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Bitcoin could trigger financial meltdown, warns Bank of England

44 points by headmelted 5y ago

roenxi 5y ago
The activities of most central banks could trigger a financial meltdown. Financial meltdowns are a regular thing, there is one happening with Evergrande right now. Focus on the positives. Bitcoin is actually a really interesting way of effecting an international wealth transfer that is totally independent of governments.
- Applejinx 5y ago
  To whom?
  - mam3 5y ago
    your family in another country
  - nikanj 5y ago
    To ransomware gangs and drug manufacturers
llcoolv 5y ago
It is not a meltdown, but merely a shift to a better foundation. From their perspective it looks like a meltdown, though.
Havoc 5y ago
Way more concerned about the Fiat economy melting down all on its own frankly
smileysteve 5y ago
> “The bulk of these assets have no intrinsic value and are vulnerable to major price corrections. This is published the same week that the US created a paltry extension to pay its obligations; of which 1 of 2 parties had 0 votes in the house for -- and that party makes up 50% of the Senate.
sharemywin 5y ago
Everyone knows crypto isn't triple A rated like subprime mortgages were. Anyone that's holding anything but a small portion of their wealth in crypto is playing with financial ruin.
- dnautics 5y ago
  That's not how you get into financial ruin. You get into financial ruin by leveraging onto a speculative position (borrowing money to buy an asset that goes upside down). I suspect most retail cryptocurrency buyers are not doing this yet.
  - otoburb 5y ago
    It also seems strange that people would be worrying about a highly leveraged speculative frenzy while simultaneously acknowledging that the underlying asset is highly volatile. The irony is that almost monotonically increasing prices of other assets lull investors into a false sense of security that encourages ever larger leveraged positions, resulting in increased risk exposure. But volatilility, especially for digital assets (sic), usually flushes out and resets build-ups of highly leveraged positions in both directions.
    - gunshai 5y ago
      It's my overall hypothesis that deleveraging events in crypto should happen more frequently and be less catastrophic systemically. The tether question not with standing, but I believe even if an event such as tether blowing up wouldn't be the end of crypto it would just birth a new thing over night to take its place.
  - ur-whale 5y ago
    The real question is where do they borrow the money from? If lenders were doing their due diligence properly (as in: I'm going to lend you a 100 grand, but you had better explain what you're going to do with it and how I'm going to get it back plus some interests), then I see zero problem with people borrowing to buy risky assets such as crypto. If lenders are to dumb or lazy to do their work, I see this as a win for the ecosystem when they get liquidate by a crypto crash: they'll probably be a little more careful next time they lend money or altogether go do something else. In other words: the problem is not with borrowing to bet on crypto, but with the facts that it's all too easy for financial institutions to lend other (unsuspecting) people's money to huge credit risk borrowers (just like in 2008).
SkipperCat 5y ago
IMHO, the risk is how crypto is purchased. If purchased via debt, there is a lot of risk if it crashed. If its owned outright, the risk is much less. The housing crash of 2008 was a drunken debt binge. Housing by its nature is funded by debt and that is why we saw such a massive impact when it cratered. I 'think' that most crypto is being purchased by people who have idle cash on hand. They don't want to invest in debt because the return is absurdly low. They don't want to invest in stocks because the US Fed has poured so much money into the system that stock prices are nuts. Thus, crypto seems like a good deal. Add to that the confidence that you can always spot the top and get out before the crash and voila, you have the crypto surge.
- senectus1 5y ago
  good lord I hope this isn't happening. I mean, aside from the Tether time bomb.
  - a2tech 5y ago
    Copying a comment I made a few days ago that applies to this thread as well: I was just discussing Bitcoin 'investing' with a client last week and one of his engineers overheard us and told us a friend of his (another fresh Lebanese immigrant) maxes out his credit cards on the first of the month buying bitcoin, then sells it on the last day of the month and pays off the credit card and pockets the difference. I just...had no response to that. It seemed so obviously dangerous and irresponsible that I couldn't believe a grown adult would do that. AND THEN he told me about another friend who does the same thing--but with the tuition/living money his family scrapes together and sends him from Lebanon. To me, that was not only stupid, it was a staggering betrayal in trust. Imagine your entire family scrimping and scraping to get money together to send you to college in the US and then you just casually betting it on Bitcoin.
    - senectus1 5y ago
