeks. What is very "ok boomer" is that the majority of information is in youtube videos and sub-reddits - no sensible places where you can read a big pile of information, its more piecemeal. Just like with any other potential investment there is a plethora of believers and nay-sayers. Even in the crypto space there is a fight between believers in the various coins.

A great example are my two friends who are heavy into crypto:
- one is a Bitcoin bull (has 80% in Bitcoin and 20% in others but every 6 months or so, if the others overtake bitcoin, he rebalances back into Bitcoin). Note that he only goes into Bitcoin and never the other way
- the other has made a lot of money on Bitcoin but thinks it's not the future and has put his money in Ethereum and Cardano

Some people talk about Metcalfe's law and how it applies to crypto. Essentially the value of a network increases with the square of the number of nodes (or users for crypto). This bears out for everything from telephone lines to facebook.

So the first bull case is that the more people who get into crypto, the greater the value. Many coins have limited supply (Bitcoin is capped at 21 million) so linear growth in users results in a exponential growth in value. Bitcoin is analogous to gold. You can't take a gold brick and buy a car so its utility is similar and its main use is as a store of value. BTCmarket cap is currently $730B and launched in 2009.

The bear case for Bitcoin is that it's a huge energy hog. Its falling out of favour in places like China where they're burning lots of coal to run their bitcoin mines. This is similar to gold - miners dig more gold out of the ground to increase supply and they sell that gold to pay for their mining and to make a profit. Bitcoin works in the same way - the mining (validating transactions and maintaining the ledger) is rewarded in Bitcoin which they sell to pay their electricity bill and make a profit. The rewards from mining are through a "proof of work" model where the miner's computers have to solve a complex problem to win the right to validate the transactions and get the reward. Therefore people with larger mines will get more of the rewards. The key difference with gold is that if all the miners in the world stopped mining gold, the gold would still exist. If all the Bitcoin miners in the world stopped mining then there is no one left to maintain the ledger. And currently the bitcoin network consumes the same power as the whole of the Netherlands. It's a negligible fraction of this power consumption that's actually used to validate transactions, all the power is used to win the right to validate and get the reward.

Cardano is the 3rd largest coin by market cap and operates with a "proof of stake" model. Instead of doing complex calculations, holders "stake" their coin and deploy a server to buy a seat at the rewards table. The transaction validation and ledger activities go from staker to staker with rewards proportional to the amount of their stake. There's is no excess power used to win the right to the reward so it's very energy efficient which is the big bull case for Cardano at the moment. Cardano is trying to be the king and has first mover advantage in the low power consumption area. ADA (Cardano) went from nothing to $32B market cap to $3B and then to $50B currently. The swings are WILD and it's only been around for 3 years.

Ethereum is the 2nd largest coin by market cap and currently operates like bitcoin (proof of work) but is moving to a proof of stake model but with a fixed stake (currently 32 ETH). When this happens (in the next year or two) Ethereum may be the biggest network with the lower energy credentials. Ethereum also allows for deployment of things on top of the blockchain, allowing for things like smart contracts, decentralized finance and NTFs. ETH is currently $300B market cap and started in 2015.

Coming back to Metcalf's law - right now something like 100 million people on this planet own Bitcoin. That's nothing like the 2 billion users that facebook has. We're still in the very early stages of adoption and any one of the above coins or a new coin could overtake and become the dominant preferred crypto. Which one will be the winner? Not sure but the growth is exponential so even if you spread your bets, the winner will make up for it in returns given that it's still very early days.

None of this works without electricity. Anyone investing in electric providers?

 

[dajebriza]

You mean like Tesla? . Another connection for the future potential of these assets.

 

[ekricket]

You mean like Tesla? . Another connection for the future potential of these assets.

Tesla generates electricity now? What states do they have generation facilities?

 

[Darson]

So . . . . . we don't care if crypto tokens ever have any serious use. It is like gold - a store of value that has limited to no practical value. All that is needed is a billion believers? Because lets be serous now, there is really no reason to believe these sorts of digital creations are the replacement for government issued money. You can't really "spend' gold or silver in normal commerce any more than you can "spend" a crypto security.

Kind of like how Tinker Bell works -=- DrStrange

Ultimately, this is new technology that we don't really understand the full implications of. Bitcoin is already in the hands of between 20 to 50 million Americans so it's not going away. But the ability to spend crypto is just a matter of a little software at the point of sale so I would not discount it taking a role as an active currency. Right now when you travel and use your credit card you're given the option to pay in local currency or USD. I can imagine this being the same with crypto in the future. But my imagination is no guarantee of the future.

Warren Buffett famously said that he wouldn't buy Facebook and Twitter because he doesn't understand them. Two companies whose valuation follow Metcalfe's law. It's no wonder that he thinks that Bitcoin is rat poison.

 

[JustDave]

Tesla generates electricity now? What states do they have generation facilities?

