Cryptocurrency investors should be prepared to lose all their money - Bank of England

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Cryptocurrency investors should be prepared to lose all their money - Bank of England

Post by watchnerd »

Locked: See this post by the site owner: New Forum Policy Prohibiting Discussions of Cryptocurrency, Market Manipulation Schemes, etc as Investing Strategies
Asked at a press conference about the rising value of cryptocurrencies on Thursday, Bailey said: “They have no intrinsic value. That doesn’t mean to say people don’t put value on them, because they can have extrinsic value. But they have no intrinsic value.”

“I’m going to say this very bluntly again,” he added. “Buy them only if you’re prepared to lose all your money.”

Bailey’s comments echoed a similar warning from the U.K.’s Financial Conduct Authority (FCA).

“Investing in cryptoassets, or investments and lending linked to them, generally involves taking very high risks with investors’ money,” the financial services watchdog said in January.

“If consumers invest in these types of product, they should be prepared to lose all their money.”
https://www.cnbc.com/2021/05/07/bank-of ... money.html

Full Disclosure:

I hold cryptocurrencies at market weight relative to global stocks and bonds (1.9%).
Last edited by watchnerd on Fri May 07, 2021 7:03 am, edited 3 times in total.
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Re: Cryptocurrency investors should be prepared to lose all their money - Bank of England

Post by watchnerd »

runninginvestor wrote: Fri May 07, 2021 7:00 am Here's the FCA's warning from earlier this year.

https://www.investopedia.com/amp/uk-reg ... ey-5095188
Coinbase's fees come to mind with this:
The FCA also warned investors against possibly high charges and fees associated with crypto investing.
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Re: Cryptocurrency investors should be prepared to lose all their money - Bank of England

Post by YRT70 »

The Economist: "The rise of e-money, The digital currencies that matter. Get ready for Fedcoin and the e-euro"

https://webcache.googleusercontent.com/ ... clnk&gl=nl
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Re: Cryptocurrency investors should be prepared to lose all their money - Bank of England

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YRT70 wrote: Fri May 07, 2021 7:18 am The Economist: "The rise of e-money, The digital currencies that matter. Get ready for Fedcoin and the e-euro"

https://webcache.googleusercontent.com/ ... clnk&gl=nl
Gosh, I hope they come up with names better than Fedcoin (not great) and e-euro (ugh).
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Re: Cryptocurrency investors should be prepared to lose all their money - Bank of England

Post by YRT70 »

watchnerd wrote: Fri May 07, 2021 7:23 am
YRT70 wrote: Fri May 07, 2021 7:18 am The Economist: "The rise of e-money, The digital currencies that matter. Get ready for Fedcoin and the e-euro"

https://webcache.googleusercontent.com/ ... clnk&gl=nl
Gosh, I hope they come up with names better than Fedcoin (not great) and e-euro (ugh).
How about deuro? Digital euro :)
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Re: Cryptocurrency investors should be prepared to lose all their money - Bank of England

Post by watchnerd »

YRT70 wrote: Fri May 07, 2021 7:33 am
How about deuro? Digital euro :)
Ewww.

Eurocoin?
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Re: Cryptocurrency investors should be prepared to lose all their money - Bank of England

Post by YRT70 »

watchnerd wrote: Fri May 07, 2021 7:36 am
YRT70 wrote: Fri May 07, 2021 7:33 am
How about deuro? Digital euro :)
Ewww.

Eurocoin?
So so, imo.
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Re: Cryptocurrency investors should be prepared to lose all their money - Bank of England

Post by SlowMovingInvestor »

YRT70 wrote: Fri May 07, 2021 7:18 am The Economist: "The rise of e-money, The digital currencies that matter. Get ready for Fedcoin and the e-euro"

https://webcache.googleusercontent.com/ ... clnk&gl=nl
Given some of the comments on the other threads by the occasional crypto fan about crypto liberating people from 'central bank slavery/theft', it would be hysterical if these were to come into wide use.

