Australian (ASX) Stock Market Forum

Is cryptocurrency the greatest market bubble of all time?

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The Triangle said:
It's an idea, but what is the purpose of this? You send in your 10 oz of physical gold and end up with a gold-crypro-token-key-number that says you have 10 oz of gold - which presumably you can use in to buy a cup of coffee with some app, then buy a 1-week cruise to Alaska, or pay your electricity bills. or maybe do nothing and sit on the cryptogold.
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What's the purpose? thats a good question.

More broadly - Why are there currently 13,235 different crypto tokens with a market cap of 869 Billion USD?

Why do some people collect physical silver? My neighbour has 8 cats - Why? Some people go on holiday to North Korea - why?
Elon paid 44 billion for Twitter - thats nuts - why do that?, why build rockets and plan to go to Mars - its irrational, its all irrational.
 
Trader X said:
cointelegraph.com

What is a gold-backed token and how does it work?

Gold-backed tokens are getting increasingly popular as a more accessible alternative to investing in physical gold.
cointelegraph.com cointelegraph.com
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That didn’t actually answer my question.

Which was how would the frictional costs of the system described by so cynical be paid.

Also, I guess I can add to that how is the long term viability of these gold back coins you linked maintained, because surely if they are backed by gold that gold requires a certain fixed monthly cost to store.

It’s a genuine question I have, eg how does their business model cover the cost of providing the coins and storing the gold?
 
So_Cynical said:
What's the purpose? thats a good question.

More broadly - Why are there currently 13,235 different crypto tokens with a market cap of 869 Billion USD?

Why do some people collect physical silver? My neighbour has 8 cats - Why? Some people go on holiday to North Korea - why?
Elon paid 44 billion for Twitter - thats nuts - why do that?, why build rockets and plan to go to Mars - its irrational, its all irrational.
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The 13,235 different cryptos exist because people are speculating on them trying to get rich quick, but of course this doesn’t imply that any of them have any real long term value.

Silver is a real commodity with a real use, so had some value even if you took the speculators away.

Pets and holidays have real world positives outcomes.

Twitter has a chance of being a real business producing real cashflow and paying dividends.

What do the crypto’s do for their holders outside of hoping a bigger idiot comes along to pay more?
 
Value Collector said:
That didn’t actually answer my question.

Which was how would the frictional costs of the system described by so cynical be paid.

Also, I guess I can add to that how is the long term viability of these gold back coins you linked maintained, because surely if they are backed by gold that gold requires a certain fixed monthly cost to store.

It’s a genuine question I have, eg how does their business model cover the cost of providing the coins and storing the gold?
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The presumption must be that any frictional and storage costs would be assessed proportionally to the stable coin holder in some manner. I am unaware of the specifics of how this would be done. I will be more interested in such details once a gold-backed stable coin project gains momentum, recognition and broad acceptance as sound digital money and a real store of value.
 
Trader X said:
I will be more interested in such details once a gold-backed stable coin project gains momentum, recognition and broad acceptance as sound digital money and a real store of value.
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I think I would prefer one of the many other stores of value that also produce income, rather than being a net cost to me.

I can see the small benefit of having a "store of value" as insurance against calamity that exists mainly digitally that I can log in and access any where in the world, but as soon as you tie this "store of value" to a lump of gold sitting in a location some where, we lose part of its insurance value in that it can be lost to governments, theft or corruption in times of war etc when we would need it the most.

I kinda feel like chasing a digital store of value is a bit like chasing a dream of designing a perpetual motion machine, it's just not going to work. As soon as you try and build in gold backing etc to legitimise it you begin to lose the parts of the digital currency dream that were attractive in the first place.

As I have said before digital currencies will work, but they will be fiat style ones backed by reserve banks and designed to be actual currencies, not these speculative things.
 
Value Collector said:
I think I would prefer one of the many other stores of value that also produce income, rather than being a net cost to me.
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Gold ownership either requires self-custody (free, but not risk free) or a trusted custodian for a fee. Real digital gold requires a trusted custodial model. A store of value implies retention of purchasing power relative to debased fiat and low volatility. Returning to a gold standard today would likely necessitate a blockchain based solution.

Value Collector said:
as soon as you tie this "store of value" to a lump of gold sitting in a location some where, we lose part of its insurance value in that it can be lost to governments, theft or corruption in times of war etc when we would need it the most.
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This is true of any asset not in self-custody. Even then, anything you own can be confiscated or rendered useless/valueless by governments whether in your direct possession or not.

