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People are taking out mortgages to buy Bitcoin, says securities regulator
- PeterisP 9y agoBubbly bubble. Seriously, some time ago you could debate if you're an early adopter (winning from a raise in the bubble even if it pops later) or a laggard who'll only lose in it; but if you're investing after a random taxi driver has taken a mortgage to do so, then (hint-hint) you're not one of the early ones.
- 1001101 9y agoSomeone that owns a substantial sum of coins recently put it to me this way: there are ~16 million millionaires in the US. If each one of them wants 1 Bitcoin... I'm long again.
- darkstar999 9y ago...what?
- chickenfries 9y agoWow that’s some amazing rationalization they’ve done there. What happens in the incredibly more likely scenario that most of them want none?
- 1001101 9y agoSure - think of it more as a thought experiment rather than a forecast and this from a professional trader that's been long since 2013. Either way, I thought I would share it, and we'll see which way it goes.
- kornakiewicz 9y agoThose 16 millions of guys might want to buy a book that I will eventually write.
- chickenfries 9y agoIf each one of them wants to buy one book... you've got 16 million in sales right there! I don't see anything wrong with this line of thinking.
- jjeaff 9y agoYa, and if every person in American gave me just 1 penny, I'd be a multi-millionaire.
- wlesieutre 9y agoThat's like saying "If every millionaire wanted a bar of gold my stash of gold bars would be worth more." It's not wrong, buuuuut....
- marshray 9y agoYes, that's exactly what happens when economic uncertainty sends the price of gold higher.
- wlesieutre 9y agoRight, but the fact that demand for something can make the price go up isn't useful investment advice. Gold hasn't been doing well against the USD recently, but yes, it's conceivable that it could shoot up if more people decided they want some. 1001101's person is betting that it will, and I agree that it's a possible outcome. Wouldn't put all my eggs in that particular basket, but hey, maybe I'm wrong.
- IncRnd 9y agoThat's a nice way to frame the type of position (long vs short) against the type of market (bull vs bear) in the context of supply vs demand. Thanks for sharing.
- marshray 9y agoThat's why it's such a big deal that Bitcoin (derivatives) are now trading on regulated exchanges in Chicago and New York. Whereas before those millionaires may have been reluctant to open an account with (i.e., send all their identity documents to) some unregulated crypto exchange, they already have brokerage accounts that can now or will soon be able to trade them.
- kristianp 9y agoIf they average 10k investment each, that's 160 Billion.
- kamaal 9y agoBad news for such people is, rich people in general happen to be smart with their money and they don't exactly like to waste their money this way. All just to make up for somebody's bad investments? If you want to know how stingy people are with their money, you have to only look at how they think about paying taxes.
- Nition 9y agoI'm becoming more convinced that Bitcoin must be in a bubble. The transaction fees are so high now that it's not really usable for actual transactions. For instance Steam just dropped support for that reason and because it's so volatile[1]. The power consumption to process those transactions has gotten similarly insane, and there's no sign of a move to proof-of-stake or anything less intensive. I don't think cryptocurrency is a bad idea in itself but Bitcoin really doesn't seem like a good currency right now, and there's little sign of it heading to a good place. [1] https://steamcommunity.com/games/593110/announcements/detail/1464096684955433613 https://steamcommunity.com/games/593110/announcements/detail...
- onion2k 9y agoThis is what I've been thinking lately too. Crytocurrencies are likely to prove useful, but Bitcoin's limitations make it much less useful than it's competitors. It's big right now because it was the first one. That won't keep the value high forever.
- ryan_j_naughton 9y agoBitcoin is useless as a currency. It is naturally deflationary, which makes for a terrible currency as no one wants to spend a unit of currency that is going to be worth more tomorrow in real terms. What bitcoin is useful for is simply as a store of value -- as digital gold. In that regard it is working perfectly. It is a well defined property right on a good with limited quantity. Given that there will be way fewer transactions for a store of value than for a currency, I am not as concerned. Further, it makes sense for its value to soar as more demand increases for it as a store of value. I'm not saying it isn't a bubble -- it will likely correct at some point. But long term I think it will still hit $100K to 200K per coin given the limited supply and still increasing group of people who will use it as a store of value.
