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That is a much worse risk than basically any other investment! If you buy gold, the price will fluctuate, but it won't be lost. If you bought the Dow at the pe

That is a much worse risk than basically any other investment! If you buy gold, the price will fluctuate, but it won't be lost. If you bought the Dow at the peak in 1929 and held it all the way to the bottom then you lost 89% of your money, but it didn't actually go to zero. When Ponzi schemes evaporate, the money disappears. You can sign on to whatever class action lawsuit comes out of it, but the lawyers are going to eat most of the proceeds. It's more options trading than "investing", and Robinhood's profits demonstrate that most people lose money on options. Blockfi's yields remind me of money market funds in 2008. They looked like bank accounts, and paid out mostly sane yields, but the fine print said "not a bank account, may evaporate". Well, when it threatened to evaporate, everyone freaked out: https://www.investopedia.com/articles/economics/09/money-market-reserve-fund-meltdown.asp https://www.investopedia.com/articles/economics/09/money-mar... When the NFT staking people are advertising yields of 132%, https://twitter.com/Route2FI/status/1492940519965605890 https://twitter.com/Route2FI/status/1492940519965605890 that's a huge blinking red sign that says SCAM SCAM SCAM, but 9.25% isn't as big of a warning as it should be. The moral hazard of every market bubble is sophisticated actors chasing yield on the way up, then claiming you were swindled, bamboozled, and had no idea what you were getting into, and urgently need a bailout when the bubble pops.

thebean11 5y ago
It's unlikely that every single borrower would default just like it's unlikely every stock in an index fund would go to zero. I wouldn't really compare it to options trading, junk bonds are a much better comparison. Lower potential return but also much less likely you would lose money than with options. Obviously the devil is in the details, it's not clear if/how these loans are secured.
- CPLX 5y ago
  There’s no reason at all to think that a complete and total default is unlikely. It’s far from certain but it’s certainly plausible that the value of nearly all cryptocurrency’s will collapse to nothing at all.
  - Animats 5y ago
    The more likely failure mode is that you've lent to something that's leveraged. That can go to zero on a partial drop of the underlying asset. Which is what happened in 2008.

thebean11 5y ago

It's unlikely that every single borrower would default just like it's unlikely every stock in an index fund would go to zero. I wouldn't really compare it to options trading, junk bonds are a much better comparison. Lower potential return but also much less likely you would lose money than with options. Obviously the devil is in the details, it's not clear if/how these loans are secured.

CPLX 5y ago
There’s no reason at all to think that a complete and total default is unlikely. It’s far from certain but it’s certainly plausible that the value of nearly all cryptocurrency’s will collapse to nothing at all.
- Animats 5y ago
  The more likely failure mode is that you've lent to something that's leveraged. That can go to zero on a partial drop of the underlying asset. Which is what happened in 2008.