      I mean yeah your points I agree with. horrifying. but the problem i think (hope) is only a small one. isolated people doing silly things. At least its not hiding behind the might of massive banks and being sold as prime stock.
sschueller 5y ago
If bitcoin can cause a financial meltdown at a 1T market cap then what about Apple at 2.3T or Microsoft at 2.2T? Facebook is at 915B and is not doing to so well lately either. I would think these companies would need to be split up as it would be too big of a risk that a "financial meltdown" could occur...
- throw1234651234 5y ago
  Short and yet the most informative post here.
- deleted 5y ago
  [deleted]
- tootie 5y ago
  There's a huge difference in that the apple and MS produce an enormous amount of value and gain mountains of revenue by producing goods and services. Apple's market share could wane the same way as IBM but it won't crash. The value of Bitcoin is 100% notional. It's all demand driven by FOMO. No one needs it. We could lose interest really quickly the way we did with Friendster and it would be dead really quickly.
  - ur-whale 5y ago
    > It's all demand driven by FOMO. No one needs it. That would squarely fall in the "that's my opinion, unbacked as it is" bucket. There are people who actually need BTC. Ask wikileaks, for example.
- NikolaNovak 5y ago
  I see your point; all stocks are to certain (or large:) degree ephemeral. But at the same time, I like the quote: “Reality is that which, when you stop believing in it, doesn't go away.” Apple's stock may crash; but there'll still be 10's of thousands of people selling 100's of millions of iPhones. They'll keep doing it, as I don't see interest in iPhones being cut off in a day (slow or fast decline, maybe). Heck, even Blackberry as a company is still around somewhere. Bitcoin is ALL market sentiment / vaporware / belief. (A comparison to Fiat money may be more apt, though would take me out of discussion - I simply haven't the foggiest deep understanding of "what if currency X crashes / how likely is it / what is it backed by REALLY if anything" )
fernowens 5y ago
There's a lot of other industries that have a bigger market cap than Bitcoin. It doesn't make sense as Bitcoin has been one of the best assets to invest in the last ten years. This might be one of their ways to spread FUD about cryptocurrency.
- SideburnsOfDoom 5y ago
  > There's a lot of other industries that have a bigger market cap than Bitcoin. Sure, and those industries make things.
  - gmadsen 5y ago
    im pretty sure high frequency trading only siphons money from industries that make things
xiphias2 5y ago
People with power in the IMF doesn’t like Bitcoin competing with the fiat monetary system so much, as they want to force countries to tax Bitcoin higher. There are some countries (like Germany, Portugal, Malta and Cyprus) where there’s no capital gains tax for selling BTC, and people are moving there (Adam Back moved to Malta for example, but he’s not the only one).
ilaksh 5y ago
Misleading headline as usual. Borrowing a bunch of money to gamble on Bitcoin, just like borrowing to gamble on anything else, can lead to a meltdown. The reality is that the financial world operates on about the same level as a sportsbook or racetrack. Except for some insane reason we treat the traders and hedge fund managers like priests instead of bookies and addicts. One thing that people will figure out eventually is that cryptocurrency at least makes it hard to hide all of the borrowing and side bets. Edit: thought about it for a minute, sportsbooks and racetracks are much more honest than the global financial system.
theknocker 5y ago
I'm tired of hearing about econ 101 ludic cartoon universe from people who know better.
wtfrmyinitials 5y ago
Cars could trigger destruction of cities, warns top horse-drawn carriage maker
- maxwell 5y ago
  Automobiles did trigger the destruction of most cities.
  - navane 5y ago
    Whereas before cars, big cities were drowning in horse shit. https://www.uu.nl/en/research/urban-futures-studio/initiatives/mixed-classroom-techniques-of-futuring/mobility-museum-2050/the-great-manure-crisis https://www.uu.nl/en/research/urban-futures-studio/initiativ...
    - maxwell 5y ago
      Manure is a valuable commodity. That was a logistics problem. Now we're all suffocating in CO2 instead.
  - wtfrmyinitials 5y ago
    That’s why the comparison is apt. “Cars are were bad for cities” isn’t a remotely hot take, and yet nobody claims that the invention of the car was a net-negative for the world.
    - maxwell 5y ago
      I claim that automobiles have been a net-negative for the world. You'd argue the rollout of automobiles has been a net-positive? By which metric(s)?
- seoaeu 5y ago
  Anyone who disagrees with me is a Luddite, says cryptocurrency peddler
nivenkos 5y ago
So ban all bank transactions with the fiat exchanges then. This is where I really respect China, they actually act. When they have a housing problem, they build more housing. When they have an energy problem, they build hydroelectric dams and nuclear power plants. When they have an electricity demand problem, they ban cryptocurrencies. It seems the West has just lost the ability to carry out effective action and invest in infrastructure.
- deleted 5y ago
  [deleted]
- ChemSpider 5y ago
  I guess you have never been to China? China is #1 on coal plants (and still building more) and home to the upcoming biggest housing bubble in the world.
