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A lot of people seem to underestimate the regulatory risk. Cryptocurrencies are not too big to fail. On the contrary, something like a single high-profile scam

by pavlov 6y ago

A lot of people seem to underestimate the regulatory risk. Cryptocurrencies are not too big to fail. On the contrary, something like a single high-profile scam with billion-dollar losses for retail investors could lead to Western governments also getting squeamish and shutting down the money flow between exchanges and banks. Nobody will care if that destroys some startup's IPO or a 0.05% holding at a JPMorgan fund.

spurdoman77 6y ago
Lol, no one is going to care about the retail getting scammed. Otherwise I agree, things might get nasty if important rich people get scammed.
generalizations 6y ago
It could add to the government regulation, but I think we shouldn't underestimate the people interested in crypto. If there's a way to get around those regulations, people will find it.
- deleted 6y ago
  [deleted]
xiphias2 6y ago
US is still the leading country in the world when it comes to regularity clarity and legal certainity. When it goes a way by changing simething infrastructure is built upon for many years, even people who don't care about Bitcoin care about it and see the country as less investable.
- pavlov 6y ago
  There's been a pandemic and an insurrection in USA, yet stocks are higher than ever. Banning crypto exchange transactions wouldn't even be a blip on the radar. The forces attracting foreign investment are much bigger.
  - edrxty 6y ago
    I broadly agree with this, but there's also been a disproportionate interest in crypto from the finance community. It's seemingly part of a larger desire for some sort of fintech-libertarian-utopia (hard air-quotes there). As such, a move against crypto would be a pretty big signal that nobody should expect anything other than a rather conservative (in the dictionary sense) approach to financial regulation.
Hermel 6y ago
You implicitly assume that when governments start to burn the bridges between fiat and crypto, it is the crypto holders that will run to the fiat side before the last bridge is gone. But it could also go the other way around.
- beefield 6y ago
  How? I mean, what non-crypto not illegal thing you actually can currently purchase without going via fiat?
  - cfcosta 6y ago
    Teslas, gift cards.
    - pavlov 6y ago
      The Tesla isn't priced in Bitcoin though, is it? It's not like they have a Model 3 that costs 0.75 BTC. The Bitcoin price will vary daily based on whatever rate they get from their off-ramp. I don't think Tesla would keep the revenue as Bitcoins because the accounting implications are pretty weird. This is from Tesla's 10-K, via FT [1]: "We will account for digital assets as indefinite-lived intangible assets in accordance with ASC 350, Intangibles — Goodwill and Other. The digital assets are initially recorded at cost and are subsequently remeasured on the consolidated balance sheet at cost, net of any impairment losses incurred since acquisition." You sell a car for Bitcoin but then you'd have to record the revenue as intangible goodwill on the balance sheet? That would mess up their results. It's worth noting that Tesla includes US government bonds as cash equivalents, but isn't able to do the same with Bitcoin. [1] https://www.ft.com/content/364734d1-80df-49d3-bc2f-c813c93062ab https://www.ft.com/content/364734d1-80df-49d3-bc2f-c813c9306...
