News BITCOIN, Heists, Thefts, Hacks, Scams, and Losses

[Melbourne Guy]

But, how can a currency be so volatile?

If you're intending your invention to be the global currency, you're not considering that it's going to be converted to fiat currency (or anything else for that matter), so volatility isn't an issue.

 

[Melbourne Guy]

People always say to invest 1% of your assets into BTC. If it turns out to be awesome, you'll have a piece of the action, but if it goes to $0 or sucks, then you'll have lost at most 1%.

We're waaaay off topic, but I worked for a successful businessman and he always told me that a speculative investment needed to cause you pain if it failed for it to be beneficial if it succeeded. Given he's the guy driving the hypercar between his multiple expensive houses, there might be something in it

 

[russ_watters]

1/2 of a 1% of one's portfolio.

People always say to invest 1% of your assets into BTC. If it turns out to be awesome, you'll have a piece of the action, but if it goes to $0 or sucks, then you'll have lost at most 1%.

I guess I didn't even like the idea of 1%. That's why I asked about 1/2 a percent.

Of what portfolio? Your total net worth? All investments? Non retirement investments? Play money investments? People can't have been saying this for long, because crypto hasn't been around long.

Regardless, if we're talking about a tiny amount of money such that the risk of the asset itself doesn't matter, then where you keep it doesn't matter either, does it? Or even, if it goes to zero, that's probably going to be part of the reason anyway.

But what if I said one shouldn't store money in a bank/investment company that is less than 20 years old?

 

[russ_watters]

If you're intending your invention to be the global currency, you're not considering that it's going to be converted to fiat currency (or anything else for that matter), so volatility isn't an issue.

Are you talking about exchange rates? That's not what stability/volatility means, it's just a proxy. Bitcoin is volatile not because of the exchange rate but rather because last year you could buy 2 cars with one bitcoin and today you can only buy 2/3 of a car.

 

[BWV]

Bitcoin is not volatile, its price denominated in bitcoin has been exceedingly stable:

BTC cultists actually are spouting this a cope as all the other maxi arguments have collapsed -
new, more efficient currency - No
Inflation hedge - No
Environmental disaster - Yes

Oh well then at least 1BTC = 1BTC
https://finance.yahoo.com/news/one-bitcoin-equals-one-bitcoin-140000086.html

 

[Drakkith]

What if your computer has malware, though. And let's say you keep your BTC in a digital wallet (I'm guessing this is an app of some sort) on your desktop computer. And let's say the malware has some tracking of everything you type and that info. is retrieved by a hacker. With your digital wallet screen name/password (I'm assuming that's how it works), they proceed to log into your account.

AT THAT POINT, is there a way for them to steal your stuff?

I don't know the details of how digital wallets work when it comes to passwords and account names and all that. But I assume that if your digital wallet is compromised, then yes, your BTC could be stolen. One way to mitigate this is to use a device whose only purpose is to do your BTC and other cryptocurrency banking.

BTC doesn't seem to have this 'insurance," nor the investigative bodies interested enough in BTC theft to look into it, right?

No, which is one of the downsides to directly holding your own BTC instead of allowing a 3rd party to do so. Yes, some of the exchanges have been hacked and assets have been stolen, but in at least some of those cases the exchanges themselves have reimbursed people for their losses.

 

[kyphysics]

Of what portfolio? Your total net worth? People can't have been saying this for long, because crypto hasn't been around long.

Regardless, if we're talking about a tiny amount of money such that the risk of the asset itself doesn't matter, then where you keep it doesn't matter either, does it? Or even, if it goes to zero, that's probably going to be part of the reason anyway.

I've heard it said the past few years in the investing/finance community. Not sure if people have said it longer than 3-4 years. It's usually net worth. Some may say portfolio, but nw is more common, I think.

Of course 1% still matters. It's just that relative to the 99% it's not that big of a loss. . .but it still matters. Over the course of an investing career - 40 years - 1% can be the difference of $500,00 easily (that's the pitch people say to not use full-service brokerages and/or financial advisors, etc. who charge 1.5-2.5% on transactions/commissions/wealth under management, etc.) for the average median income investor.

I remember seeing the compounding math on a mere 1 or 2% difference on a portfolio over 35-40 years and it's pretty amazing. Anyhow, I'm not sure I'd put 1%...maybe 1/2 a percent.