- deleted 5y ago
  [deleted]
- mythrwy 5y ago
  Have a problem with a corporate leader or journalist, he just comes up missing. Very effective!
- jeanvaljean2463 5y ago
  The west could carry out effective action and invest in infrastructure, but our serious unacknowledged issues with corruption prevent effective execution. It's less blatant than in other countries because we have a veneer of the rule of law, but there is still incredible corruption. The real issues hit hyperspeed when the "Citizens' United vs FEC" ruling was made since it codified a lot of the corrupt practices by equating cash to speech, incentivizing a lot of the current grift in politics.
  - ur-whale 5y ago
    >but our serious unacknowledged issues with corruption prevent effective execution. That, I agree with wholeheartedly. We suffer from a "we don't have that kind of problem here, thank god" complex that's the size of Mt everest.
naraga 5y ago
No bullshit fear mongering HN comments on Bitcoin (yet)? What happened?
g354g43b43 5y ago
There are a lot of powder kegs in the financial system that can cause a financial meltdown, so why are they highlighting this one specifically?
- smileysteve 5y ago
  Seriously, we're only days away from the US threatening to default on its debt - and they're worried about cryptocurrencies being "Worthless" the next day.
BenoitEssiambre 5y ago
The article draws parallels with the sub-prime mortgage market but it's potentially much worse than that with crypto. It's more like the gold tied currency market of the 1930s. Bitcoin acts as digital gold and sometimes as a currency (See https://benoitessiambre.com/specter.html https://benoitessiambre.com/specter.html). Apparently the labor market is starting to be affected: https://twitter.com/mattyglesias/status/1448610691854839815 https://twitter.com/mattyglesias/status/1448610691854839815 I'm surprised that Stripe is jumping on the crypto bandwagon as this is one of the biggest risk to their mission of "growing GDP".
- Shadonototra 5y ago
  "jumping"? are you sure? they already jumped, and they failed miserably and they quit https://stripe.com/blog/ending-bitcoin-support https://stripe.com/blog/ending-bitcoin-support that is why multinationals have so much power, because "people" have short memory and are easy to manipulate
ur-whale 5y ago
>Cunliffe said there was evidence that speculators were beginning to borrow money to buy crypto assets That is not a new phenomenon, and all that matters is how much money is actually borrowed to onramp into crypto. What also matters is who does that borrowing to buy crypto and if they have the shoulders to weather a 10x price down event, something which is a real possibility with crypto. Finally, I'll note that the person crying wolf in this article is among those who stand to lose a huge chunk of their influence and power should crypto really take off in the sense of being used by the average joe to store value away from the grabby hands of governments.
mensetmanusman 5y ago
Maybe I’m not creative enough, but how can gambling on the value of a digital hash trigger a financial meltdown. It seems to me that gambling would be just as risky. Are there orders of magnitude more people involved in bitcoin than gambling?
- nthot 5y ago
  Here's a few ways I could think of: 1. It's much more difficult to gamble with debt/debt is not used for gambling to such an extent that the scale would have enough of an effect. 2. From an economy's perspective gambling is net zero. What is catastrophic to an individual is a benefit for the person(casino) on the other side of the bet. Whereas the loss of value from bitcoin would reduce the total balance sheet for the economy. 3. I think that Bitcoin as assets can be used as collateral for other purchases or to be loaned out for others to use. This creates a chain of wealth based on the value of a bitcoin. Break the foundation of this chain (reduce the price of bitcoin by 75%) and that entire chain of wealth creation is broken. 4. The revenue from gambling is around $40 billion per year in the United States, whereas the market value of Bitcoin is over $1 trillion. It's really not apples to apples at all though, since it's market value vs. revenue. I'm not sure a good way to compare the gambling market vs. the crypto market.
McDyver 5y ago
We've tried the banks' way since forever, and we have meltdowns every couple of years, with more money being poured to "save" the banks. Maybe it's time we try a different approach and just let cryptocurrencies be adopted, to see how it goes
Shadonototra 5y ago
i wish i bought a bunch when it was $300 i kept listening to random people, mistake!
mrkramer 5y ago
But commercial banks are not investing billions of dollars in high risk crypto assets so I don't see how crypto hype can cause financial meltdown except small number of big private investors losing a lot of money in crypto because they got nothing better to invest in other than overblown and hyped crypto coins, tokens and DeFi platforms(Andreessen Horowitz comes to mind). Speaking of retail investors they are not the problem because your average crypto investor doesn't care about losing couple of thousands of dollars investing in some pump and dump crypto stuff .