  - deleted 6y ago
    [deleted]
  - perennate 6y ago
    https://99bitcoins.com/bitcoin/who-accepts/ https://99bitcoins.com/bitcoin/who-accepts/ Prices are pegged to fiat but the merchants accept BTC directly.
swiley 6y ago
A lot of people forget how many years people were using cryptocurrencies for when banks did actively close your account if they found out you were messing with them. People still bought and sold and traded bitcoin on IRC. Even robots were still able to do it. The whole thing still works it's just that some use cases are more annoying.
- pavlov 6y ago
  Sure. But do you really think one Bitcoin will be worth $50k if you have to trade it on IRC?
ejanus 6y ago
But Nigeria Naira is in free fall for more than 5 years now. The risk of holding Naira is more than that of BTC. We have two important exchange rates one at 372, another at 472. Only people with government link can easily source at so-called official rate. It is virtually impossible to import basic materials for small scale industries. Cryptocurrencies created windows for Nigerians to invest their money. We have inflation at 17% but CBN ordered banks to fix interest rate at around 1%. This is nothing but wealth destruction. Cryptocurrencies have helped Nigerians to work remotely and earn decent wages. I remember one guy from Nigeria who was making good money from a cryptocurrency based freelance company.
- manmal 6y ago
  > We have inflation at 17% but CBN ordered banks to fix interest rate at around 1% I would‘ve thought it’s prudent to keep interest low in such a scenario, because it stimulates investments.
  - notahacker 6y ago
    Low interest rates also make borrowing money cheap, which means people borrow money from banks, which increases the money supply (as well as the rate at which it's being turned over). This effect dominates any long term production increase which certain types of investment might facilitate. Raising interest rates when inflation is high is Central Banking 101
    - ejanus 6y ago
      Sure, CBN 101. But investment 101 is different,you try to beat inflation. Here, inflation destroys your currency value. Note that inflation in Nigeria is driven by foreign currency exchange rates and not interest rates.
- onlyrealcuzzo 6y ago
  Serious question - why is BTC a unique answer? Can't you buy index funds or ETFs? Can you not easily convert Naira to USD and/or Euro? Does the government forbid this?
jMyles 6y ago
> A lot of people seem to underestimate the regulatory risk. I think you overestimate how much people visualize their future based on the degree to which somebody in Washington, DC approves of their choices. People holding crypto aren't suddenly going to say, "Oh, the government that's already swirling the drain doesn't approve? I guess I'll move my assets back into a currency they control."
- notahacker 6y ago
  Sure, cryptoenthusiasts can hold on to crypto all they want, but in a scenario where buying and using it is about to become incredibly difficult or even illegal, the value of Bitcoins isn't going up. Given the concentration of miners, I'd rate the Chinese government as potentially the bigger regulatory risk though...
- pavlov 6y ago
  I think you overestimate the number of Bitcoin buyers who are libertarian ideologues vs. pure FOMO investors.
- nradov 6y ago
  Perhaps the US government might fall someday. But in the meantime they still have plenty of resources to imprison you for money laundering, fraud, or tax evasion.
fasdf1122 6y ago
you wish lol

