Would a crypto crash of 90%+ be good or bad for coins??
2manycoins2fewfunds
Posts: 3,036 ✭✭✭
Bitcoin, etc.
Thoughts?
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2manycoins2fewfunds
Posts: 3,036 ✭✭✭
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Depends on the catalyst, I’d imagine.
Crypto something crashed a bunch in the last 24 hours. I saw it in the news. I know very little but am trying to figure out what it is 😉
🎶 shout shout, let it all out 🎶
Maybe Laura would be happy after her last hot topics report.
It could be good and bad. For those that have coins and crypto, a big crash in crypto might wipe out their funds to spend on coins (potentially less competition in auctions) and even force them to sell coins (increased market supply leading to potential deals for those in positions to buy).
Bounced almost all the way back already.
Thanks JM. I’m doing some studying and I guess it can move quickly. Makes silver look slow. There’s just so much information and I need time. I’ll try to ask intelligent questions 😉
🎶 shout shout, let it all out 🎶
Crypto is only one area of wealth creation.
I’d think a stock market crash would affect the market more.
Wealth effect.
Not clear to me how broad crypto ownership is, especially among the older folks who buy coins.
Wealth creation for one comes at wealth destruction of another. Unless of course a printing press is involved.
Repetition of ignorance is ignorance raised to the power two.
In general, I don’t think it would currently have much of an impact. Down the road, anyone’s guess.
It likely more popular among the younger folks who buy coins.
If you lost 90% of the value of your bank account, would that encourage you to buy more coins?
"Crypto crash of 90%" might well cause panic selling in the stock markets and overall economic disruption in this country. Probably bad for everyone.
90% crypto crash would have a positive affect on decision to buy gold/silver coins. Cryptos have been stealing precious metal thunder.
Repetition of ignorance is ignorance raised to the power two.
There are some younger folks in crypto who are not quite familiar with how the stock market works. Market makers take out common stop loss handles in heavily leveraged positions. That’s what happened in the crypto markets today.
That's true, but the hobby skews older. Hence the stock market would affect the hobby more than crypto would while crypto would affect PS5 more than the stock market would.
Some folks would rationalize any market condition as a reason to buy more coins.
Bitcoin futures now trade just like gold and silver futures. Wait till Wall St. creates "crypto banks" to do to prices what their "bullion banks" do to PM prices. What could go wrong? LOL
Repetition of ignorance is ignorance raised to the power two.
For rare coins to jump, you need Silver/Gold to go up.
If there was not much interest in rare coins prior to 2017 when Bitcoin became a 4 or 5 figure price,
you won't have rare coin interest if it crypto collapses. The excitement in silver/gold prices is what drives the excitement in rare coins.
The problem though is that stocks/real estate/crypto are all selling off because of deleveraging by the Fed Reserve. They have kept interest rates at 0% for forever which has made it super easy to borrow money for risky assets/investments.
Crypto banks is a nonsensical idea
Crypto is made via mining and those crypto credits are immediately in a wallet and immediately convertible to many currencies.
As it is now, crypto is thoroughly liquid and there is no need for a spot market or futures market where crypto is held.
If someone were to try to create a crypto repository, it would not be used because of wallets, existing exchanges, and immediate liquidity
Crypto is not necessarily "made" via mining.
Takes a lot of Jamison to make Crypto crash
11.5$ Southern Dollars, The little “Big Easy” set
And
The Bitcoin cme futures contract is financially settled
No impact.
Coin values based on BV and coin market demand (collectors / long term investors). There can be short term investors / speculators but most I know have lost money / filed bankruptcy. Nobody I know involved in coins does crypto. Cash is king on the bourse.
A major war (nuclear exchange) / emp burst would of course make crypto worthless and and most likely stocks too.
as are many gold and silver futures contracts.
And yet, poof, there is a bitcoin futures market. Lest we forget that futures markets were initially created to provide price stability for both producers and consumers of specific commodities. . . then the bankers (after the Hunt brothers) figured out how to speculate in them and dictate price movements with their buy and sell orders.
Repetition of ignorance is ignorance raised to the power two.
And many of those markets need a future delivery choice because it takes a certain amount of time to deliver. Not a crypto factor
Also for something like Libor where there is a group of market players setting rates, crypto has exchanges already and those a by the nature of crypto are decentralized.
The fact that Bitcoin and microbitcoin futures trading is so tiny is indicative of the acceptance of the concept.
Future delivery dates are not, in the modern era, based on the time needed to deliver. They are based solely on the timeline of your bet.
No doubt futures are traded for gambling primarily.