Value Collector said:
As I have said before digital currencies will work, but they will be fiat style ones backed by reserve banks and designed to be actual currencies, not these speculative things.
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Agree that CBDC will dominate. A gold backed CBDC, essentially returning to a gold standard, would be ideal but seems unlikely. If, as some have suggested, a "great financial reset" event occurs and ushers in a new gold standard, I would expect that to be implemented via blockchain.
 
Trader X said:
1. Gold ownership either requires self-custody (free, but not risk free) or a trusted custodian for a fee. Real digital gold requires a trusted custodial model. A store of value implies retention of purchasing power relative to debased fiat and low volatility. Returning to a gold standard today would likely necessitate a blockchain based solution.


2. This is true of any asset not in self-custody. Even then, anything you own can be confiscated or rendered useless/valueless by governments whether in your direct possession or not.


3. Agree that CBDC will dominate. A gold backed CBDC, essentially returning to a gold standard, would be ideal but seems unlikely. If, as some have suggested, a "great financial reset" event occurs and ushers in a new gold standard, I would expect that to be implemented via blockchain.
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1. Yep I have an understanding of what a store of value is, As I said I prefer stores of value that also generate income, for example quality pieces of industrial real estate, on long 30 year leases.

2. Yep, as I said even digital currency can't take away risk with out the currency itself being worthless

3. gold backing a currency that you actually want to use as a national currency is a terrible idea, you need to be able to expand and contract the currency as the economy grows, and you don't want it open to speculation and cornering. You also want a little bit of inflation to avoid deflation and encourage people to make real investments rather than just hoarding currency.
 
Value Collector said:
The 13,235 different cryptos exist because people are speculating on them trying to get rich quick, but of course this doesn’t imply that any of them have any real long term value.

Silver is a real commodity with a real use, so had some value even if you took the speculators away.

Pets and holidays have real world positives outcomes.

Twitter has a chance of being a real business producing real cashflow and paying dividends.

What do the crypto’s do for their holders outside of hoping a bigger idiot comes along to pay more?
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Mail on the head.

And there are plenty of idiots to throw their money at something worth nothing.
 

HashFlare's Sergei Potapenko and Ivan Turogin charged over four-year cryptocurrency pyramid scheme​

From the article:
Police in Estonia have arrested two men accused of a $US575 million ($870 million) cryptocurrency fraud, United States authorities confirm.
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An indictment that was unsealed in the US District Court in Seattle contains charges against Estonian citizens Sergei Potapenko and Ivan Turogin, both aged 37, with wire fraud and conspiracy to commit money laundering.

Four other people living in Estonia, Belarus and Switzerland were also charged, but their identities have not been released.

Prosecutors said that, from 2015 to 2019, the suspects tricked hundreds of thousands of people into buying contracts for a cryptocurrency mining service called HashFlare and investing in a virtual currency bank called Polybius Bank.

In reality, the businesses operated as pyramid schemes, prosecutors said.

The men are accused of using shell companies to launder the fraud proceeds and to purchase real estate and luxury cars.

According to the US Justice Department, the men are in custody in Estonia pending extradition to the US.
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basilio said:
...

My question would be how this collapse will impact on the mainstream financial systems ?

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Good evening basilio,
People that got burnt over this mess will be hurting for some time and there will be a follow-on effect. Ultimately the steam roller will keep moving forward. Anything in its way, well...

Kind regards
rcw1
 
On the wider investment front there is some heavy recalculation of value and risk as interest rates rise.
This analysis from Satyajit Das explores that issue.

www.abc.net.au

'Populist anger' drove the crypto craze and bust, but Satyajit Das says there's a bigger threat hiding in plain sight

One of the few financiers who sounded a warning bell before the global financial crisis believes today's cryptocurrency "meltdown" was predictable, and that "nobody is taking much notice" of a broader financial market problem.
www.abc.net.au www.abc.net.au
 
This analysis looks at FTX's collapse against the history of similar swindles.

The ad that Larry David did for FTX ? Priceless..

www.reuters.com

Breakingviews - FTX flop evokes history’s great financial swindles

Sam Bankman-Fried claims to be more interested in gaming than literature. Not long ago the founder of FTX, the failed cryptocurrency exchange, declared: “I don’t want to say no book is ever worth reading, but I actually do believe something pretty close to that. I think, if you wrote a book, you...
www.reuters.com www.reuters.com

 
From the company that was called National Cash Register and now called NCR Corporation. Crypto/stable coins are more than likely here to stay.

