After the bitcoin boom: hard lessons for cryptocurrency investors

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#1
After the bitcoin boom: hard lessons for cryptocurrency investors

Nathaniel Popper and Su-Hyun Lee
August 21, 2018
The New York Times

SAN FRANCISCO — Pete Roberts of Nottingham, England, was one of the many risk-takers who threw their savings into cryptocurrencies when prices were going through the roof last winter.

Now, eight months later, the $23,000 he invested in several digital tokens is worth about $4,000, and he is clearheaded about what happened.

"I got too caught up in the fear of missing out and trying to make a quick buck," he said this week. "The losses have pretty much left me financially ruined."

Mr. Roberts, 28, has a lot of company. After the latest round of big price drops, many cryptocurrencies have given back all of the enormous gains they experienced last winter. The value of all outstanding digital tokens has fallen by about $600 billion, or 75 percent, since the peak in January, according to data from the website coinmarketcap.com.

The virtual currency markets have been through booms and busts before — and recovered to boom again. But this bust could have a more lasting impact on the technology's adoption because of the sheer number of ordinary people who invested in digital tokens over the last year, and who are likely to associate cryptocurrencies with financial ruin for a very long time.

"What the average Joe hears is how friends lost fortunes," said Alex Kruger, a former banker who has been trading in the cryptocurrency markets for some time. "Irrational exuberance leads to financial overhang and slows progress."

It is hard to know how many cryptocurrency investors are now in the red, with holdings worth less than the money they put in. Many who have lost money in recent months had gotten into the markets before the big run-up last year, and their holdings are still worth more than their initial investments.

But by many metrics, more people put money into virtual currencies last fall and winter than in all of the preceding nine or so years. Coinbase, the largest cryptocurrency brokerage in the United States, doubled its number of customers between October 2017 and March 2018. The start-up Square began allowing the users of its mobile app, Square Cash, to buy Bitcoin last November.

Almost all of the new customers on Coinbase and Square would be in the red if they bought cryptocurrencies at almost any point over the last nine months and held on to them.

The damage is likely to be particularly bad in places like South Korea and Japan, where there was minimal cryptocurrency activity before last year, and where ordinary investors with little expertise jumped in with abandon.

In South Korea, the biggest exchanges opened physical storefronts to make it easier to invest for people who didn't feel comfortable doing it online. The offices of one big exchange, Coinone, had just one customer walk in during a two-hour period in the middle of the day last week. An employee, Yu Ji-Hoon, said "the prices of the digital tokens have fallen so much that people seem to feel upset."

Kim Hyon-jeong, a 45-year-old teacher and mother of one who lives on the outskirts of Seoul, said she put about 100 million won, or $90,000, into cryptocurrencies last fall. She drew on savings, an insurance policy and a $25,000 loan. Her investments are now down about 90 percent.

"I thought that cryptocurrencies would be the one and only breakthrough for ordinary hard-working people like us," she said. "I thought my family and I could escape hardship and live more comfortably but it turned out to be the other way around."

In the United States, Charles Herman, a 29-year-old small business owner in Charleston, S.C., became obsessed with virtual currencies last September. He said he now felt like he had wasted 10 months of his life trying to play the markets.

While he is essentially back to the $4,000 he put in, he has soured on the revolutionary promises that virtual currency fanatics made for the technology last year and has resumed investing his money in real estate.

"I guess I thought we were 'sticking it to the man' when I got on board," Mr. Herman said. "But I think 'the man' had already caught on, and had an exit strategy."

More details in https://www.cnbc.com/2018/08/20/after-th...stors.html
Specuvestor: Asset - Business - Structure.
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#2
Using the history of 2000s TMT bubble, the crypto survivors will be the next Sina.com, Amazon, etc.

Like the fibre networks left behind, maybe the mining rigs may reconfigured for some massive AI projects.
"... but quitting while you're ahead is not the same as quitting." - Quote from the movie American Gangster
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#3
Indeed, the crypto infrastructure (regulations, software, hardware, developer base, investments, use case, investor interests etc.) has indeed grown materially, and if investors where invested before the exponential increase, they would still be up a lot (Ethereum was ~$10 in early 2017; BTC was ~$1000).

That said, I'm still not clear about the intrinsic value of each coins. The applications they provide must indeed be of great value and completely irreplaceable by a substitute to justify today's price.
“If you buy a business just because it’s undervalued, then you have to worry about selling it when it reaches its intrinsic value. That’s hard. But if you can buy a few great companies, then you can sit on your ass. That’s a good thing.” - Charlie Munger
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#4
(22-08-2018, 11:35 AM)Wildreamz Wrote: That said, I'm still not clear about the intrinsic value of each coins.
I see it this way
Bitcoin and Ethereum have the same intrinsic value of cash, zero.
If you want, their value, just like the value of cash, is the confidence of their users.
However, you must differentiate, there are cryptos backed just by confidence and cryptos backed by goods.
Cryptos which represent a title of ownership on a certain quantity of goods have the same instrinsic value of that goods.
The current cryptohype is due only to the latent lack of confidence in the managers of what we call money, the central banks.
On the long run BTC & Co. will get absorbed by those cryptos which represent a title of ownership on some goods.
Just my opinion
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#5
(13-10-2018, 06:02 PM)Luke Wrote:
(22-08-2018, 11:35 AM)Wildreamz Wrote: That said, I'm still not clear about the intrinsic value of each coins.
I see it this way
Bitcoin and Ethereum have the same intrinsic value of cash, zero.
If you want, their value, just like the value of cash, is the confidence of their users.
However, you must differentiate, there are cryptos backed just by confidence and cryptos backed by goods.
Cryptos which represent a title of ownership on a certain quantity of goods have the same instrinsic value of that goods.
The current cryptohype is due only to the latent lack of confidence in the managers of what we call money, the central banks.
On the long run BTC & Co. will get absorbed by those cryptos which represent a title of ownership on some goods.
Just my opinion

By then, we can't call it Crypto isn't it ?