44 points by headmelted 5y ago

The activities of most central banks could trigger a financial meltdown. Financial meltdowns are a regular thing, there is one happening with Evergrande right now. Focus on the positives. Bitcoin is actually a really interesting way of effecting an international wealth transfer that is totally independent of governments.

Applejinx 5y ago
To whom?
- mam3 5y ago
  your family in another country
- nikanj 5y ago
  To ransomware gangs and drug manufacturers

llcoolv 5y ago

It is not a meltdown, but merely a shift to a better foundation. From their perspective it looks like a meltdown, though.

Havoc 5y ago

Way more concerned about the Fiat economy melting down all on its own frankly

smileysteve 5y ago

> “The bulk of these assets have no intrinsic value and are vulnerable to major price corrections. This is published the same week that the US created a paltry extension to pay its obligations; of which 1 of 2 parties had 0 votes in the house for -- and that party makes up 50% of the Senate.

sharemywin 5y ago

Everyone knows crypto isn't triple A rated like subprime mortgages were. Anyone that's holding anything but a small portion of their wealth in crypto is playing with financial ruin.

dnautics 5y ago
That's not how you get into financial ruin. You get into financial ruin by leveraging onto a speculative position (borrowing money to buy an asset that goes upside down). I suspect most retail cryptocurrency buyers are not doing this yet.
- otoburb 5y ago
  It also seems strange that people would be worrying about a highly leveraged speculative frenzy while simultaneously acknowledging that the underlying asset is highly volatile. The irony is that almost monotonically increasing prices of other assets lull investors into a false sense of security that encourages ever larger leveraged positions, resulting in increased risk exposure. But volatilility, especially for digital assets (sic), usually flushes out and resets build-ups of highly leveraged positions in both directions.
  - gunshai 5y ago
    It's my overall hypothesis that deleveraging events in crypto should happen more frequently and be less catastrophic systemically. The tether question not with standing, but I believe even if an event such as tether blowing up wouldn't be the end of crypto it would just birth a new thing over night to take its place.
- ur-whale 5y ago
  The real question is where do they borrow the money from? If lenders were doing their due diligence properly (as in: I'm going to lend you a 100 grand, but you had better explain what you're going to do with it and how I'm going to get it back plus some interests), then I see zero problem with people borrowing to buy risky assets such as crypto. If lenders are to dumb or lazy to do their work, I see this as a win for the ecosystem when they get liquidate by a crypto crash: they'll probably be a little more careful next time they lend money or altogether go do something else. In other words: the problem is not with borrowing to bet on crypto, but with the facts that it's all too easy for financial institutions to lend other (unsuspecting) people's money to huge credit risk borrowers (just like in 2008).

SkipperCat 5y ago

IMHO, the risk is how crypto is purchased. If purchased via debt, there is a lot of risk if it crashed. If its owned outright, the risk is much less. The housing crash of 2008 was a drunken debt binge. Housing by its nature is funded by debt and that is why we saw such a massive impact when it cratered. I 'think' that most crypto is being purchased by people who have idle cash on hand. They don't want to invest in debt because the return is absurdly low. They don't want to invest in stocks because the US Fed has poured so much money into the system that stock prices are nuts. Thus, crypto seems like a good deal. Add to that the confidence that you can always spot the top and get out before the crash and voila, you have the crypto surge.

