Anyone Into Crypto?

[Bazza06]

Bazza, I really wasn't having a pop at you but to date no one I've asked has been able to answer the questions I asked you.

In short my view is that Crypto currencies could be considered an everlasting Ponzi scheme. My simplified reasoning is this:

1. I put a pound Stirling into a Crypto currency and I get 1 Crypto coin back. So £1 = CR1
2. Someone somewhere declares the value of my CR1 has increased to £1 = CR2. I tell 10 of my friends and family about my success and they all buy CR1 for £2
3. Someone somewhere declares the value of CR has decreased to £1 = CR1.50.
4. Someone somewhere takes a profit of CR.50 x 10 = £5.00
5. 10 friends and family keep quiet because its a long term investment and things will improve.
6. Someone somewhere declares the value of CR is now £1 = CR2.50. 10 friends and family tell 10 friends and family how well they are doing and they all invest £1
7. I've done very well and decide to withdraw my original investment while keeping my CR1.5 invested and singing the praises of CR which encourages another 100 people to invest £1.
8. Someone somewhere declares the value of CR has dropped to £1 = CR2
9. Someone somewhere takes a big profit
10. Repeat steps 1-9

In short a Ponzi scheme, unless someone somewhere can tell me why it isn't

I fully understand where you are coming from, and I don't take it personally.
As I said in a previous post, I'm certainly not an expert in this field.

Your example above, is something I have seen over and again, not just in crypto but in the stock market too, in particular the AIM market.

In the year 2000, tech stocks were going through the roof on the back of nothing other than they are going to be the next best thing.
Ramping of shares took place not just within online forums, but in newspapers and on TV.
Between 1999 - 2000 there was a daily show called Show Me The Money. It covered many very small cap shares and their value would soar, only to come down with a bump when those already invested bailed out.

I'm not suggesting there was intention to cover the shares they did, but rumours did surface.

Sorry that I couldn't give you any greater clarity on your questions.

[Col Lamb]

Today one bitcoin is valued at c£35,264 and in the last year its so called value has varied from £21,000 to nearly £50,000

So if someone buys one bitcoin and sits on it until their traded value goes up by £10,000 then they sell.

They now have £10,000 in their pocket, but someone or some fund manager has effectively lost their investors £10,000.

Remember the internet bubble of the 90’s when rampant trading took place on shares that had no effective assets backing them up it collapsed loosing rather large sums of cash.

Deregulation of the Banks caused chaos as bubble after bubble burst and volatility of the financial market took place with the financial crash of the 90’s and again in the 00’s. Soros made Billions out of the UK alone.

What is the difference with these crypto currencies?

The whole financial world is legalised gambling with other peoples money.

There has to be a better way.

[martinto8]

Today one bitcoin is valued at c£35,264 and in the last year its so called value has varied from £21,000 to nearly £50,000

So if someone buys one bitcoin and sits on it until their traded value goes up by £10,000 then they sell.

They now have £10,000 in their pocket, but someone or some fund manager has effectively lost their investors £10,000.

Remember the internet bubble of the 90’s when rampant trading took place on shares that had no effective assets backing them up it collapsed loosing rather large sums of cash.

Deregulation of the Banks caused chaos as bubble after bubble burst and volatility of the financial market took place with the financial crash of the 90’s and again in the 00’s. Soros made Billions out of the UK alone.

What is the difference with these crypto currencies?

The whole financial world is legalised gambling with other peoples money.

There has to be a better way.

Unfortunately ‘the way’ typical favours the ones that make the rules up. Whatever currency you play with it is a zero sum game. Money has to come from somewhere. Trading forex is no different. Someone’s take profit is someone else’s stop loss

How well banks are regulated is subjective but FIAT can be as risky as crypto. 2015 Swiss franc flash crash comes to mind….

[Miopyk]

Bazza, I really wasn't having a pop at you but to date no one I've asked has been able to answer the questions I asked you.