There are also times when the markets are inefficient
But the underlying is still an issue
Oil once went to -$40/bbl for a reason
“Deleveraging by the Fed”? Where is that happening?
Uh, yeah. There's roughly 71 Trillion in the US Stock Market. There's roughly 2.5 Trillion (depending on the day) in all world cryptocurrencies combined.
I might or might not understand cryptos but all wealth creation takes place through mutually beneficial trades. If I build a billion dollar dam that creates two billion dollars in electricity, tourism, water resources etc then the worlds is a billion dollars richer and I should be paid out of some of that billion dollars. If I trade $100 coin to someone to whom it's worth $200 for a coin worth 200 to me and 100 to him then we are both richer. Now days they shut down factories and feast off the entrails but this makes the world poorer rather than richer. Crypto makes no one richer and no one poorer because it's a zero sum gain.
But just stick around a while because if the world is still here in ten years it's a very safe bet all cryptos will have crashed. There's a real possibility the government will have instituted a new one denominated in dollars, however.
...And less than an eight of a trillion in silver.
To the original question, I don’t think that it would have much impact.
With the majority of type coins and widgets…no impact.
Graded gold $20 maybe a little downward pressure.
Top rarities, might reduce number of bidders.
Crypto is only part of the reason that the coin market is heating up.
And the other part of Crypto to remember, is that BTC used to be $50. It's now $49,000. Even if it crashes to $25,000, it's still worth 500x what it was.
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Bad. Less money is less money.
"It's like God, Family, Country, except Sticker, Plastic, Coin."
How is it a zero sum game? The world is net long, about $2.5T. That value was created out of almost nothing (besides energy costs). Zero sum games are things like derivatives where there is a bet on each side and the net aggregate is literally zero. The idea that no one has been made richer makes no sense. There are a few crypto billionaires who would have a good laugh at that.
Also, if a crypto crash is a very safe bet, are you currently shorting the Bitcoin future? If not, why not? How much would you be prepared to bet that all of them will have crashed in 10 years?
Lastly, your statement about wealth creation is incomplete. If I buy an ounce of gold for $1800 and the price of gold goes up to $1900, I am pretty clearly $100 richer despite having traded nothing in the meantime because gold (and stocks and crypto) are completely fungible.
and more on zero sum.
crypto are mined, miners are paid in crypto. wealth is literally being created.
also, there is transactional income.
It’s far more extreme than that! It used to be fractions of a penny back in 2010. Also, it has crashed > 80% multiple times in the last decade. There’s no rational floor (or ceiling, frankly, other than the total wealth in the world). I’d be interested to know what the average cost basis is for current holders.
Whales hold a lot of most cryptos and most of those are founders or early adapters. Average cost basis is very low for most of them.
"It's like God, Family, Country, except Sticker, Plastic, Coin."
Bitcoin doesn't produce anything like a powerplant or bridge that connects cities.
Like all money its value is solely psychological; people believe it has value and therefore it does. Like gold, or bonds, or the "full faith and credit of the United States Government" its value is strictly intangible and relies on people continuing to accept it as being valuable.
But unlike dollars which are similar to constitutionally mandated currency or bonds which are denominated in the same terms bitcoin is specifically prohibited Constitutionally by all previous interpretations. Even were it necessarily legal or deemed legal through fiat there is every chance that some government (China India, etc) will find Bitcoin to be too competitive. No government will allow a currency they can't control to compete with their own printing presses.
You don't try to catch a falling knife and if the balloon starts getting away from its handlers you must let go.
I would agree that there is no such thing as "investment" any longer because the value of nothing can be determined and its future value is determined in the future by fiat or committee, both of which are largely unpredictable. But one might be able to get all the money by borrowing billions at no interest and shorting bitcoin. No doubt there are highly leveraged means to short it.
Gold and dollars have no value and neither can be used to create wealth. They are merely exchanged in a complex sort of barter.
I expected gold to go up with the results of this last election. It was apparent to me that inflation would be going up (it has), but I also figured it would be good for crypto since keeping your money out of USD would seem to me to be a good thing during an inflationary cycle.
Apparently, I was wrong.
I lost about 25% across the board the other night, and I spent the entire night scooping up what I hope to be bargains.
Even with all the cash I pumped in I'm still only a couple k over where I started.
TLDR
No Idea
Thank you for your thoughtful reply. It sounds like you are using wealth as a proxy for productivity. If you don’t think gold and money count as wealth I think we’ll just have to agree to disagree.
You’re looking at this from a micro rather than macro perspective as the question assumes. It might affect the buying habits of a few but is there enough aggregate effect to hurt the larger coin market?