senectus1 5y ago
good lord I hope this isn't happening. I mean, aside from the Tether time bomb.
- a2tech 5y ago
  Copying a comment I made a few days ago that applies to this thread as well: I was just discussing Bitcoin 'investing' with a client last week and one of his engineers overheard us and told us a friend of his (another fresh Lebanese immigrant) maxes out his credit cards on the first of the month buying bitcoin, then sells it on the last day of the month and pays off the credit card and pockets the difference. I just...had no response to that. It seemed so obviously dangerous and irresponsible that I couldn't believe a grown adult would do that. AND THEN he told me about another friend who does the same thing--but with the tuition/living money his family scrapes together and sends him from Lebanon. To me, that was not only stupid, it was a staggering betrayal in trust. Imagine your entire family scrimping and scraping to get money together to send you to college in the US and then you just casually betting it on Bitcoin.
  - senectus1 5y ago
    I mean yeah your points I agree with. horrifying. but the problem i think (hope) is only a small one. isolated people doing silly things. At least its not hiding behind the might of massive banks and being sold as prime stock.

sschueller 5y ago

If bitcoin can cause a financial meltdown at a 1T market cap then what about Apple at 2.3T or Microsoft at 2.2T? Facebook is at 915B and is not doing to so well lately either. I would think these companies would need to be split up as it would be too big of a risk that a "financial meltdown" could occur...

throw1234651234 5y ago
Short and yet the most informative post here.
deleted 5y ago
[deleted]
tootie 5y ago
There's a huge difference in that the apple and MS produce an enormous amount of value and gain mountains of revenue by producing goods and services. Apple's market share could wane the same way as IBM but it won't crash. The value of Bitcoin is 100% notional. It's all demand driven by FOMO. No one needs it. We could lose interest really quickly the way we did with Friendster and it would be dead really quickly.
- ur-whale 5y ago
  > It's all demand driven by FOMO. No one needs it. That would squarely fall in the "that's my opinion, unbacked as it is" bucket. There are people who actually need BTC. Ask wikileaks, for example.
NikolaNovak 5y ago
I see your point; all stocks are to certain (or large:) degree ephemeral. But at the same time, I like the quote: “Reality is that which, when you stop believing in it, doesn't go away.” Apple's stock may crash; but there'll still be 10's of thousands of people selling 100's of millions of iPhones. They'll keep doing it, as I don't see interest in iPhones being cut off in a day (slow or fast decline, maybe). Heck, even Blackberry as a company is still around somewhere. Bitcoin is ALL market sentiment / vaporware / belief. (A comparison to Fiat money may be more apt, though would take me out of discussion - I simply haven't the foggiest deep understanding of "what if currency X crashes / how likely is it / what is it backed by REALLY if anything" )

fernowens 5y ago

There's a lot of other industries that have a bigger market cap than Bitcoin. It doesn't make sense as Bitcoin has been one of the best assets to invest in the last ten years. This might be one of their ways to spread FUD about cryptocurrency.