- kamaal 9y ago'Store of value' is a dead on arrival concept in a world where inflation exists. Investments have a 'Store of value' feature by default built into them. For Bitcoin to be viable its value has to endlessly increase over time. Or you are simply better off storing your cash beneath your mattress.
- bllguo 9y agoI read a similar sentiment here: https://medium.com/@jamesjunghanns/my-0-00000173120-btc-a-practicing-orthodox-macroeconomists-unsolicited-views-on-bitcoin-543da352fc49 https://medium.com/@jamesjunghanns/my-0-00000173120-btc-a-pr... "I thought of how Henry Ford called his broker and instructed him to 'sell everything' when his doorman or elevator-operator (anecdotes differ in detail) started telling him about stocks in 1929."
- 3pt14159 9y agoI have yet to hear of anyone outside of tech bring up Bitcoin. We might be at 1927, but I don't think we're at 1929. Either way, I stupidly got out of almost all of my Bitcoin between $200 and $1000.
- deleted 9y ago[deleted]
- icedchai 9y agoYes, I think we're about to enter the final stage before the bubble bursts. My uncle had one of his retired friends ask about bitcoin. It's on CNBC every morning now, and seems like it's starting to go mainstream. I got into Bitcoin back in 2010. Unfortunately I only have a small percentage of my Bitcoin "fortune" intact, having cashed out most of it below $100.
- rhino369 9y agoMy mom, who I won't let have admin rights on her own laptop, wants bitcoins for Christmas. She told me "it's like a giftcard for the internet, and people are getting rich from them." I'd buy them for shits and giggles but the transaction costs are ridiculous.
- adamnemecek 9y agoWrong question. When everyone is invested is it a bubble? When everyone is invested in bitcoin going up, it will keep increasing. Stop calling them tulips. The most “educated” answer is that you don’t understand them. Stop pretending you do. A thing like this is the first off, many rules of economics don’t apply.
- infinite8s 9y agoWhen people start saying the rules of economics don't apply this time, that's usually a good sign of a bubble.
- paulgb 9y ago"The price of Bitcoin is solid, there's a mathematically guaranteed finite supply" - 2017 "The price of land is solid, they aren't making more of it" - 2007
- marshray 9y agoLand has inherent utility, Bitcoin has inherent costs, notably energy.
- adamnemecek 9y agoIt's not tho. What would you say was the economic system even comparable with Bitcoin?
- infinite8s 9y agoHuh? Bitcoin is a finite resource. There's lots of examples of finite resources (land, for example).
- adamnemecek 9y agoIs land used as currency?
- darkstar999 9y agoHow do you take out a mortgage and spend it on something other than a property? That has to be fraud regardless of what you purchase, right? This worthless article didn't explain much.
- ceejayoz 9y agoA home equity loan is a form of second mortgage. You can take money out of it for whatever purpose you like.
- stephengillie 9y agoIt sounds insane to me, but some banks offer home equity credit cards, to leverage your home to buy clothing or other items.
- anm89 9y agoLets say you own a 200k house outright. You take out a mortgage for 200k. You now have 200k debt on the house on 200k cash which you could spend however you want with no responsibility to the bank beside your monthly payment
- onion2k 9y agoA mortgage is just a loan secured against an asset like a property. If you already own the property you can secure a loan against it and spend the money on whatever you want. Even if you already have a mortgage you can take out a second one for the value of what the property is worth in excess of the value of the first mortgage ("unlocking" the equity).
- IncRnd 9y ago> How do you take out a mortgage and spend it on something other than a property? You already own property and take a loan with the property as security.
- frgtpsswrdlame 9y agoSo how does a bubble in Bitcoin pop? Since there's no real underlying value does it just take the spread of the idea that Bitcoin is a bubble?
- chickenfries 9y agoMaybe another Mt Gox.
- 659087 9y agoGoxFinex
- m1sta_ 9y agoPeople stop buying. That’s it. There is no underlying value. There is no floor to the price of a coin.