Generally agree, but a lot of this money was made from "nothing" or very little. There's a lot of speculation involved.
If Bitcoin "crashes" to $5,000, that's still higher than it was as recently as 2 years ago in 2019.
Maybe my response wasn't worded clearly. When I said "you", I meant "people whose spending on coins is affected by their investment in crypto". I don't have any idea if that's a few people or a lot. Does the presence/existence of crypto currently affect the coin market? Whatever the answer, I would expect a crash of 90% wouldn't cause the answer to change.
I think you are defining "wealth" differently than cladking. IMO, gold and money are only wealth if they can be exchanged for products or services.
Being exchanged for goods and services is kind of money’s thing.
You don't consider yourself wealthy, Scrooge McDuck, if you're sitting on a giant pile of yellow bricks that can't be exchanged for anything?
I agree with you and @cladking People overestimate the intrinsic value of gold. True "intrinsic" value has to be utilitarian. Beans have intrinsic value because I can eat them. Wood has intrinsic value because I can build with it or burn it for heat. Gold has intrinsic value because it is an inert conductor that can be used to fabricate circuit boards NOT because it can be fashioned into jewelry or exchanged for USD. That exchangeability is extrinsic and applies to gold, paper money, beans, wood, and even crypto. And it is that extrinsic value that is untethered to anything useful or productive.
I'm not a huge believer in crypto. But I also recognize that the extrinsic value in crypto is no different than the extrinsic value of gold...it just has a shorter history to view. The intrinsic value of gold is higher than the intrinsic value of crypto, but what is that value? $1000 per ounce (mining costs), perhaps? Or is there so much hoarded gold that we don't need to mine it and the intrinsic cost is lower?
I'm not sure. But I am sure that really hard times will make everyone consider the extrinsic value of anything, including coins. In the end, the intrinsic value of a 1916-D dime is no different than the intrinsic value of a 1945 dime. Anything above that value is subject to correction if market conditions change.
But the only way you can achieve your $100 increase in wealth is by selling the gold which requires someone else to pay you $1900 and, therefore, put the $100 into the gold market. Viewed in total, it is a zero sum game.
The same is true of the stock market. The stock market can increase in value. If there are 1 billion shares of Ford at $20 per share, when the next trade is at $21 then you've added $1 billion to total stock market value. HOWEVER, that is all paper. The only way to unlock that $1 billion is for all of the shareholders to exchange their shares for $21. But is there $21 billion that would come into the market to make those purchases? Probably not.
In the end, if you view the entire monetary system and economy, it is limited to the increase in underlying GDP. You can't actually create real value by simply inflating the cost of a stock or commodity because there is nothing to exchange it for.
Viewed another way: Suppose the total value of ALL physical assets on the planet (food, housing, commodities, etc) is $100 trillion. If you bid up the stock market to $200 trillion is there now $200 trillion in "wealth"? No, because there is nothing to trade it for. You can trade your $200 trillion in stocks for everything on the planet, but you have no increase in assets just an inflated cost for the assets that were their all along.
That is when bubble burst: when a significant number of sellers emerge and there isn't enough money/assets flowing into the market to pay off the participants. The price then adjusts down. It really is something of a zero sum game if you view the entirety of the economy.
Almost anything nonperishable can be a store of wealth. But holding commodities or financial instruments doesn't directly create new wealth. Unless what bitcoin is mining has value other than as bitcoin it is actually destructive of wealth because it ties up infrastructure and human effort and produces nothing. In this crazy world today where productivity is so huge that we can waste more than we consume a great deal of money is created by destruction. Someone figures out a way to make refrigerators that last an even shorter time and "earns" a huge bonus. Products and companies are destroyed for profit. But this isn't how wealth is produced. It is only produced in mutually beneficial trades. Wealth is created by lower costs, higher quality, and more efficient means of handling production and distribution. If you buy a better mouse trap then it's improved quality is of more value than the additional cost.
Consumers are unconcerned about cost or quality and fill up their garbage cans every week with products that should have lasted many years instead of a few days. Then this destruction is monetized and given free to the very individuals causing it, the stock holders, and the managers. Since individuals are so unconcerned about quality a better mousetrap isn't going to sell anyway and wouldn't be profitable if it did. There is a race to the bottom now to see how cheap, flimsy, and unacceptable every product can be made. If you need something like a tire pump it's easier to rebuild one from the 1940's because it will last for decades while a brand new one has to be replaced almost annually. Many things that we used to think of as "nonperishable" now are. A warehouse full of bicycle pumps probably has a short shelf life.