That being said, these are more like proof of authority, with one or possibly a very few authorized issuers. Depending on the use cases, if I were designing these, I would just use a standard distributed database than a blockchain (which has lots of scaling limitations) or maybe a permissioned blockchain (which is much more efficient). But maybe cross-chain links could be put in to allow digital currency to be transferred to a public blockchain (but again, only via trusted participants) for use there -- that might end the use of stablecoins such as USDC.
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Re: Cryptocurrency investors should be prepared to lose all their money - Bank of England

Post by 3CT_Paddler »

How the conversation could have gone...

Government official: "Digital currency has no intrinsic value!"
Reporter: "Speaking of intrinsic value, can you talk to us about our currency and how it..."
Government official: "This press conference is over"

PS I agree that digital currency has no intrinsic value. I can come up with a new currency tomorrow and if I can get the crowd to join in, all of the early adopters can become fabulously rich. Of course once you start going down this road enough times, the crowds will realize the foolishness of this game and the gig is up.
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Re: Cryptocurrency investors should be prepared to lose all their money - Bank of England

Post by staustin »

3CT_Paddler wrote: Fri May 07, 2021 7:59 am How the conversation could have gone...

Government official: "Digital currency has no intrinsic value!"
Reporter: "Speaking of intrinsic value, can you talk to us about our currency and how it..."
Government official: "This press conference is over"

PS I agree that digital currency has no intrinsic value. I can come up with a new currency tomorrow and if I can get the crowd to join in, all of the early adopters can become fabulously rich. Of course once you start going down this road enough times, the crowds will realize the foolishness of this game and the gig is up.
you could use the same language to describe many ipo's dating back to the tech bubble (theglobe, vonage, pets.com, just to name a few).. investment bankers bring 'companies' to market with inflated valuations and projections.. earn high fees, exit, etc.

I don't own bitcoin but this isn't anything new.. that said, I do agree with Munger's comments yesterday in particular.
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Re: Cryptocurrency investors should be prepared to lose all their money - Bank of England

Post by qwertyjazz »

staustin wrote: Fri May 07, 2021 8:12 am
3CT_Paddler wrote: Fri May 07, 2021 7:59 am How the conversation could have gone...

Government official: "Digital currency has no intrinsic value!"
Reporter: "Speaking of intrinsic value, can you talk to us about our currency and how it..."
Government official: "This press conference is over"

PS I agree that digital currency has no intrinsic value. I can come up with a new currency tomorrow and if I can get the crowd to join in, all of the early adopters can become fabulously rich. Of course once you start going down this road enough times, the crowds will realize the foolishness of this game and the gig is up.
you could use the same language to describe many ipo's dating back to the tech bubble (theglobe, vonage, pets.com, just to name a few).. investment bankers bring 'companies' to market with inflated valuations and projections.. earn high fees, exit, etc.

I don't own bitcoin but this isn't anything new.. that said, I do agree with Munger's comments yesterday in particular.
Also Amazon, Netflix etc
High valuations initially with an unsustainable business model initially - a few hit big - the rest die off
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Re: Cryptocurrency investors should be prepared to lose all their money - Bank of England

Post by dt123 »

Agree completely. But since this post has a negative headline, it will not be kept alive by endless posts from the same few crypto advocates that have been keeping the other threads alive for weeks/months. This seems to be the trend across the entire internet. The pump continues.

The persistence of such threads on a respectable site like bogleheads adds an air of investment credibility to crypto that in reality it just doesn't have. Many of the respected members here have posted their views against crypto, just once, and moved on. They are diluted out by the repeated pro-crypto posts. I don't think that's random/accidental.

I've met a number of people in their 20s whose only investments are in crypto. They know nothing of stocks/bonds or even money market funds, and they don't want to know. The idea that their investment in crypto could go to zero is laughable to them. "It always goes up," they've all said. It's scary.
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Re: Cryptocurrency investors should be prepared to lose all their money - Bank of England

Post by txhill »

Gensler at the SEC just described crypto as an asset class and bitcoin as a digital store of value with low correlation to other markets: https://www.youtube.com/watch?v=6NxD-e4Dqf0

Yes, Gensler also said there needs to be greater investor protection in the space and that bitcoin is highly volatile and is speculative in nature. That's of course true.