- workthrowaway27 9y agoI've been wondering this too. Its price is obviously not supported by anything, but that was always the case. My bet is the price naturally starts to come down as someone with lots of bitcoins tries to cash out, then others panic trying to cash out as the price declines and the price rapidly crashes after that.
- pmoriarty 9y agoWhy not just the same way as any other bubble? People start selling in vast quantities, other people see the selling and panic, the currency devalues, and the selling snowballs until it's a small fraction of its former value. The big questions are if that's ever going to happen, and if so, when? Unless you've got a time machine or have cornered the market, though, I'm not sure how you could ever know.
- frgtpsswrdlame 9y agoWell here, let me explain: if gold is a bubble someone comes up and says, gold is overvalued, here's x, y, z that explain why it's overvalued. That idea spreads, people stop buying and start selling, boom bubble popped. With bitcoin though, I don't see a good way to say bitcoin "is overvalued, here's x, y, z that explain why it's overvalued." There's really no explanation for it's value at all, that's the aspect of bitcoin that resembles a currency.
- anm89 9y agoSounds anecdotal to me... Also, funny how these regulators seem to magically disappear when it comes to white collar crime, but they sure have a lot of time to discuss protecting everyone from themselves buying bitcoin.
- pmoriarty 9y agoNot that this is going to stop anyone, but those who are considering investing a lot of their net worth in something so speculative should do themselves a favor and read up on the so-called Tulip Craze (aka Tulip Mania) in the 17th century. https://en.wikipedia.org/wiki/Tulip_craze https://en.wikipedia.org/wiki/Tulip_craze
- 21 9y agoFor decades, economists have pointed to 17th-century tulipmania as a warning about the perils of the free market. Writers and historians have reveled in the absurdity of the event. The incident even provides the backdrop for the new film Tulip Fever, based on a novel of the same name by Deborah Moggach. The only problem: none of these stories are true. https://www.smithsonianmag.com/history/there-never-was-real-tulip-fever-180964915/ https://www.smithsonianmag.com/history/there-never-was-real-...
- pmoriarty 9y agoAn interesting article, though even its author admits: "That’s not to say that everything about the story is wrong; merchants really did engage in a frantic tulip trade, and they paid incredibly high prices for some bulbs. And when a number of buyers announced they couldn’t pay the high price previously agreed upon, the market did fall apart and cause a small crisis--but only because it undermined social expectations." "In this case it was very difficult to deal with the fact that almost all of your relationships are based on trust, and people said, ‘I don’t care that I said I’m going to buy this thing, I don’t want it anymore and I’m not going to pay for it.’ There was really no mechanism to make people pay because the courts were unwilling to get involved," Goldgar says.
- eridius 9y agoThat summary understates it. > That’s not to say that everything about the story is wrong; merchants really did engage in a frantic tulip trade, and they paid incredibly high prices for some bulbs. And when a number of buyers announced they couldn’t pay the high price previously agreed upon, the market did fall apart and cause a small crisis—but only because it undermined social expectations. The tulip craze was real, it just didn't cause society to crumble.
- misotaur 9y agoMaybe some take a mortgage to short it?
- maltalex 9y agoAre there sane ways of shorting Bitcoin?
- 21 9y agoTo invoke a higher authority: Bitcoin: my answer to the repeated questions. No, there is NO way to properly short the bitcoin "bubble". Any strategy that doesn't entail options is nonergodic (subjected to blowup). Just as one couldn't rule out 5K, then 10K, one can't rule out 100K. Gabish? https://twitter.com/nntaleb/status/939526347730407424 https://twitter.com/nntaleb/status/939526347730407424
- TheSoftwareGuy 9y agoMaybe get a CDS on those mortgages?
- blueprint 9y agoThis is possibly the worst financial advice in existence.
- handbanana 9y agoBecause it isn't advice?
- deleted 9y ago[deleted]
- AnimalMuppet 9y agoIt sure sounded like at least a suggestion...
- 9y ago
- freedomben 9y agoOh people COME ON! I love Bitcoin and other crypto currencies but driving yourself into debt to buy in is grossly irresponsible. Worst of all these will be the same people clamoring for regulation when they lose all their things.
