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Can you describe how these financial products are “dangerous”? Because they could be rug pulls? I disagree that citizens need to be “protected” from speculatio

Can you describe how these financial products are “dangerous”? Because they could be rug pulls? I disagree that citizens need to be “protected” from speculation. Governments should monitor markets and go after scammers when they act, not shut down the markets entirely.

consp 5y ago
I guess your assumption is people know what they are doing. Looking at legal bank products with derivates and who got into other speculative products in the past decades most people didn't see they were being manipulated into buying a product for which the risks where greater than they could afford. This is a different stance from the America libertarian view of "everyone is responsible for their own actions" mostly because the balance of power is greatly in favour of the companies.
- meowkit 5y ago
  > I guess your assumption is people know what they are doing. My assumption is most people do not know what they are doing when it comes to trading equities or derivatives. There are other solutions to your concerns - namely required training explaining risks, an approval process, and not allowing derivatives to be recommended by platforms. Outright bans come from ulterior motives or incompetence. My stance is not what you have presented. If I had to briefly summarize my stance: let people make reasoned decisions for themselves, and provide safeguards to mitigate the most common accidents.
- 3np 5y ago
  Notable that US legislation does not take this “America libertarian view”. Like how a huge class of investments are not legally accessible to anyone who’s not an “accredited investor”, with requirements such as 1M$ net worth.
MikeDelta 5y ago
The problem is not speculation or market risk, but leverage. Say you covert 1000 USD into BTC, and you can convert back without costs. If BTC goes up 100%, you should be able to get back 2000 USD. If BTC goes to 0, you get zero. Leverage is 1 as your return relates 1:1 to the return on BTC. Now let's look at leverage, say we take a leverage of 100 (not a crazy amount). This means that your return in USD goes 100x the return in BTC, so if BTC goes up 1% you earn 100% (and walk away with 2000 USD). It also means that if BTC goes down 1%, you lose everything. The other thing is that if you have insufficient margin, the venue close down your position by putting it on the market. If BTC has a short dip and quickly recovers, the venue will have closed down your position at the point where you lost your margin (all your money). This can be exactly the -1%, but depends on the market and the liquidity. If BTC will go up 10% but does so in a noisy way, you might be right but the venue could have closed down your position the moment BTC touched -1% during the random movements. Eveb worse, say that BTC drops 10% in a very rapid move because of some tough news and panic. The venue puts the orders to sell your position at the -1% mark but because of lack of liquidity these orders get filled at -10% and your loss becomes 10.000 USD. Even if BTC recovers quickly, you keep your loss because the position is closed. That is the problem. So, in a nutshell, with unleveraged investing you can lose everything, but with leveraged investing you can end up in serious debt.
- csomar 5y ago
  > Eveb worse, say that BTC drops 10% in a very rapid move because of some tough news and panic. The venue puts the orders to sell your position at the -1% mark but because of lack of liquidity these orders get filled at -10% and your loss becomes 10.000 USD. Even if BTC recovers quickly, you keep your loss because the position is closed. That is the problem. Losses in the Crypto world are limited to the amount of capital you put in a certain position. This has the side effect of (maybe) not collecting the full amount on the up-side. Pretty much all exchanges do this, since it's almost impossible to go after individuals when they go bankrupt. Now the popular derivatives frameworks have sizable insurance funds for such events; but clawbacks are a thing in the crypto world.
Symbiote 5y ago
Look at something like https://cashasap.co.uk/ https://cashasap.co.uk/ "WARNING: Late repayment can cause you serious money problems. For help, go to moneyadviceservice.org.uk" "Representative Example: £250 loan for 3 months at a fixed interest rate of 290% pa. Total amount payable is £321.51" Or at https://www.ig.com/uk/spread-betting https://www.ig.com/uk/spread-betting "71% of retail investor accounts lose money when trading spread bets and CFDs with this provider." Or even https://www.vanguardinvestor.co.uk/investing-explained/investment-account-types https://www.vanguardinvestor.co.uk/investing-explained/inves... "Please remember that the value of investments can go down as well as up and you may get back less than you invest." It's the opinion of British society that citizens _do_ need to be protected in this way.
- celticninja 5y ago
  > It's the opinion of British society that citizens _do_ need to be protected in this way. I would replace 'protected' with 'warned'. You can still do it but as long as you have been informed correctly beforehand then you are taking a risk with the knowledge it could go tits up.