 

[kyphysics]

No, which is one of the downsides to directly holding your own BTC instead of allowing a 3rd party to do so. Yes, some of the exchanges have been hacked and assets have been stolen, but in at least some of those cases the exchanges themselves have reimbursed people for their losses.

Did you mean traditional brokerages holding stocks when you said that or like an exchange for crypto. Sorry if this is a stupid reading comprehension failure on my part. I honestly wasn't sure. Thanks.

 

[Melbourne Guy]

Are you talking about exchange rates? That's not what stability/volatility means, it's just a proxy.

Is there a way to note sources such as the Cambridge Dictionary disagree with you in a way that's not seen as me being petty

 

[Drakkith]

Did you mean traditional brokerages holding stocks when you said that or like an exchange for crypto. Sorry if this is a stupid reading comprehension failure on my part. I honestly wasn't sure. Thanks.

An exchange, like Coinbase, Bybit, or Bitmart.

 

[kyphysics]

Oh well then at least 1BTC = 1BTC
https://finance.yahoo.com/news/one-bitcoin-equals-one-bitcoin-140000086.html

BTC was actually a better inflation hedge than gold this latest investing cycle.

It's up a little over 2x since February 2020 right before the pandemic and little over 3x off the March lows.

Gold's been flat (pretty much same price) and did next to nothing when inflation was raging. That's why many have said BTC has become a legit competitor to gold in that role. It's price cannot be manipulated by big bank spoofing (which many have admitted to and been caught for), even if it's much more volatile than gold.

Not saying it cannot go to $0 or has any intrinsic value at $20k...$60K...$500K, etc. But, it does have a big network effect and "enough believers" behind it to give reason to think maybe this is just another blip down on the way back up to $X in the next bull run.

Isn't there a saying that BTC has never lost anyone money who bought it and held for four years? If true, maybe this is just a temporary drop?

 

[russ_watters]

Is there a way to note sources such as the Cambridge Dictionary disagree with you in a way that's not seen as me being petty

When it's not informative to the subject of the discussion, no. And given the subject matter, it'd be best to be clear and not coy about this, because it sure sounds like you're saying what BVW was joking about in post #245...except that you're not joking. If that's really what you're saying...oy vey no.

 

[russ_watters]

Of course 1% still matters. It's just that relative to the 99% it's not that big of a loss. . .but it still matters. Over the course of an investing career - 40 years - 1% can be the difference of $500,00 easily (that's the pitch people say to not use full-service brokerages and/or financial advisors, etc. who charge 1.5-2.5% on transactions/commissions/wealth under management, etc.) for the average median income investor.

1% of your portfolio and 1% growth are very, very different things.

I guess my point here is that if you're young and economically stable and only have $100k saved for retirement, then throwing $1,000 into crypto, it isn't a big deal if it goes to zero. You could just put it in the most trustworthy exchange you are aware of and if that exchange gets hacked, well, then it probably was a losing lottery ticket anyway.

 

[BWV]

BTC was actually a better inflation hedge than gold this latest investing cycle.

It's up a little over 2x since February 2020 right before the pandemic and little over 3x off the March lows.

Gold's been flat (pretty much same price) and did next to nothing when inflation was raging. That's why many have said BTC has become a legit competitor to gold in that role. It's price cannot be manipulated by big bank spoofing (which many have admitted to and been caught for), even if it's much more volatile than gold.

Not saying it cannot go to $0 or has any intrinsic value at $20k...$60K...$500K, etc. But, it does have a big network effect and "enough believers" behind it to give reason to think maybe this is just another blip down on the way back up to $X in the next bull run.

Isn't there a saying that BTC has never lost anyone money who bought it and held for four years? If true, maybe this is just a temporary drop?

except that bitcoin's gains were in 2020 and 2021 before inflation began to be a problem

 

[russ_watters]

BTC was actually a better inflation hedge than gold this latest investing cycle.

What's an "investing cycle" and what was this last one?

But, it does have a big network effect and "enough believers" behind it to give reason to think maybe this is just another blip down on the way back up to $X in the next bull run.

How is that different from what Beanie Babies had?

Isn't there a saying that BTC has never lost anyone money who bought it and held for four years? If true, maybe this is just a temporary drop?