SideburnsOfDoom 5y ago
> There's a lot of other industries that have a bigger market cap than Bitcoin. Sure, and those industries make things.
- gmadsen 5y ago
  im pretty sure high frequency trading only siphons money from industries that make things

xiphias2 5y ago

People with power in the IMF doesn’t like Bitcoin competing with the fiat monetary system so much, as they want to force countries to tax Bitcoin higher. There are some countries (like Germany, Portugal, Malta and Cyprus) where there’s no capital gains tax for selling BTC, and people are moving there (Adam Back moved to Malta for example, but he’s not the only one).

ilaksh 5y ago

Misleading headline as usual. Borrowing a bunch of money to gamble on Bitcoin, just like borrowing to gamble on anything else, can lead to a meltdown. The reality is that the financial world operates on about the same level as a sportsbook or racetrack. Except for some insane reason we treat the traders and hedge fund managers like priests instead of bookies and addicts. One thing that people will figure out eventually is that cryptocurrency at least makes it hard to hide all of the borrowing and side bets. Edit: thought about it for a minute, sportsbooks and racetracks are much more honest than the global financial system.

theknocker 5y ago

I'm tired of hearing about econ 101 ludic cartoon universe from people who know better.

wtfrmyinitials 5y ago

Cars could trigger destruction of cities, warns top horse-drawn carriage maker

maxwell 5y ago
Automobiles did trigger the destruction of most cities.
- navane 5y ago
  Whereas before cars, big cities were drowning in horse shit. https://www.uu.nl/en/research/urban-futures-studio/initiatives/mixed-classroom-techniques-of-futuring/mobility-museum-2050/the-great-manure-crisis https://www.uu.nl/en/research/urban-futures-studio/initiativ...
  - maxwell 5y ago
    Manure is a valuable commodity. That was a logistics problem. Now we're all suffocating in CO2 instead.
- wtfrmyinitials 5y ago
  That’s why the comparison is apt. “Cars are were bad for cities” isn’t a remotely hot take, and yet nobody claims that the invention of the car was a net-negative for the world.
  - maxwell 5y ago
    I claim that automobiles have been a net-negative for the world. You'd argue the rollout of automobiles has been a net-positive? By which metric(s)?
seoaeu 5y ago
Anyone who disagrees with me is a Luddite, says cryptocurrency peddler

nivenkos 5y ago

So ban all bank transactions with the fiat exchanges then. This is where I really respect China, they actually act. When they have a housing problem, they build more housing. When they have an energy problem, they build hydroelectric dams and nuclear power plants. When they have an electricity demand problem, they ban cryptocurrencies. It seems the West has just lost the ability to carry out effective action and invest in infrastructure.

deleted 5y ago
[deleted]
ChemSpider 5y ago
I guess you have never been to China? China is #1 on coal plants (and still building more) and home to the upcoming biggest housing bubble in the world.
deleted 5y ago
[deleted]
mythrwy 5y ago
Have a problem with a corporate leader or journalist, he just comes up missing. Very effective!
jeanvaljean2463 5y ago
The west could carry out effective action and invest in infrastructure, but our serious unacknowledged issues with corruption prevent effective execution. It's less blatant than in other countries because we have a veneer of the rule of law, but there is still incredible corruption. The real issues hit hyperspeed when the "Citizens' United vs FEC" ruling was made since it codified a lot of the corrupt practices by equating cash to speech, incentivizing a lot of the current grift in politics.
- ur-whale 5y ago
  >but our serious unacknowledged issues with corruption prevent effective execution. That, I agree with wholeheartedly. We suffer from a "we don't have that kind of problem here, thank god" complex that's the size of Mt everest.