But he was careful not to say the same of all crypto, because some crypto tokens have intrinsic and productive value beyond just the store of value / hedging aspect of bitcoin. I can't believe there are folks who are (or should be) educated about the space who are still saying all crypto has zero value...
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Re: Cryptocurrency investors should be prepared to lose all their money - Bank of England

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dt123 wrote: Fri May 07, 2021 10:46 am Agree completely. But since this post has a negative headline, it will not be kept alive by endless posts from the same few crypto advocates that have been keeping the other threads alive for weeks/months. This seems to be the trend across the entire internet. The pump continues.

The persistence of such threads on a respectable site like bogleheads adds an air of investment credibility to crypto that in reality it just doesn't have. Many of the respected members here have posted their views against crypto, just once, and moved on. They are diluted out by the repeated pro-crypto posts. I don't think that's random/accidental.

I've met a number of people in their 20s whose only investments are in crypto. They know nothing of stocks/bonds or even money market funds, and they don't want to know. The idea that their investment in crypto could go to zero is laughable to them. "It always goes up," they've all said. It's scary.
By holding at market weight, I've decided I don't need to have a detailed opinion on the various crypto assets, which ones have better potential, which ones are rubbish, etc.

Just like I have no particular opinion on most of the stocks in TSM.

And at market weight (<2%), it's not going to do much damage to my port if it all explodes.
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Re: Cryptocurrency investors should be prepared to lose all their money - Bank of England

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txhill wrote: Fri May 07, 2021 10:56 am Gensler at the SEC just described crypto as an asset class and bitcoin as a digital store of value with low correlation to other markets: https://www.youtube.com/watch?v=6NxD-e4Dqf0

Yes, Gensler also said there needs to be greater investor protection in the space and that bitcoin is highly volatile and is speculative in nature. That's of course true.

But he was careful not to say the same of all crypto, because some crypto tokens have intrinsic and productive value beyond just the store of value / hedging aspect of bitcoin. I can't believe there are folks who are (or should be) educated about the space who are still saying all crypto has zero value...
I thought he had a pretty balanced POV.
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Re: Cryptocurrency investors should be prepared to lose all their money - Bank of England

Post by vwgrrc »

watchnerd wrote: Fri May 07, 2021 1:55 pm
txhill wrote: Fri May 07, 2021 10:56 am Gensler at the SEC just described crypto as an asset class and bitcoin as a digital store of value with low correlation to other markets: https://www.youtube.com/watch?v=6NxD-e4Dqf0

Yes, Gensler also said there needs to be greater investor protection in the space and that bitcoin is highly volatile and is speculative in nature. That's of course true.

But he was careful not to say the same of all crypto, because some crypto tokens have intrinsic and productive value beyond just the store of value / hedging aspect of bitcoin. I can't believe there are folks who are (or should be) educated about the space who are still saying all crypto has zero value...
I thought he had a pretty balanced POV.
He's pro-regulation but also pro-cryptos. IMO it's a bullish sign for the space long-term. Regulation is the foundation of mass adoption.
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Re: Cryptocurrency investors should be prepared to lose all their money - Bank of England

Post by rhoms33 »

watchnerd wrote: Fri May 07, 2021 6:57 am
Full Disclosure:

I hold cryptocurrencies at market weight relative to global stocks and bonds (1.9%).
It’s fun to look back at your posts over the last month or two demonizing crypto and more specifically Bitcoin.

Regardless if you still think all the things you said, love to see that you’re now one of us. Welcome and buckle up.
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Re: Cryptocurrency investors should be prepared to lose all their money - Bank of England

Post by SlowMovingInvestor »

watchnerd wrote: Fri May 07, 2021 6:57 am
I hold cryptocurrencies at market weight relative to global stocks and bonds (1.9%).
So you also hold Doge :happy ?
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Re: Cryptocurrency investors should be prepared to lose all their money - Bank of England

Post by watchnerd »

rhoms33 wrote: Fri May 07, 2021 6:44 pm
watchnerd wrote: Fri May 07, 2021 6:57 am
Full Disclosure:

I hold cryptocurrencies at market weight relative to global stocks and bonds (1.9%).
It’s fun to look back at your posts over the last month or two demonizing crypto and more specifically Bitcoin.