That's only happened 3 times. It's not much of a track record.

 

[fluidistic]

I don't have timw to write an elaborated answer, I just see a lot of things to clarify for kyphysics. Regarding the intrinsec value of bitcoin, you can think of it a bit like a wikipedia hosted on millions of people's ''servers'', where each entry is a bank account. You can only edit your own entries, to send money to other accounts. There's no known reasonably feasible way to hack the system by taking control of ''the server'', for there is no such thing (it would mean performing a 51 percent attack). If you don't see any value to such a system, then fine, you're like millions of other people (see r/buttcoin). If you think this has value, then fine, you're also like million of people.

Regarding your hacking question, I suggest you to read about hardware wallets. The hack you mention cannot occur on them, they are completely disconnected from the host pc, except to transfer a file (that you sign using your hardware device's buttons, this cannot be keylogged, but of course there are ways to get your seedphrase). No internet connected, and you should never, ever type your seedpbrase into your computer. The seedpbrase is a ljsf of 12 to 25 words, most if nkt all of them picked randomly from a well known list of like 5000 words. Then an algorithm translates your words (and their order matters) into the private key of your wallet on the blockchain.And.a.comment regarding that bitcoin was made to be anonymous or opaque, this is wrong. Nakamoto was well aware of privacy concerns, and he found no better than to suggest the use of a different wallet for every transaction (this did not aged well), he wasn't a privacy expert. Monero came up with better ideas in that aspect.

 

[kyphysics]

What's an "investing cycle" and what was this last one?

How is that different from what Beanie Babies had?

That's only happened 3 times. It's not much of a track record.

Expansion to recession is one cycle.

Agree on short life-cycle. It remains to be seen if BTC bull run and that pattern holds.

Beanie babies aren't practical to carry around as an alt currency. Maybe you could store them in a vault (like gold) and have units of them traded on stock exchanges. It doesn't have to be hugely different maybe. . .the point is that if enough people accept it as a currency/store of value (a la gold, U.S. dollars), the network is big enough, it can be decently portable to trade, etc. etc., then it can be an alt currency.

Might not be a great currency. . .maybe it's limited and only a minority of the global population uses it, but it can still be a medium of exchange and unit store of value. I wouldn't trust it over the U.S. dollar, gold, or even a future Federal Reserve digital currency (despite all the concerns about privacy and tracking), but I would still be willing to put a small sum of money into BTC.

Maybe 1/2 percent is too kind. . .. .I haven't decided yet. Definitely not more than 1%.

 

[kyphysics]

except that bitcoin's gains were in 2020 and 2021 before inflation began to be a problem

Nah. BTC went from 8K February 2020 to 60K in 2021. It definitely did it's job.

Gold, which has historically done well with negative real yields and heavy inflation was sadly flat.

That's why there was so much debate over this.

As for BTCs latest collapse, the argument from some is that it LEADS (not lags, nor coincidental) to asset price rises and drops. So, it's "early." Institutional investors are first to drop the speculative asset when rates rise, but also quick to pick it back up when interest rates drop. . .that's one argument. If true, asset prices will soon drop precipitously just like BTC has, but BTC will lead the way up on the rebound when the bull resumes.

In that sense, though, it's not really a currency. It's way too volatile. I'm seen the argument that BTC is a more volatile supped up version of the QQQ. Or, alt currency-wise, it's a super volatile version of silver, which in turn is a super volatile version of gold (in trading terms).

Charts/pattern-wise, this does play out well. Those correlations can end anytime of course.

 

[kyphysics]

As for why BTC (and gold) are not protecting against recent 8.3% August y/y inflation (.01 m/m), it's because of rising rates and expectations of disinflation or deflation with a very likely recession coming. It's leading.

Asset prices will fall.

Then, BTC will lead the way out once interest rates drop again and we're coming out of recession (and inflation expectations likely rise again).

 

[Melbourne Guy]

When it's not informative to the subject of the discussion, no. And given the subject matter, it'd be best to be clear and not coy about this, because it sure sounds like you're saying what BVW was joking about in post #245...except that you're not joking. If that's really what you're saying...oy vey no.

Was BVW joking? But thanks for the advice, I'll be clear: your call out was incorrect, most definitions of currency volatility reference exchange rates.