naraga 5y ago

No bullshit fear mongering HN comments on Bitcoin (yet)? What happened?

g354g43b43 5y ago

There are a lot of powder kegs in the financial system that can cause a financial meltdown, so why are they highlighting this one specifically?

smileysteve 5y ago
Seriously, we're only days away from the US threatening to default on its debt - and they're worried about cryptocurrencies being "Worthless" the next day.

BenoitEssiambre 5y ago

The article draws parallels with the sub-prime mortgage market but it's potentially much worse than that with crypto. It's more like the gold tied currency market of the 1930s. Bitcoin acts as digital gold and sometimes as a currency (See https://benoitessiambre.com/specter.html https://benoitessiambre.com/specter.html). Apparently the labor market is starting to be affected: https://twitter.com/mattyglesias/status/1448610691854839815 https://twitter.com/mattyglesias/status/1448610691854839815 I'm surprised that Stripe is jumping on the crypto bandwagon as this is one of the biggest risk to their mission of "growing GDP".

Shadonototra 5y ago
"jumping"? are you sure? they already jumped, and they failed miserably and they quit https://stripe.com/blog/ending-bitcoin-support https://stripe.com/blog/ending-bitcoin-support that is why multinationals have so much power, because "people" have short memory and are easy to manipulate

ur-whale 5y ago

>Cunliffe said there was evidence that speculators were beginning to borrow money to buy crypto assets That is not a new phenomenon, and all that matters is how much money is actually borrowed to onramp into crypto. What also matters is who does that borrowing to buy crypto and if they have the shoulders to weather a 10x price down event, something which is a real possibility with crypto. Finally, I'll note that the person crying wolf in this article is among those who stand to lose a huge chunk of their influence and power should crypto really take off in the sense of being used by the average joe to store value away from the grabby hands of governments.

mensetmanusman 5y ago

Maybe I’m not creative enough, but how can gambling on the value of a digital hash trigger a financial meltdown. It seems to me that gambling would be just as risky. Are there orders of magnitude more people involved in bitcoin than gambling?

nthot 5y ago
Here's a few ways I could think of: 1. It's much more difficult to gamble with debt/debt is not used for gambling to such an extent that the scale would have enough of an effect. 2. From an economy's perspective gambling is net zero. What is catastrophic to an individual is a benefit for the person(casino) on the other side of the bet. Whereas the loss of value from bitcoin would reduce the total balance sheet for the economy. 3. I think that Bitcoin as assets can be used as collateral for other purchases or to be loaned out for others to use. This creates a chain of wealth based on the value of a bitcoin. Break the foundation of this chain (reduce the price of bitcoin by 75%) and that entire chain of wealth creation is broken. 4. The revenue from gambling is around $40 billion per year in the United States, whereas the market value of Bitcoin is over $1 trillion. It's really not apples to apples at all though, since it's market value vs. revenue. I'm not sure a good way to compare the gambling market vs. the crypto market.

McDyver 5y ago

We've tried the banks' way since forever, and we have meltdowns every couple of years, with more money being poured to "save" the banks. Maybe it's time we try a different approach and just let cryptocurrencies be adopted, to see how it goes

Shadonototra 5y ago

i wish i bought a bunch when it was $300 i kept listening to random people, mistake!

mrkramer 5y ago

But commercial banks are not investing billions of dollars in high risk crypto assets so I don't see how crypto hype can cause financial meltdown except small number of big private investors losing a lot of money in crypto because they got nothing better to invest in other than overblown and hyped crypto coins, tokens and DeFi platforms(Andreessen Horowitz comes to mind). Speaking of retail investors they are not the problem because your average crypto investor doesn't care about losing couple of thousands of dollars investing in some pump and dump crypto stuff .