Regardless if you still think all the things you said, love to see that you’re now one of us. Welcome and buckle up.
I’m not pro crypto.

I’m not endorsing it.

I think at least half of the coins or more are of dubious future utility.

And there is a decent chance it all collapses and languishes for a long time.

But market weight is market weight.

I’m not pro gold, either, but I’m also holding that.

Fully committing to the global market portfolio means you end up buying the market, good or bad.
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Re: Cryptocurrency investors should be prepared to lose all their money - Bank of England

Post by watchnerd »

SlowMovingInvestor wrote: Fri May 07, 2021 6:48 pm
watchnerd wrote: Fri May 07, 2021 6:57 am
I hold cryptocurrencies at market weight relative to global stocks and bonds (1.9%).
So you also hold Doge :happy ?

Can’t get it on Coinbase
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Re: Cryptocurrency investors should be prepared to lose all their money - Bank of England

Post by txhill »

watchnerd wrote: Fri May 07, 2021 7:00 pm
rhoms33 wrote: Fri May 07, 2021 6:44 pm
watchnerd wrote: Fri May 07, 2021 6:57 am
Full Disclosure:

I hold cryptocurrencies at market weight relative to global stocks and bonds (1.9%).
It’s fun to look back at your posts over the last month or two demonizing crypto and more specifically Bitcoin.

Regardless if you still think all the things you said, love to see that you’re now one of us. Welcome and buckle up.
I’m not pro crypto.

I’m not endorsing it.

I think at least half of the coins or more are of dubious future utility.

And there is a decent chance it all collapses and languishes for a long time.

But market weight is market weight.

I’m not pro gold, either, but I’m also holding that.

Fully committing to the global market portfolio means you end up buying the market, good or bad.
I think market weight makes sense. There might be a ton of scamcoins in crypto, but the stock market is full of zombie companies / GameStops / $100 million NJ delis too :)
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Re: Cryptocurrency investors should be prepared to lose all their money - Bank of England

Post by watchnerd »

txhill wrote: Fri May 07, 2021 7:14 pm
watchnerd wrote: Fri May 07, 2021 7:00 pm
rhoms33 wrote: Fri May 07, 2021 6:44 pm
watchnerd wrote: Fri May 07, 2021 6:57 am
Full Disclosure:

I hold cryptocurrencies at market weight relative to global stocks and bonds (1.9%).

It’s fun to look back at your posts over the last month or two demonizing crypto and more specifically Bitcoin.

Regardless if you still think all the things you said, love to see that you’re now one of us. Welcome and buckle up.
I’m not pro crypto.

I’m not endorsing it.

I think at least half of the coins or more are of dubious future utility.

And there is a decent chance it all collapses and languishes for a long time.

But market weight is market weight.

I’m not pro gold, either, but I’m also holding that.

Fully committing to the global market portfolio means you end up buying the market, good or bad.
I think market weight makes sense. There might be a ton of scamcoins in crypto, but the stock market is full of zombie companies / GameStops / $100 million NJ delis too :)
Exactly,

If you own the haystack, you also get the donkey turds, too.
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Re: Cryptocurrency investors should be prepared to lose all their money - Bank of England

Post by 3CT_Paddler »

staustin wrote: Fri May 07, 2021 8:12 am
3CT_Paddler wrote: Fri May 07, 2021 7:59 am How the conversation could have gone...

Government official: "Digital currency has no intrinsic value!"
Reporter: "Speaking of intrinsic value, can you talk to us about our currency and how it..."
Government official: "This press conference is over"

PS I agree that digital currency has no intrinsic value. I can come up with a new currency tomorrow and if I can get the crowd to join in, all of the early adopters can become fabulously rich. Of course once you start going down this road enough times, the crowds will realize the foolishness of this game and the gig is up.
you could use the same language to describe many ipo's dating back to the tech bubble (theglobe, vonage, pets.com, just to name a few).. investment bankers bring 'companies' to market with inflated valuations and projections.. earn high fees, exit, etc.

