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“Once crypto banks obtain deposits from investors, these firms borrow, lend, and trade with themselves. They do not interact with firms connected to the real ec

“Once crypto banks obtain deposits from investors, these firms borrow, lend, and trade with themselves. They do not interact with firms connected to the real economy.” That's the reality. The only reason prices went up is because the "whales" build up this domino bonanza sucking in real people's money in the process. Since no sane person would invest in crypto in the short to medium term, I don't see how the industry will recover from that. Personally, I believe the only way is to "earn" for doing stuff on the internet. Yet, the experience is that earning in a highly volatile currency is not the incentive many people think it is.

mupuff1234 4y ago
Most of the population isn't really that sane (see lottery ticket sales)
- plandis 4y ago
  I’ll admit that I bought a lottery ticket for the first time ever when the US Powerball was over $1B. I don’t think people entirely buy lottery tickets expecting to win and doing the rational thing of calculating expectation values and taking calculated risks after weighing opportunity costs. They just want to daydream and paying a few dollars for a ticket makes that more exciting.
  - mupuff1234 4y ago
    Which is quite similar to "investing" in crypto I think. It's basically being marketed as a get rich quick scheme to most retail.
    - medellin 4y ago
      Maybe as a “get rich” scheme but I haven’t seen it marketed as a get rich quick scheme anymore than options trading is. * options have legit uses but almost no one is retail is using them for things like capping risk.
    - lokedhs 4y ago
      The difference is in your reaction to loss. If people spend a few dollars on the lottery, most people are not going to be upset when they lose. Of course, they're are always people who spend everything they have on gambling, but most people agree that a lottery is something you expect to lose. When people invest, they don't expect to lose. Of course course, there is always the risk of losing, but the difference between a lottery and an investment is that there is an expectation of loss in the former case.
    - MisterBastahrd 4y ago
      No, because there's no real expectation to win when you buy a lottery ticket. There were enough cryptocurrencies that got pumped enough that people who bought into crypto felt that they had a good chance at succeeding. Also, there's been an insane amount of delusional fanboyism surrounding crypto that would be seen as completely insane if we're talking about gambling.
    - rchaud 4y ago
      But getting rich still requires risking a lot of one's capital on some exchange that could go under any second, buying a coin that could get rugpulled any second. A lottery ticket costs no more than a few dollars. Even if you buy a bunch of tickets to improve your odds, that's still a few hundred dollars tops.
  - chillwaves 4y ago
    Everyone who buys a ticket believes they have a chance of winning, though in reality they do not. What I mean is to say, it is a more honest/accurate statement that "you have zero chance of winning when you buy a lottery ticket" is more true than claiming they have a chance, (even if it is literally true) due to how our mind biases work.
    - jstanley 4y ago
      But you have non-zero chance of winning the lottery. How can it be "honest/accurate" to say you have zero chance?
    - plandis 4y ago
      The chance of winning is very small but it’s certainly not zero.
  - bruce511 4y ago
    I'm not sure why you are bring down voted. Your point is valid, people buy tickets for reasons other than "I expect to win". We buy raffle tickets, not because we expect to win, but because we support the cause. Gambling can be entertainment. If I spend all night in a casino, end up $50 down, but had a fun night, how is that different to a ballgame, or show, or whatever. [1] In the same way people buy lottery tickets not because they _expect_ to win, but because its entertaining to _think about winning_, and the ticket is the price of admission. [2] [1] clearly there's a difference between losing entertainment money, and rent money. And gambling is not a good hobby for most people. [2] actually _winning_ the lottery has massive relationship downsides, which one can clearly ignore while daydreaming. Losing all your friends, an almost inevitable consequence, seems like a bad thing...
- jsemrau 4y ago
  That's the point, I guess. Stock markets would be efficient if players were rational. But we humans are not. We trade for all kinds of reasons and at the weirdest times.
- bee_rider 4y ago
  I wouldn’t characterize lottery tickets as insane, necessarily. If the ticket is a small enough amount of money that it won’t make a qualitative difference in your life, and the reward might… I dunno, I have trouble criticizing that decision. The expected value might be negative, but if it doesn’t produce a quality of life change, why care? Spending enough money on lottery tickets to produce a quality of life change would, on the other hand, be a bad idea.
cercatrova 4y ago
> Since no sane person would invest in crypto in the short to medium term, I don't see how the industry will recover from that. There are always marks to go around.
roenxi 4y ago
I do think that in this case the most important factor is that the crypto market is small and isolated when compared to the rest of the economy. And most of the serious investors are all thinking it looks like a scam so approaching cautiously. However we would also be remiss not to observe that the reason a collapse in something like the stock market is so painful is because central banks and governments manoeuvre to artificially flush the system with huge amounts of credit. That means that a crash takes out not only current earnings, but forces a big re-evaluation of what is possible in the future too as huge amounts of leverage start to unwind. Then the cavalry arrives to bail everyone out and preserve value-destructive systems. The central banks aren't going to ride in to save the crypto markets, so people are going to be more cautious about levering up. We expect the falls to be sharper, more decisive and over more quickly with less lingering pain.