Just my Diary
corylogics.blogspot.com/


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#6
(14-10-2018, 03:44 PM)corydorus Wrote:
(13-10-2018, 06:02 PM)Luke Wrote:
(22-08-2018, 11:35 AM)Wildreamz Wrote: That said, I'm still not clear about the intrinsic value of each coins.
I see it this way
Bitcoin and Ethereum have the same intrinsic value of cash, zero.
If you want, their value, just like the value of cash, is the confidence of their users.
However, you must differentiate, there are cryptos backed just by confidence and cryptos backed by goods.
Cryptos which represent a title of ownership on a certain quantity of goods have the same instrinsic value of that goods.
The current cryptohype is due only to the latent lack of confidence in the managers of what we call money, the central banks.
On the long run BTC & Co. will get absorbed by those cryptos which represent a title of ownership on some goods.
Just my opinion

By then, we can't call it Crypto isn't it ?

It's a matter of definition.
Today we call instinctively crypto everything which run on blockchain.
There is a new company, kinesis, their coins will represent title of ownership on precious metals.
Their CEO wrote somewhere ""By definition, Kinesis is not a cryptocurrency. It is a precious metal title of ownership on the blockchain".
I agree that we shouldn't call things like kinesis cryptos.
Probably one day someone will come out with a new word for these real-goods-backed-blockchain-currencies.
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#7
really funny man, these crypto spruikers are now really getting desperate. If a crytocurrency is to be backed by precious metals, its just going back to the old days of government issue a bank note and backed by gold in the vault. And if its just a title of ownership, there are already companies that can buy gold for you and keep it in their vaults for a fee and register u on their client list and how much you own.

The whole point of cyrpto is to create a decentralised currency not controlled by any one government or entity. Cryptohype is just because its a new thing for speculation and also fantastic tool for money laundering as it was not regulated as much in the past.

Big tech companies love to promote crypto as well. Why? Crypto is a decentralised database system that requires redundancy on all nodeS! (for e.g. everyone using bitcoin will need to have a copy of the whole list of ownership and transaction data on their computer!! That's a whopping 185 gigabytes on every PC. This is a boon for hardware/processor/server manufacturers! Add on hardware intensive mining to provide the computing power for processing the transactions = even more hardware needed!! Wow chip manufacturers/PCB board manufacturers/etc.. profits++++
Virtual currencies are worth virtually nothing.
http://thebluefund.blogspot.com
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#8
The difference, with Blockchain, when implemented properly, is that no one government or entity can shut it down, or take it away from you by force or other illegal means. And trade will not be bounded by borders or regulation. You can send gold (or other asset) to your friend anywhere in the world as easy as email, in theory. 

http://www.undp.org/content/undp/en/home...India.html
Quote:Take for example what happened in Haiti, after the devastating earthquake back in 2010.  While many countries and organisations did their best to help rebuild the nation, a major obstacle kept cropping up… there were thousands of plots of land where the rightful owner could not be identified, and in many instances ownerships were in dispute.

These issues have had a big impact on recovery efforts, to this day. Construction projects have stalled, while government and contractors wait for ownership issues to be resolved. Business and homes that are desperately needed to help the citizens of Haiti get back on their feet are not being built. The current land registry system is rife with corruption and inefficiencies, and it is the unprotected citizens of Haiti that are suffering the most.

In dozens of cities across the developing world, land registries suffer from similar problems. Many citizens simply don’t have confidence in the system. Some are unsure if they legally own a piece of land, even if they have a legitimate sale deed. Others who want to buy a piece of land are not sure if the seller legally owns it. In a situation like Haiti, where the disaster destroyed paper records, this would be avoided with blockchain.
“If you buy a business just because it’s undervalued, then you have to worry about selling it when it reaches its intrinsic value. That’s hard. But if you can buy a few great companies, then you can sit on your ass. That’s a good thing.” - Charlie Munger
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#9
Quote:The difference, with Blockchain, when implemented properly, is that no one government or entity can shut it down, or take it away from you by force or other illegal means. And trade will not be bounded by borders or regulation. You can send gold (or other asset) to your friend anywhere in the world as easy as email, in theory.

Not necessary so. The weakest link is still the human.
All transactions can be proper but yet, it is still illegally transferred due to frauds.

And the most depressing of all is that, till date, there is no way to get it back once you lost it.
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#10
(15-10-2018, 06:51 AM)yeokiwi Wrote:
Quote:The difference, with Blockchain, when implemented properly, is that no one government or entity can shut it down, or take it away from you by force or other illegal means. And trade will not be bounded by borders or regulation. You can send gold (or other asset) to your friend anywhere in the world as easy as email, in theory.

Not necessary so. The weakest link is still the human.
All transactions can be proper but yet, it is still illegally transferred due to frauds.

And the most depressing of all is that, till date, there is no way to get it back once you lost it.

You are exactly right. This is the point of it, transactions are set in stone. Although depending of the protocol, it may still be possible to trace where the money went or even reverse it (but that would be missing the point).

This is one of the biggest barrier to mass adoption (cyber-security, including low tech fraud and scams). Today Bitcoin whales (those that owns lots of bitcoins) go to extreme means to secure their digital assets.

Probably another 10-20 years until humans figure out how to scale this up sensibly.
“If you buy a business just because it’s undervalued, then you have to worry about selling it when it reaches its intrinsic value. That’s hard. But if you can buy a few great companies, then you can sit on your ass. That’s a good thing.” - Charlie Munger
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