- tptacek 9y agoThis doesn't surprise me. My Facebook feed has three kinds of people on it: family, people I went to grade school and high school with, and security industry people I've met at conferences. Over the last few months, it's gotten to the point where I can't snark about Bitcoin (to my security industry friends) without getting aggressive pushback from the people I went to grade school with, none of whom are in the technology industry, many of whom are cheerleading their social circles into investing in Bitcoin. None of them are transacting in Bitcoin (to a first approximation: nobody is transacting in Bitcoin). They're buying for the same reason people bought into Pets.com. Here's an example: November 29 at 11:03am: Bitcoin just topped 11k! That's a 77% gain in just the last 30 days. Who wants in??? [21 likes, 19 comments]. This is from a home mortgage loan officer I went to grade school with. The comments are all variants of "Me, I want in." I don't know what weird threshold we crossed in the middle of this year, but cross it we did.
- jrs235 9y agoSocial media is fueling this pyramid scheme. #fakenews was bad, now we have #headsinthesand. Don't rain on people's parade, the will be shooting the messengers.
- thesmallestcat 9y agoI normally wouldn't buy a foreclosure for ethical reasons that I'm sure fail to hold water. But if there's a wave following the collapse of Bitcoin, count me in. I have zero sympathy for somebody who loses their shirt speculating on fucking Bitcoin.
- tptacek 9y agoWhy? It's a manifestly crazy investment, but why is a mortgage broker on the south side of Chicago expected to have enough innate technical knowledge to qualify Bitcoin as an investment, but not for an NYSE-listed stock? To the overwhelming majority of investors, both are fundamentally opaque instruments; you buy because other people are buying. To me, this indicts Bitcoin's most aggressive promoters, not the investors.
- symlinkk 9y agoInteresting that everyone seems to be in consensus that this is a bubble. If you're so sure, why not short it? That's free money you're leaving on the table.
- brlewis 9y ago"The market can stay irrational longer than you can stay solvent." Calling the day when a bubble will pop is hard.
- akvadrako 9y agoI agree folks should put up or shut up, but it can be both true that it will go to 100K and be a bubble. And if you short it now, you'll go broke even if it later crashes to 0.
- ifdefdebug 9y agoIt takes another 15% spike and your short margin position pops just 10 seconds before it goes crashing down again... this is happening all day long.
- AnimalMuppet 9y agoI've been thinking about options as a way of doing that. But if anyone is selling put options on bitcoin, they're... probably not wise.
- slyfocks 9y agoI’m fairly certain it’s a bubble but it’d be foolish to short. Altcoins are in a bubble as well—Potcoin being valued at $64mil is just one of many examples of coins with zero or close to zero utility valued at absurd levels merely due to their visibility as a cryptocurrency (much like dot coms in 1999). Ultimately, the mania present in a bubble can persist longer than one can stay liquid, i.e. Bitcoin could double or triple before the bubble bursts, which would trigger a margin call on a short position.
- ellius 9y agoOne rationale would be that a person believes they cannot time the market correctly.
- age_bronze 9y agoWhat is curious is that it seems like there's a growing consensus with everyone with a real clue about it that this is a bubble, while the price keeps rising anyway. We're already past the point where bitcoin could have any value as a currency, as the higher and higher transaction fees ensure the only remaining users are traders. I mean I can hardly see anyone using bitcoin today as anything but a store of value for speculative reasons. Any real users (which treat it as a currency) should have already left for cheaper currencies. It's going to fall, and fall hard, and it will be painful. When it will crash, it's going to take similar protocols (who can use the same setups / hardware / asics) down with it as miners try to reuse their hardware on more effective currency.
- justifier 9y agoDo these people know cryptocurrencies are reliant on unsolved mathematics? This information needs to be the first thing people learn about cryptocurrency.. long before putting any money in
- DougN7 9y agoIsn’t this exactly what made the stock market crash of 1929 so devastating to the US? And which lead to the Great Depression our grandparents tell us about?