mupuff1234 4y ago

Most of the population isn't really that sane (see lottery ticket sales)

plandis 4y ago
I’ll admit that I bought a lottery ticket for the first time ever when the US Powerball was over $1B. I don’t think people entirely buy lottery tickets expecting to win and doing the rational thing of calculating expectation values and taking calculated risks after weighing opportunity costs. They just want to daydream and paying a few dollars for a ticket makes that more exciting.
- mupuff1234 4y ago
  Which is quite similar to "investing" in crypto I think. It's basically being marketed as a get rich quick scheme to most retail.
  - medellin 4y ago
    Maybe as a “get rich” scheme but I haven’t seen it marketed as a get rich quick scheme anymore than options trading is. * options have legit uses but almost no one is retail is using them for things like capping risk.
  - lokedhs 4y ago
    The difference is in your reaction to loss. If people spend a few dollars on the lottery, most people are not going to be upset when they lose. Of course, they're are always people who spend everything they have on gambling, but most people agree that a lottery is something you expect to lose. When people invest, they don't expect to lose. Of course course, there is always the risk of losing, but the difference between a lottery and an investment is that there is an expectation of loss in the former case.
  - MisterBastahrd 4y ago
    No, because there's no real expectation to win when you buy a lottery ticket. There were enough cryptocurrencies that got pumped enough that people who bought into crypto felt that they had a good chance at succeeding. Also, there's been an insane amount of delusional fanboyism surrounding crypto that would be seen as completely insane if we're talking about gambling.
  - rchaud 4y ago
    But getting rich still requires risking a lot of one's capital on some exchange that could go under any second, buying a coin that could get rugpulled any second. A lottery ticket costs no more than a few dollars. Even if you buy a bunch of tickets to improve your odds, that's still a few hundred dollars tops.
- chillwaves 4y ago
  Everyone who buys a ticket believes they have a chance of winning, though in reality they do not. What I mean is to say, it is a more honest/accurate statement that "you have zero chance of winning when you buy a lottery ticket" is more true than claiming they have a chance, (even if it is literally true) due to how our mind biases work.
  - jstanley 4y ago
    But you have non-zero chance of winning the lottery. How can it be "honest/accurate" to say you have zero chance?
  - plandis 4y ago
    The chance of winning is very small but it’s certainly not zero.
- bruce511 4y ago
  I'm not sure why you are bring down voted. Your point is valid, people buy tickets for reasons other than "I expect to win". We buy raffle tickets, not because we expect to win, but because we support the cause. Gambling can be entertainment. If I spend all night in a casino, end up $50 down, but had a fun night, how is that different to a ballgame, or show, or whatever. [1] In the same way people buy lottery tickets not because they _expect_ to win, but because its entertaining to _think about winning_, and the ticket is the price of admission. [2] [1] clearly there's a difference between losing entertainment money, and rent money. And gambling is not a good hobby for most people. [2] actually _winning_ the lottery has massive relationship downsides, which one can clearly ignore while daydreaming. Losing all your friends, an almost inevitable consequence, seems like a bad thing...
jsemrau 4y ago
That's the point, I guess. Stock markets would be efficient if players were rational. But we humans are not. We trade for all kinds of reasons and at the weirdest times.
bee_rider 4y ago
I wouldn’t characterize lottery tickets as insane, necessarily. If the ticket is a small enough amount of money that it won’t make a qualitative difference in your life, and the reward might… I dunno, I have trouble criticizing that decision. The expected value might be negative, but if it doesn’t produce a quality of life change, why care? Spending enough money on lottery tickets to produce a quality of life change would, on the other hand, be a bad idea.

cercatrova 4y ago

> Since no sane person would invest in crypto in the short to medium term, I don't see how the industry will recover from that. There are always marks to go around.

roenxi 4y ago

I do think that in this case the most important factor is that the crypto market is small and isolated when compared to the rest of the economy. And most of the serious investors are all thinking it looks like a scam so approaching cautiously. However we would also be remiss not to observe that the reason a collapse in something like the stock market is so painful is because central banks and governments manoeuvre to artificially flush the system with huge amounts of credit. That means that a crash takes out not only current earnings, but forces a big re-evaluation of what is possible in the future too as huge amounts of leverage start to unwind. Then the cavalry arrives to bail everyone out and preserve value-destructive systems. The central banks aren't going to ride in to save the crypto markets, so people are going to be more cautious about levering up. We expect the falls to be sharper, more decisive and over more quickly with less lingering pain.