And yes, inflation is also a driver, but unless it's hyperinflation, we don't generally notice that as 'volatility' in our local fiat currencies. Also, for BTC specifically, those value charts are pegged to a fiat currency - usually USD - so it's 100% volatile against that measure, there is no other common reference point for a BTC having less purchasing power now than previously.

 

[fluidistic]

I think kyphysics's allusions to Bitcoin's cycles can be seen on the famous rainbow.chart of bitcoin.

It's a bit like internet adoption or tumor growth. The price of bitcoin rose roughly logarithmically in time, with some ups and downs but overall there was a trend. The ups where correlated in time (possibly with a lag, I forgot) with the halvings, i.e. a halving in btc rewards for each mined block. So some people believe that there is a 4 years cycle that cannot be broken, just because it happened a few times in a row. And.therefore.that the price of bitcoin is obliged to rise soon.

 

[russ_watters]

Was BVW joking?

Yes...or, rather, poking fun.

But thanks for the advice, I'll be clear: your call out was incorrect, most definitions of currency volatility reference exchange rates.

My call out was not incorrect. I agree with the last part, but that doesn't impact what we are discussing.

And yes, inflation is also a driver, but unless it's hyperinflation, we don't generally notice that as 'volatility' in our local fiat currencies.

True. So the question is whether bitcoin would settle down if adopted and be more stable like most fiat currencies, or not.

Also, for BTC specifically, those value charts are pegged to a fiat currency - usually USD - so it's 100% volatile against that measure, there is no other common reference point for a BTC having less purchasing power now than previously.

It's really hard to understand why you would say such a thing. It really sounds disingenuous. Again, we measure against other currencies for convenience. If that stops being useful we can make an artificial measuring stick such as the CPI. Nothing is stopping us from doing that now if we choose to and I did above. We can call my artificial yardstick the CAR. You can't possibly really believe that bitcoin's buying power is unchanged since last year. Per my measuring stick, it peaked at 2.0 CAR and has since dropped to 0.6 CAR.

You seem to be claiming that if all other currencies disappeared bitcoin would become stable by default due to lack of a basis for comparison, and that's just nonsense.

 

[BWV]

The maxi argument circa 2015 was along the lines of 'at some future point bitcoin will be worth $1,000,000 or whatever, at that point it will be widely adopted and somehow become a stable currency' (measured against the price of goods and services). How would a capitalist economy function under 100% bitcoin adoption? An economy cannot function if participants just want to hoard the medium of exchange because they believe it offers a higher return than investments in the real world. Will everyone who got rich on the ride up will realize this moment and gradually begin transacting with their hoard of BTC? The crypto bros become the new elite and the rest of us maybe can scrape by washing their Lambos. This argument is pure millennialism - the believers will be saved and the rest consigned to outer fiat darkness.

 

[fluidistic]

The maxi argument circa 2015 was along the lines of 'at some future point bitcoin will be worth $1,000,000 or whatever, at that point it will be widely adopted and somehow become a stable currency' (measured against the price of goods and services). How would a capitalist economy function under 100% bitcoin adoption? An economy cannot function if participants just want to hoard the medium of exchange because they believe it offers a higher return than investments in the real world. Will everyone who got rich on the ride up will realize this moment and gradually begin transacting with their hoard of BTC? The crypto bros become the new elite and the rest of us maybe can scrape by washing their Lambos. This argument is pure millennialism - the believers will be saved and the rest consigned to outer fiat darkness.

Have a look at this 2013 reddit post (and possibly comments). , and some of the comments, to find answers to your question.

See the comment

Given your estimates, even if all bitcoins were currently mined and available they would be worth:
step 5. $1,190 step 6. $19,047 step 7. $47,619 step 8. $238,095 - $952,380
If this is true then why would anyone in their right mind do anything but horde bitcoins. And at that point you have no commerce.

and the replies.

Bitcoin was worth about 117 USD at that point.

 

[BWV]

Have a look at this 2013 reddit post (and possibly comments). , and some of the comments, to find answers to your question.

See the comment

and the replies.

Bitcoin was worth about 117 USD at that point.

Yes, its the pie in the sky maxi argument. #7 was crossed last year (the market cap has since fallen below $1T), crime remains the only significant use case.