In short my view is that Crypto currencies could be considered an everlasting Ponzi scheme. My simplified reasoning is this:

1. I put a pound Stirling into a Crypto currency and I get 1 Crypto coin back. So £1 = CR1
2. Someone somewhere declares the value of my CR1 has increased to £1 = CR2. I tell 10 of my friends and family about my success and they all buy CR1 for £2
3. Someone somewhere declares the value of CR has decreased to £1 = CR1.50.
4. Someone somewhere takes a profit of CR.50 x 10 = £5.00
5. 10 friends and family keep quiet because its a long term investment and things will improve.
6. Someone somewhere declares the value of CR is now £1 = CR2.50. 10 friends and family tell 10 friends and family how well they are doing and they all invest £1
7. I've done very well and decide to withdraw my original investment while keeping my CR1.5 invested and singing the praises of CR which encourages another 100 people to invest £1.
8. Someone somewhere declares the value of CR has dropped to £1 = CR2
9. Someone somewhere takes a big profit
10. Repeat steps 1-9

In short a Ponzi scheme, unless someone somewhere can tell me why it isn't

I fully understand where you are coming from, and I don't take it personally.
As I said in a previous post, I'm certainly not an expert in this field.

Your example above, is something I have seen over and again, not just in crypto but in the stock market too, in particular the AIM market.

In the year 2000, tech stocks were going through the roof on the back of nothing other than they are going to be the next best thing.
Ramping of shares took place not just within online forums, but in newspapers and on TV.
Between 1999 - 2000 there was a daily show called Show Me The Money. It covered many very small cap shares and their value would soar, only to come down with a bump when those already invested bailed out.

I'm not suggesting there was intention to cover the shares they did, but rumours did surface.

Sorry that I couldn't give you any greater clarity on your questions.

That's fine. You're not alone in that.

[Miopyk]

I know there are some supporters on here for Cryptos and hey at the end of the day its your money and you can do what you like with it but I just can't see how cryptos make money except by feeding off peoples greed.

I guess the issue I have is that while any investment is a gamble, traditional stocks, shares, gilts, bonds, gold, property etc. have rules, regulations, government backing etc. that provide some level of security and trust that generally gives the average investor faith that the system works. Yes there are many examples of where this has gone wrong, Bernie Madoff being a prime example and I personally took a paper loss when the markets crashed in March last year but these are known risks and investors have some ability to control that risk if they put some time and effort in but Cryptos seem in the main to be operating outside of any conventional structure, have no regulation and appear to have no fall back position when things go wrong.

The biggest problem I have though is I just don't see where the increased value of a crypto currency comes from other than the desire to make a quick buck. Is the money invested in a company that makes something or provides a service? Is the money lent to governments that promise to pay back a given amount over a stated period? Is the money invested in a tangible asset with a known intrinsic value such as precious metals or property? The answer seems to be none of the above.

Currently there are some 10K crypto currencies and most of these were started by private individuals or companies set up to run them. But they are not investment houses or banks, they are set up solely to manage the currency and they exist to promote their currency in the hope that people will buy and the value will increase via popularity and demand. And what happens to the money people give these organisations their new crypto coins? Who controls the value of the currency? Who dictates how many units of currency are sold? Do you get a contract when you buy your shiny crypto coin outlining your rights and the parameters the business managing the currency will be operating within? So it has to be a Pyramid or Ponzi scheme purely on the basis that it is completely under the control of the organisation that created it, has no intrinsic value underpinning it, has no assets supporting the business operations and ultimately relies on the desire of individuals to make a quick buck to drive growth and value.

I'm yet to be shown any evidence to suggest its worth risking a pound of my money.

[Miopyk]

Very simply, just like buying shares, if the value of the share/crypto increases from the price you bought at, you will see a gain in your original investment.
Equally, if the price goes down, your original investment decreases.

Profit or losses are only realized when you sell.

You buy crypto through an exchange, similar to how you would buy a share through a broker.
The most common exchange is Coinbase which is a public listed company.
Their platform is easy to use, but their fees are amongst the highest.

It's a good starting point, though.

I use Binance, but you can no longer deposit funds from most UK banks. There are ways around it, but it's not for the beginner (neither is it illegal!).

Coinbase has its own insurance in the event something goes wrong. However, I am not au fait with the extent of this. I would imagine it is protection in the event they are hacked.
Similar to if a bank experienced similar and your funds were affected.

However, as with your bank details, passwords etc. you are responsible for keeping these secure.