Generating electricity isn't, in my mind, that big of a problem. Transporting and storing electricity is on the critical path and they are working in that space.

 

[ekricket]

And currently the bitcoin network consumes the same power as the whole of the Netherlands.

Generating electricity isn't, in my mind, that big of a problem.

right now something like 100 million people on this planet own Bitcoin. That's nothing like the 2 billion users that facebook has. We're still in the very early stages of adoption

Ok

 

[Darson]

Rather interestingly, as crypto is treated as property by the IRS, it's not subject to wash sale rules.

If I understand correctly, if you're sitting on a big loss you can sell, buy the same stuff back and deduct those losses from your capital gains tax liability.

I guess it'll take time for the IRS to get up to speed with crypto but for now, it looks like a potential tax loophole.

https://www.cnbc.com/2021/05/25/bitcoin-crash-opens-door-to-a-tax-loophole-for-investors.html

 

[buzzmonkey]

Generating electricity isn't, in my mind, that big of a problem. Transporting and storing electricity is on the critical path and they are working in that space.

Depends on the source of the electricity.

 

[SuckoutKing]

Tesla generates electricity now? What states do they have generation facilities?

Well they are growing their solar roof/ powerwall business every year. They also have large Megapack deployments also connected to solar. Thats the direction things are heading. It will take sometime for costs to come down.

 

[ekricket]

Well they are growing their solar roof/ powerwall business every year. They also have large Megapack deployments also connected to solar. Thats the direction things are heading. It will take sometime for costs to come down.

Your saying buy gas stations, I’m saying buy oil companies. That’s an analogy btw, I’m not being literal

 

[DrStrange]

Let's pretend that we are using only crypto as a form of payment. Not just once or twice a day but for every transaction.

Everything we buy creates a new line on our tax return. I guess software could help, if it existed. But the capital gain / loss schedule is going to be thousands of lines - likely a hundred or more pages.

That alone is bad enough, but if the wash sale rule was also in effect we would be paying taxes on every gain but unable to take most of our losses. Thank goodness for that small blessing. Well, likely not so small for a middle to upper class consumer.

 

[Señor Tony]

https://www.notboring.co/p/own-the-internet

Have a read of this @DrStrange

Current crash doesn't phase me, I'm just excited that after almost 8 years my GoxCoins might finally be coming home soon.

 

[Marius L]

Let's pretend that we are using only crypto as a form of payment. Not just once or twice a day but for every transaction.

Everything we buy creates a new line on our tax return. I guess software could help, if it existed. But the capital gain / loss schedule is going to be thousands of lines - likely a hundred or more pages.

That alone is bad enough, but if the wash sale rule was also in effect we would be paying taxes on every gain but unable to take most of our losses. Thank goodness for that small blessing. Well, likely not so small for a middle to upper class consumer.

While what you write is true today, you should keep in mind that crypto is still a new thing. In another 10 years, maybe it will be used for payments and transactions might not be taxed like they are today. The confusion about whether to classify crypto bitcoin as an asset, property or currency has been ongoing, and IMO is not unlikely to change in the future. If it would be classified as a currency, then the premise of your post is broken. This might happen sooner rather than later in some countries at least, based on the recent developments in el Salvador from last week, but who knows.

As it is today though, Bitcoin is not really usable for day to day transactions. Bitcoin is not really a suitable payment system for small transactions anyways, like buying coffee(unless something is changed). The fee structure would make the fees larger than the price of the cup of coffee itself, so it wouldn't make sense. However there are other cryptos that have other use cases and have lower fees and higher transaction speeds. One example is IOTA, which is based on machine to machine micro transactions and has zero fees.

As of right now it is very much useless for the reasons you mention, but the tech is developing and if down the line regulation change in a way that allows crypto to be used as any other currency without taxing each transaction, it could become an extremely efficient and helpful tech.

Even if the tech is useless today for small transactions, it can still be a great allocation of some of ones capital.

A small %1 of you net worth if you are old and don't wanna risk too much, or a more generous gamble for 5-10% if you are young and don't mind loosing it all. I have much less than that, but I do own a little bit and will most likely be buying more and holding for the foreseeable future.
The way I see it, the thing with crypto is that yes, it is a speculative play for sure. But the risk-adjusted return is actually very reasonable. Bitcoin is volatile, yes, but the potential upside is pretty much limitless. Noone thought it would ever hit $1k back in the day. Noone thought it would hit $20k. And recently noone thought it would hit $60k.


As this Bloomberg article writes:

With the cryptocurrency sinking as much as 31% Wednesday, one might ask whether the token has been a good investment over time. As scary as the sudden wipeout is, the gains have been so enormous that -- even adjusted for risk -- Bitcoin has done way better than other major assets

 

[Taghkanic]

Over the last 2 years, even with this crash, Bitcoin is up 275%. Over the last 5 years, it's up 6000%. It's a high risk high reward punt.