I don't own bitcoin but this isn't anything new.. that said, I do agree with Munger's comments yesterday in particular.
If I own a fractional piece of a company I have a claim to future profits in the form of a dividend. I own something tangible, even if the valuation is way off. Same thing with a bond.

With digital currency what underlying value do you own? Think about it this way... if tomorrow there is a better alternative to Bitcoin and a large group of people decide to switch, what would happen to Bitcoin?
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Re: Cryptocurrency investors should be prepared to lose all their money - Bank of England

Post by txhill »

3CT_Paddler wrote: Fri May 07, 2021 7:55 pm
staustin wrote: Fri May 07, 2021 8:12 am
3CT_Paddler wrote: Fri May 07, 2021 7:59 am How the conversation could have gone...

Government official: "Digital currency has no intrinsic value!"
Reporter: "Speaking of intrinsic value, can you talk to us about our currency and how it..."
Government official: "This press conference is over"

PS I agree that digital currency has no intrinsic value. I can come up with a new currency tomorrow and if I can get the crowd to join in, all of the early adopters can become fabulously rich. Of course once you start going down this road enough times, the crowds will realize the foolishness of this game and the gig is up.
you could use the same language to describe many ipo's dating back to the tech bubble (theglobe, vonage, pets.com, just to name a few).. investment bankers bring 'companies' to market with inflated valuations and projections.. earn high fees, exit, etc.

I don't own bitcoin but this isn't anything new.. that said, I do agree with Munger's comments yesterday in particular.
If I own a fractional piece of a company I have a claim to future profits in the form of a dividend. I own something tangible, even if the valuation is way off. Same thing with a bond.

With digital currency what underlying value do you own? Think about it this way... if tomorrow there is a better alternative to Bitcoin and a large group of people decide to switch, what would happen to Bitcoin?
Ethereum behaves in many ways like stock in an AWS competitor. The Ethereum network is a platform on which apps can be deployed and used, and the act of using them requires spending ETH on transaction fees. Once Ethereum switches over to a proof of stake model (ETH 2.0), the transaction fees will be distributed to ETH holders who use their ETH to validate transactions. And even though it is in its infancy, Ethereum accounts for a huge amount of transactions and thus transaction fees--comparable to AWS in 2015.

Bitcoin is more like digital gold. People could switch at some point and decide to use something else as a store of value, but with enough momentum, the network effect can be so dominant it becomes very unlikely for a swap to happen. But it does not have productive value in itself.

There are lots of different crypto assets with different use cases, so it's hard to generalize the entire space.
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Re: Cryptocurrency investors should be prepared to lose all their money - Bank of England

Post by dru808 »

dt123 wrote: Fri May 07, 2021 10:46 am

I've met a number of people in their 20s whose only investments are in crypto. They know nothing of stocks/bonds or even money market funds, and they don't want to know. The idea that their investment in crypto could go to zero is laughable to them. "It always goes up," they've all said. It's scary.
I know a few as well along with some 30’s+ that recently sold all equities and are all in on crypto, same guys that tried riding the GameStop wave.

I laugh and wish them the best of luck.

Their moto “stocks are potentially life changing money, crypto is wife changing money”
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Re: Cryptocurrency investors should be prepared to lose all their money - Bank of England

Post by SlowMovingInvestor »

txhill wrote: Fri May 07, 2021 8:04 pm
Ethereum behaves in many ways like stock in an AWS competitor. The Ethereum network is a platform on which apps can be deployed and used, and the act of using them requires spending ETH on transaction fees. Once Ethereum switches over to a proof of stake model (ETH 2.0), the transaction fees will be distributed to ETH holders who use their ETH to validate transactions. And even though it is in its infancy, Ethereum accounts for a huge amount of transactions and thus transaction fees--comparable to AWS in 2015.
The level of functionality in Ethereum is not remotely comparable to AWS in 2015, let alone AWS now. In terms of supporting live applications at reasonable throughput with reasonable latency, it's not comparable to AWS in 2012. Possibly not even comparable to AWS in 2010 although I didn't actually use AWS at that time. As for fees -- the amount of stuff that I could get done in AWS in 2012 (in terms of running servers with decent storage space, database/web servers, running time) for the fee required to complete a very simple transaction now in Ethereum, well it's a near laughable comparison.