In terms of controls, this depends on how and where you store the crypto you buy.
Some people keep it on the exchange, which is convenient to access but less secure if the exchange was hacked.
Others use "cold storage" in the form of a secure device such as Ledger (www.ledger.com). They transfer their crypto from the exchange to the Ledger device and keep it in a secure location of their choice.

These devices have a passphrase comprising a number of words that enable you to access your crypto should you lose or damage it.
However, anyone obtaining access to the passphrase can also gain access, hence the importance of keeping it secure.

YouTube is a hive of information for understanding crypto but beware of the many "influencers" promoting the next 10X, 50X, 100X wonder coin.
Just like the many forums of individuals promoting a small cap company that's going to be the next Apple, Amazon etc. they also exist in crypto.

The best channel for informative, balanced and educated content is the Coin Bureau (https://www.youtube.com/c/CoinBureau/videos)
His introductions as to how he is not a financial advisor have become legendary.

No one should invest in crypto without understanding the risks and volatility.

Everything you've said makes sense but you've not really answered my questions, how does a crypto make a profit? What does it do to generate value? If I buy stocks or shares I'm betting on the ability of the company I've invested in making a profit by conducting its business. Can you explain what a crypto does to do the same?

This is a good read to your question: https://www.investopedia.com/tech/what- ... 1-bitcoin/

This sounds like the overview/instructions from a playstation game. Some dark shadowy person or organisations running a blockchain to determine the value of something that only exists in the ether worth millions should be ringing alarm bells somewhere.

[Bluesnose1812]

Historically money has always been tangible and portable be it beans, tokens, silver or gold. Personal wealth would be carried on the person. As individuals became rich and unable to carry it around banks became established and would lend the money to trusted others and a return was paid to the depositor. Governments needed money to finance big projects such as wars so issued paper promissory notes or currency secured on their gold reserves. After the two World wars the projects and finances required became so big that there was a disassociation from tangible assets. And then the fun began. Once a government could issue bonds without any security, big banks and corporations started doing the same. The outcome was the 2008 crash and since then quantitative easing has been the order of the day. Once the concept of unsupported currencies became accepted by the mainstream financial system, and cheques then cards replaced cash it was a small step to have a currency with no apparent tangible existence. However to convince the punter to exchange their existing money into hope of capital gain there had to be control over the creation of new funds. Until that happened the excess of demand over supply would never occur and the price would not increase. However as the new currency only exists as a hypothetical construct it will always be subject to the vagaries of the demand curve.

Until governments give it unreserved support.

[Pivot]

If we park the valuations for a moment, one should also note that while Bitcoin is a digital currency with no underlying asset, it provides a valuable service to poor souls that get to live in tightly controlled dictatorships.

While dictators typically don’t allow their subjects to move money out of the country, there are published cases where ‘foreigners’ get to buy fantastic real estate for absolute bargain paid for in crypto, so that the seller can access his funds in the free world.
Naturally this is being demonized by strong-men authorities, while their govt is planning their own crypto that will enable them to control the population even tighter.

Second important point is that many cryptos are ‘utility tokens’ not currencies, e.g. ETH. The ETH is also called the gas on the Ethereum exchange, to cover the cost of transactions performed on the network.

So the value of ETH represents the value of performing transactions on the Ethereum platform. As ETH (gas) gets more expensive, it attracts competition in a form of competing Blockchain platforms. E.g. Algorand founded by Silvio Micali, brilliant scientist from MIT, and Turing Award winner, planning to disrupt financial sector with DeFi services. The value of Algorand reflects the value of performing transactions on Algorand platform.

Having said that, at this stage the price of the utility tokens are purely speculative, as punters take bets on which platform will actually deliver value, as shown in futuristic presentations with emerging business models.

[Neil1911]

Anyone Into Crypto, or do you believe it's a massive scam?

OK Bazza, now get the genie back in the bottle!

Maybe not, it is more interesting than "Oh dear, I don't know what colour to pick "

[Bazza06]

Anyone Into Crypto, or do you believe it's a massive scam?

OK Bazza, now get the genie back in the bottle!

Maybe not, it is more interesting than "Oh dear, I don't know what colour to pick "

Thank you, Neil.
I knew someone would appreciate my input
(I’m opening a colour thread in the main section)