by pavlov 6y ago

spurdoman77 6y ago

Lol, no one is going to care about the retail getting scammed. Otherwise I agree, things might get nasty if important rich people get scammed.

generalizations 6y ago

It could add to the government regulation, but I think we shouldn't underestimate the people interested in crypto. If there's a way to get around those regulations, people will find it.

deleted 6y ago
[deleted]

xiphias2 6y ago

US is still the leading country in the world when it comes to regularity clarity and legal certainity. When it goes a way by changing simething infrastructure is built upon for many years, even people who don't care about Bitcoin care about it and see the country as less investable.

pavlov 6y ago
There's been a pandemic and an insurrection in USA, yet stocks are higher than ever. Banning crypto exchange transactions wouldn't even be a blip on the radar. The forces attracting foreign investment are much bigger.
- edrxty 6y ago
  I broadly agree with this, but there's also been a disproportionate interest in crypto from the finance community. It's seemingly part of a larger desire for some sort of fintech-libertarian-utopia (hard air-quotes there). As such, a move against crypto would be a pretty big signal that nobody should expect anything other than a rather conservative (in the dictionary sense) approach to financial regulation.

Hermel 6y ago

You implicitly assume that when governments start to burn the bridges between fiat and crypto, it is the crypto holders that will run to the fiat side before the last bridge is gone. But it could also go the other way around.

beefield 6y ago
How? I mean, what non-crypto not illegal thing you actually can currently purchase without going via fiat?
- cfcosta 6y ago
  Teslas, gift cards.
  - pavlov 6y ago
    The Tesla isn't priced in Bitcoin though, is it? It's not like they have a Model 3 that costs 0.75 BTC. The Bitcoin price will vary daily based on whatever rate they get from their off-ramp. I don't think Tesla would keep the revenue as Bitcoins because the accounting implications are pretty weird. This is from Tesla's 10-K, via FT [1]: "We will account for digital assets as indefinite-lived intangible assets in accordance with ASC 350, Intangibles — Goodwill and Other. The digital assets are initially recorded at cost and are subsequently remeasured on the consolidated balance sheet at cost, net of any impairment losses incurred since acquisition." You sell a car for Bitcoin but then you'd have to record the revenue as intangible goodwill on the balance sheet? That would mess up their results. It's worth noting that Tesla includes US government bonds as cash equivalents, but isn't able to do the same with Bitcoin. [1] https://www.ft.com/content/364734d1-80df-49d3-bc2f-c813c93062ab https://www.ft.com/content/364734d1-80df-49d3-bc2f-c813c9306...
- deleted 6y ago
  [deleted]
- perennate 6y ago
  https://99bitcoins.com/bitcoin/who-accepts/ https://99bitcoins.com/bitcoin/who-accepts/ Prices are pegged to fiat but the merchants accept BTC directly.

swiley 6y ago

A lot of people forget how many years people were using cryptocurrencies for when banks did actively close your account if they found out you were messing with them. People still bought and sold and traded bitcoin on IRC. Even robots were still able to do it. The whole thing still works it's just that some use cases are more annoying.

pavlov 6y ago
Sure. But do you really think one Bitcoin will be worth $50k if you have to trade it on IRC?

ejanus 6y ago

But Nigeria Naira is in free fall for more than 5 years now. The risk of holding Naira is more than that of BTC. We have two important exchange rates one at 372, another at 472. Only people with government link can easily source at so-called official rate. It is virtually impossible to import basic materials for small scale industries. Cryptocurrencies created windows for Nigerians to invest their money. We have inflation at 17% but CBN ordered banks to fix interest rate at around 1%. This is nothing but wealth destruction. Cryptocurrencies have helped Nigerians to work remotely and earn decent wages. I remember one guy from Nigeria who was making good money from a cryptocurrency based freelance company.

manmal 6y ago
> We have inflation at 17% but CBN ordered banks to fix interest rate at around 1% I would‘ve thought it’s prudent to keep interest low in such a scenario, because it stimulates investments.
- notahacker 6y ago
  Low interest rates also make borrowing money cheap, which means people borrow money from banks, which increases the money supply (as well as the rate at which it's being turned over). This effect dominates any long term production increase which certain types of investment might facilitate. Raising interest rates when inflation is high is Central Banking 101
  - ejanus 6y ago
    Sure, CBN 101. But investment 101 is different,you try to beat inflation. Here, inflation destroys your currency value. Note that inflation in Nigeria is driven by foreign currency exchange rates and not interest rates.
onlyrealcuzzo 6y ago
Serious question - why is BTC a unique answer? Can't you buy index funds or ETFs? Can you not easily convert Naira to USD and/or Euro? Does the government forbid this?

jMyles 6y ago

> A lot of people seem to underestimate the regulatory risk. I think you overestimate how much people visualize their future based on the degree to which somebody in Washington, DC approves of their choices. People holding crypto aren't suddenly going to say, "Oh, the government that's already swirling the drain doesn't approve? I guess I'll move my assets back into a currency they control."

notahacker 6y ago
Sure, cryptoenthusiasts can hold on to crypto all they want, but in a scenario where buying and using it is about to become incredibly difficult or even illegal, the value of Bitcoins isn't going up. Given the concentration of miners, I'd rate the Chinese government as potentially the bigger regulatory risk though...
pavlov 6y ago
I think you overestimate the number of Bitcoin buyers who are libertarian ideologues vs. pure FOMO investors.
nradov 6y ago
Perhaps the US government might fall someday. But in the meantime they still have plenty of resources to imprison you for money laundering, fraud, or tax evasion.

fasdf1122 6y ago

you wish lol