Embracing Crypto:

What’s the current global outlook for crypto?​


There has been a surge of interest in cryptocurrency from consumers to businesses to regulators over the last several years. Much of this stems from increasing communications and clarity from regulators, which in turn gives businesses the comfort to launch their crypto products in their respective markets. In the US, both the Securities and Exchange Commission and the Commodity Futures Trading Commission have put out new guidance and enforcement actions. The Senate has held numerous hearings on crypto regulation. While there is no global licensing system for cryptocurrency, there is a continued pattern of positive or no regulation for most countries. Additionally, countries like El Salvador have even adopted bitcoin to be legal tender alongside the US Dollar.

How has the crypto market evolved in recent years?​




There has been a surge in emerging use cases outside of the main “store of value” value proposition. Cryptocurrencies like Ethereum and stablecoins like USD Coin or USD Tether continue to see strong adoption. Ethereum has provided a springboard for Decentralized Finance (DeFi) applications that allow for consumers to become direct participants in activities previously limited to banks and other third parties (e.g. lending, payment processing, etc.) and partaking in the higher risk/reward that comes with that. Stablecoins, for instance, allow individuals and businesses to make direct payments and move funds across borders instantly 24/7 outside traditional bank hours and holidays without a third party.

What does this mean for financial institutions?​




This presents both a risk and an opportunity for financial institutions (FIs). Consumers have indicated their desire for new and innovative solutions to generate returns in today’s macroeconomic environment. Inflation is high and consumers are increasingly looking to seek out products and services that can help generate outsized returns accordingly. If traditional FIs do not offer this, consumers are moving their funds to brokers and service providers that do. One top 20 bank has seen outflows of hundreds of millions of dollars to cryptocurrency exchanges last year alone.
That said, FIs are trusted providers and consumers have indicated many would prefer their FIs add these additional services like the ability to buy/sell bitcoin instead of figuring out how to manage all that on their own. By adding crypto capabilities to their offerings, FIs can satisfy customer demand, add fast growing innovative products while sharing in the fee revenue opportunity.

What are the key considerations for FIs in building their crypto strategy – and where are most on this journey?​




FIs first need to decide where cryptocurrency is on the demand spectrum and what services their customers are interested in to determine the correct prioritization. This can be done actively by talking to customers, commissioning surveys and passively by analyzing bank outflows.
FIs then need to decide how much and what areas of the crypto business activity they want to perform themselves - partner vs. build and buy/sell/hold vs. DeFi lending/staking, etc. As cryptocurrency is still new for most FIs and not their main offering, many will prefer to partner with reputable and established cryptocurrency providers and lean on their regulatory, licensing, and reporting programs instead of building the same from scratch.
The FIs may want to engage with their respective regulators depending on how they are chartered and provide notice of their intended offering.
For most FIs, it is only a matter of when as it relates to crypto offerings. Consumers across all geographies and demographics want access to the rapidly growing cryptocurrency ecosystem. It is clear that cryptocurrency is not going away, so the decision is more if an FI prefers to be a leader or is content with being a follower in the space.