Mmm, but that 6000% jump covers a unique period when bitcoin went from a fringe commodity held by surpassingly few people to much wider public acceptance. Arguably, that transition can only happen once in any asset’s life cycle.

Sure, there are still vast numbers of people who do not know what BTC is, let alone own any, so there may be plenty more potential for huge growth. But 6000% in 5 years may not ever happen again. Maybe over 25 years?

 

[DrStrange]

Just so we are on the same page - - - Crypto securities are not "new". They are roughly a decade old, "mature" or even "old" by the standards of other technological innovations.

Ten year-old innovations have had plenty of time to prove they are useful. Cryptos are so mainstream that Congress and the IRS have paid attention and adopted rules and regulations.

It isn't impossible that digital transactions will become a big deal. But the truth is, digital transactions are already a huge part of society. Just the transactions are denominated in dollars, euros and yen - no need for Bitcoin or any of the other cryptos.

Just saying this is already a thing in wide spread use. -=- DrStrange

 

[justsomedude]

Bitcoin is volatile, yes, but the potential upside is pretty much limitless.

So is the potential downside.

Just sayin'.

 

[mipevi]

@DrStrange

The first cell phone was invented in 1973 by Motorola, but it took two decades for the technology to really start taking off. The first text message was sent in 1992, and new layers have been continually added on and improved upon ever since (smart phones, touch screen, etc.), but adoption always takes time.

The idea behind blockchain was first introduced in 1991 and Bitcoin came to existence in 2009. I suppose in this analogy Ethereum (2013) could be seen as the first smart phone, which came about already in 1994, but again the adoption of such devices followed much later. We are still relatively early in crypto IMO.

 

[Darson]

To be clear, I am not an advocate of going "all in" on crypto. And in the crypto market there are offerings that will thrive and those that won't survive so you have to educate yourself to differentiate between those that have utility and potential longevity and those that are unlikely to succeed. It took me a while to educate myself on blockchain as a technology and crypto as an offering using this technology. I don't consider myself an expert but I know enough to be willing to put some money on a punt.

But I also think that it's wise to diversify your asset portfolio and crypto is one of those asset classes that are high risk so should be treated as such. I also have such high risk investments in my stock portfolio - companies that have a potential for huge growth but also may go bankrupt. I don't put much money in there but I also don't shy away from them if I understand and value their premise.

So depending on your risk tolerance, 5% of your portfolio in crypto is a smart play. If it goes up 500% then great, if it drops 50% then it's not devastating. And we're talking 5-10 year outlooks so these large swings can be considered noise and the reality is that it's not going to go away.

Amazon IPO'd at a present value around $2. In a couple of years it went to $70 and then a year later back down to $6. It took 7 years to get back to $70. 7 years later it was at $350 and another 7 years (today) we're at $3200. In the first 10 years of Amazon the volatility was just as eye watering as Bitcoin. And the long term gains just as agreeable.

And to be clear, if you think crypto and the blockchain is just a digital currency, then you really don't understand change that this technology is going to bring. The blockchain is a secure decentralized record of transactions - we find it easy to think of this in terms of currency but there are an order of magnitude more transactions that occur outside of currency ones. I know my company is working on food safety assurance using traceability on the blockchain. We didn't know that Facebook and Google would become the new face of advertising. We don't know what the blockchain will do for society and business.

 

[Marius L]

So is the potential downside.

Just sayin'.

It's not limitless though, its limited to whatever you put in. Unless you gearing your investment of course, which makes it a much higher risk play, but lets just asume you are investing only money you actually have, the potential downside is limited to whatever you put in.

 

[grebe]

I just cashed out more from my online poker account into BTC, so here's to hoping I can get back to even from buying at the highs! (Still holding though)

 

[justsomedude]

It's not limitless though, its limited to whatever you put in. Unless you gearing your investment of course, which makes it a much higher risk play, but lets just asume you are investing only money you actually have, the potential downside is limited to whatever you put in.

I'm just saying, you can lose 100% of whatever you put in. Just as your gains are a function of whatever you put in.

The idea of Bitcoin headed to $1,000,000 is about as good as the AMC Hodlers planning on selling their shares at a floor of $100,000. It's a fairly retarded prospect. So using the term "limitless" as it pertains to potential valuation is not within the confines of reality.

 

[ekricket]

I'm just saying, you can lose 100% of whatever you put in. Just as your gains are a function of whatever you put in.

The idea of Bitcoin headed to $1,000,000 is about as good as the AMC Hodlers planning on selling their shares at a floor of $100,000. It's a fairly retarded prospect. So using the term "limitless" as it pertains to potential valuation is not within the confines of reality.

But “to the moon” is perfectly feasible. Are people really making enough money from crypto that they can have new hands made out of diamond grafted on?