 

[Melbourne Guy]

You seem to be claiming that if all other currencies disappeared bitcoin would become stable by default due to lack of a basis for comparison, and that's just nonsense.

Nonsense how? To use BTC it has to be converted to some other currency, it's not intrinsically spendable otherwise. If it was intrinsically spendable - like a dollar in your pocket in your local fiat currency is - then it would not be seen as any more volatile than USD, AUD, GBP, etc.

And if it was the only currency, then of course it would be stable in the same way people in the United States, spending USD locally, consider their currency stable.

It's really hard to understand why you would say such a thing. It really sounds disingenuous. Again, we measure against other currencies for convenience. If that stops being useful we can make an artificial measuring stick such as the CPI. Nothing is stopping us from doing that now if we choose to and I did above. We can call my artificial yardstick the CAR. You can't possibly really believe that bitcoin's buying power is unchanged since last year. Per my measuring stick, it peaked at 2.0 CAR and has since dropped to 0.6 CAR.

Can you plot your CAR against time to show the cause and effect you're claiming? Because I think you are suggesting a CPI and BTC calculation that slashes BTC buying power by a HUGE amount in less than 12 months without any fiat currency conversion effect. Is that what you are saying?

 

[Office_Shredder]

Can you plot your CAR against time to show the cause and effect you're claiming? Because I think you are suggesting a CPI and BTC calculation that slashes BTC buying power by a HUGE amount in less than 12 months without any fiat currency conversion effect. Is that what you are saying?

Yes, the buying power of bitcoin changed by a huge amount when it dropped from 60k to 20k. I don't understand how this isn't wildly obvious.

The only other possibility mathematically is the buying power of a dollar increased dramatically, and that somewhat famously did not happen.

 

[Melbourne Guy]

Yes, the buying power of bitcoin changed by a huge amount when it dropped from 60k to 20k. I don't understand how this isn't wildly obvious.

It is obvious, but it requires currency exchange to effect the value comparison. Which demonstrates volatility, the definition of which was the trigger for this back and forth. I'm not arguing otherwise, and never did, volatility is relative and most often, the relativity is 'other currency' based.

 

[russ_watters]

Nonsense how?

Nonsense because that's obviously not how it works. This stuff is so self evident I'm having trouble imagining your thought process.

I don't need to know the exchange rate to know the Zimbabe dollar is wacked, I just need to know that it costs me a trillion dollars to buy a loaf of bread. Exchange rate is a convenient way to measure volatility, but it isn't what volatility is. Further, you keep saying unrelated/irrelevant things that you apparently think are connected:

To use BTC it has to be converted to some other currency, it's not intrinsically spendable otherwise. If it was intrinsically spendable - like a dollar in your pocket in your local fiat currency is - then it would not be seen as any more volatile than USD, AUD, GBP, etc.

There's no magical connection there. Being spendable doesn't make a currency stable. On the flip side, being not spendable anymore hasn't made gold particularly unstable. Market forces are what is doing the work. There isn't an inherent magical switch that gets flipped to make the currency stable when it gets adopted.

And if it was the only currency, then of course it would be stable in the same way people in the United States, spending USD locally, consider their currency stable.

Tell that to the residents of Zimbabwe. There's just no connection/no logic in what you are saying. It's not how it works.

Can you plot your CAR against time to show the cause and effect you're claiming?

What cause and effect? I've said nothing about cause and effect. But of course I could plot the CAR over time if I feel like it. Do I really need to? Do you really believe a BTC has the same buying power today that it did at its peak? What do you need me to prove here?

Because I think you are suggesting a CPI and BTC calculation that slashes BTC buying power by a HUGE amount in less than 12 months without any fiat currency conversion effect. Is that what you are saying?

Yup. That's how it works. Bitcoin is volatile. Period. It's not merely volatile with respect to the dollar. It's just volatile.

It's mind-blowing to me that you actually believe the joke.

 

[russ_watters]

Maybe we need to back up: who decides what a loaf of bread costs, and on what basis? Is there a law of the universe that says a loaf of bread always costs exactly one dollar, euro, franc and Peso, or is there something else going on?

Does a merchant selling a loaf of bread need to check the exchange rate vs another currency (which currency?) every morning before deciding what price to sell a loaf of bread for in their local currency?

Is the price of a stock an "exchange rate"?