Where do we see the future of crypto?​

Thirteen years since the invention of Bitcoin, it is clear that cryptocurrencies are here to stay. While there will always be cryptocurrency specific companies, most companies will incorporate crypto into their business in one way or another, often behind the scenes. From offering seamless ways to obtain exposure to the latest tokens through to cheaper, faster payments and managing global treasuries and foreign currency exchange, cryptocurrencies can offer a better way for individuals and businesses to transact leading to higher customer satisfaction and retention.
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...and this:
Origins of Stablecoins. Stability instead of volatility
Stablecoins are one of the largest use cases for blockchain technology. Stablecoins are a class of cryptocurrencies that attempt to offer price stability by being backed by selected collateral or managed by an automated set of rules known as algorithm. There are four types of stablecoins:
1. Fiat stablecoins: collateralized by fiat currency(s) held in a bank account
2. Commodity stablecoins: collateralized by commodity(s), such as gold or oil
3. Cryptocurrency stablecoins: collateralized by one or more cryptocurrencies
4. Non-collateralized stablecoins: an algorithm based off supply and demand principles to maintain stable prices at all times
So, what are the origins of stablecoins? Back when the cryptocurrency industry first started, traders looking to purchase cryptocurrencies would use bank transfers to move fiat currencies between their bank accounts and cryptocurrency exchanges. This transfer process took several business days to complete, thus decreasing opportunities to trade in the markets. This friction led to the creation of Stablecoins. The first stablecoin was created in July 2014 by Bitshares called BitUSD with the goal of providing an easy and fast on/off ramp within cryptocurrency exchanges for trading. BitUSD was later collateralized by cryptocurrencies, thus causing the price to fluctuate which led to losing its parity to $USD in 2018. There have been several stablecoins created since BitUSD, with the largest stablecoins by market cap (as of October 2022) being Tether, USD Coin, Binance USD, and DAI. The increase in number of stablecoin projects has led to dramatic growth in total stablecoin market capitalization from $5.6 billion in January 2020 to $181.76 billion in April 2022. However, this drastic growth has come with a few major setbacks for the market.
The downfall of Terra
Let's take a look at Terra. Terra is a protocol that uses a swap algorithm to peg stablecoins to three fiat currencies. Before the downfall in May 2022, Terra used the cryptocurrency Luna as collateral for each of the Terra stablecoins. Luna’s market capitalization dropped from $18.6 billion on May 9th 2022 to less than $1 billion by May 19th 2022. This drop was caused by an individual selling $285 million worth of Terra’s stablecoins called Terra USD (also known as UST), which led to triggering UST to lose its US Dollar parity. UST then continued decreasing in value, causing Terra to sell the protocol’s bitcoin holdings to preserve Luna’s price. The overall cryptocurrency market ramifications of this event are drastic with several large holders of UST losing their money, billions of dollars’ worth of bitcoin being sold off on the open market (which was then amplified by other macroeconomic market conditions), and over leveraged cryptocurrency positions.
The Terra example not only fuels fear in the market but its also become a poster child for individuals to create misinformed statements that stablecoins are risky. However, much of this misconception stems from the shock of the volume of loss, and only pertains to one of 200+ stablecoins. Several of these other stablecoin issuers, such as USDC, are pegged 1:1 with the US Dollar and undergo treasury audits from external accounting firms. Not only are audited fiat stablecoins less risky than other stablecoins, they also have several global benefits:
1. Fiat stablecoins allow individuals around the world to have access to several currencies such as the Euro and Dollar. This is crucial for the millions of people under high inflation and/or currency collapse pressures.
2. Fiat stablecoins allow two parties to send cross-border transactions for a fraction of current costs using the traditional correspondent banking system. The remittance process is explained on this blog post.
3. Stablecoins offer the opportunity for users to receive higher APY in a stablecoin yield account than a traditional savings account. The United States national APY average for a savings account is 0.16% (October 2022). Stablecoin yield varies per exchange ranging from 0.15% APY to 7% APY for USDC.
Global Regulation
Regulators around the world are actively creating governing frameworks to account for stablecoins. Senator Cynthia Lummis, also known as ‘Crypto Queen’, from Wyoming has led the regulatory conversations for cryptocurrencies in the United States. Senators Lummis, Toomey, Portman, Warner and Sinema proposed an amendment to the Infrastructure Bill in August 2021 to encompass digital asset regulatory clarity.
Legislation efforts are also underway in the European Union. The EU agreed on the Markets in Crypto-Assets (MiCA) regulation at the end of June. Although the final text is still to be published, MiCA may require stablecoin issuers to build up capital and liquidity reserves and should establish a cap of 200 million euros in transactions per day. The push for increased stablecoin oversight by governments has received mixed opinions, but at the heart of the debate, regulatory clarity will provide guiderails for innovation within the industry.
Where do we go from here?
The future of fiat stablecoins is very promising due to their uses cases of no-barrier access to global currencies, high yield savings accounts, and remittance technology with low fees. These world-changing use cases along with increased global regulatory clarity will drive continued innovation in the stablecoin market. We predict the stablecoin market will continue growing in the coming years and look forward to integrating the technology.
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Kathy Wood of ARKK fund is sticking by her prediction of $1000000 Bitcoin by 2030.

This does not fill me with confidence.
 


Lotta videos out there on the whole FTX collapse. But this is a good interview from CNBC of Terry Duffy who is the guy that is in charge of the CME - which is actually a legitimate exchange. He was one of the very few who months and months ago called out Sam-Bankman Freid but no one listened to him. There are also clips of this guy testifying before congress and effectively being ridiculed by Silicon Valley politicians. He takes a lot of shots at swamp in this interview.

I'd move back to the US and vote for this go to be president any day. He has effectively accused (at least asked the question) congress and Washington regulators of being paid off by SBF.
 
Almudda, FTX, FTT
All about the cult in clean easy bites, no jargon, from a savvy young Australian. I still don't get it, don't care nither.

 
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