consp 5y ago

I guess your assumption is people know what they are doing. Looking at legal bank products with derivates and who got into other speculative products in the past decades most people didn't see they were being manipulated into buying a product for which the risks where greater than they could afford. This is a different stance from the America libertarian view of "everyone is responsible for their own actions" mostly because the balance of power is greatly in favour of the companies.

meowkit 5y ago
> I guess your assumption is people know what they are doing. My assumption is most people do not know what they are doing when it comes to trading equities or derivatives. There are other solutions to your concerns - namely required training explaining risks, an approval process, and not allowing derivatives to be recommended by platforms. Outright bans come from ulterior motives or incompetence. My stance is not what you have presented. If I had to briefly summarize my stance: let people make reasoned decisions for themselves, and provide safeguards to mitigate the most common accidents.
3np 5y ago
Notable that US legislation does not take this “America libertarian view”. Like how a huge class of investments are not legally accessible to anyone who’s not an “accredited investor”, with requirements such as 1M$ net worth.

MikeDelta 5y ago

The problem is not speculation or market risk, but leverage. Say you covert 1000 USD into BTC, and you can convert back without costs. If BTC goes up 100%, you should be able to get back 2000 USD. If BTC goes to 0, you get zero. Leverage is 1 as your return relates 1:1 to the return on BTC. Now let's look at leverage, say we take a leverage of 100 (not a crazy amount). This means that your return in USD goes 100x the return in BTC, so if BTC goes up 1% you earn 100% (and walk away with 2000 USD). It also means that if BTC goes down 1%, you lose everything. The other thing is that if you have insufficient margin, the venue close down your position by putting it on the market. If BTC has a short dip and quickly recovers, the venue will have closed down your position at the point where you lost your margin (all your money). This can be exactly the -1%, but depends on the market and the liquidity. If BTC will go up 10% but does so in a noisy way, you might be right but the venue could have closed down your position the moment BTC touched -1% during the random movements. Eveb worse, say that BTC drops 10% in a very rapid move because of some tough news and panic. The venue puts the orders to sell your position at the -1% mark but because of lack of liquidity these orders get filled at -10% and your loss becomes 10.000 USD. Even if BTC recovers quickly, you keep your loss because the position is closed. That is the problem. So, in a nutshell, with unleveraged investing you can lose everything, but with leveraged investing you can end up in serious debt.

csomar 5y ago
> Eveb worse, say that BTC drops 10% in a very rapid move because of some tough news and panic. The venue puts the orders to sell your position at the -1% mark but because of lack of liquidity these orders get filled at -10% and your loss becomes 10.000 USD. Even if BTC recovers quickly, you keep your loss because the position is closed. That is the problem. Losses in the Crypto world are limited to the amount of capital you put in a certain position. This has the side effect of (maybe) not collecting the full amount on the up-side. Pretty much all exchanges do this, since it's almost impossible to go after individuals when they go bankrupt. Now the popular derivatives frameworks have sizable insurance funds for such events; but clawbacks are a thing in the crypto world.

Symbiote 5y ago

Look at something like https://cashasap.co.uk/ https://cashasap.co.uk/ "WARNING: Late repayment can cause you serious money problems. For help, go to moneyadviceservice.org.uk" "Representative Example: £250 loan for 3 months at a fixed interest rate of 290% pa. Total amount payable is £321.51" Or at https://www.ig.com/uk/spread-betting https://www.ig.com/uk/spread-betting "71% of retail investor accounts lose money when trading spread bets and CFDs with this provider." Or even https://www.vanguardinvestor.co.uk/investing-explained/investment-account-types https://www.vanguardinvestor.co.uk/investing-explained/inves... "Please remember that the value of investments can go down as well as up and you may get back less than you invest." It's the opinion of British society that citizens _do_ need to be protected in this way.

celticninja 5y ago
> It's the opinion of British society that citizens _do_ need to be protected in this way. I would replace 'protected' with 'warned'. You can still do it but as long as you have been informed correctly beforehand then you are taking a risk with the knowledge it could go tits up.