Could Ethereum grow to become a major platform for running apps ? Maybe, but it's far from that now, and has some limitations that are hard to overcome while maintaining it's one advantage -- trustless consensus (which needs good use cases beyond speculation).
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Re: Cryptocurrency investors should be prepared to lose all their money - Bank of England

Post by SlowMovingInvestor »

dru808 wrote: Fri May 07, 2021 8:18 pm
Their moto “stocks are potentially life changing money, crypto is wife changing money”
Jokes aside, this brings up the possibility of spouses hiding crypto funds during divorce proceedings. There are several cases of spouses hiding funds in banks abroad -- until the IRS made it too difficult to do that via FATCA.

Yes, I know blockchains can be traced, but there are ways to get around that, especially if it's not a nation state trying to track funds flow.
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Re: Cryptocurrency investors should be prepared to lose all their money - Bank of England

Post by txhill »

SlowMovingInvestor wrote: Fri May 07, 2021 8:20 pm
txhill wrote: Fri May 07, 2021 8:04 pm
Ethereum behaves in many ways like stock in an AWS competitor. The Ethereum network is a platform on which apps can be deployed and used, and the act of using them requires spending ETH on transaction fees. Once Ethereum switches over to a proof of stake model (ETH 2.0), the transaction fees will be distributed to ETH holders who use their ETH to validate transactions. And even though it is in its infancy, Ethereum accounts for a huge amount of transactions and thus transaction fees--comparable to AWS in 2015.
The level of functionality in Ethereum is not remotely comparable to AWS in 2015, let alone AWS now. In terms of supporting live applications at reasonable throughput with reasonable latency, it's not comparable to AWS in 2012. Possibly not even comparable to AWS in 2010 although I didn't actually use AWS at that time. As for fees -- the amount of stuff that I could get done in AWS in 2012 (in terms of running servers with decent storage space, database/web servers, running time) for the fee required to complete a very simple transaction now in Ethereum, well it's a near laughable comparison.

Could Ethereum grow to become a major platform for running apps ? Maybe, but it's far from that now, and has some limitations that are hard to overcome while maintaining it's one advantage -- trustless consensus (which needs good use cases beyond speculation).
Completely correct if they were direct competitors. I shouldn’t have described them as competitors but more like an analogous service. Yes Netflix won’t move to ethereum :) Ether will compete for things that thrive on trustlessness. But the principle underlying it is similar which can help people understand the use case.
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Re: Cryptocurrency investors should be prepared to lose all their money - Bank of England

Post by firebirdparts »

Why would you need somebody at the Bank of England to tell you this? This is like posting a link to the queen saying peanut butter contains peanuts.

It is what it is.
This time is the same
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Re: Cryptocurrency investors should be prepared to lose all their money - Bank of England

Post by Kookaburra »

If the crypto market gets too big, I worry the Fed will start to view it as “too big to fail”. In that it plunging to near-zero levels/values will take all other asset classes deep into the red too. I wonder if that’s what all their jaw-boning is about now, trying to prevent it from getting to that point (since their actions are clearly fueling the problem).
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Re: Cryptocurrency investors should be prepared to lose all their money - Bank of England

Post by chris319 »

YRT70 wrote: Fri May 07, 2021 7:42 am
watchnerd wrote: Fri May 07, 2021 7:36 am
YRT70 wrote: Fri May 07, 2021 7:33 am
How about deuro? Digital euro :)
Ewww.

Eurocoin?
So so, imo.
I have the perfect name:

Wooden Nickels
Financial decisions based on emotion often turn out to be bad decisions.
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Re: Cryptocurrency investors should be prepared to lose all their money - Bank of England

Post by ElJefeDelQueso »

watchnerd wrote: Fri May 07, 2021 7:23 am
YRT70 wrote: Fri May 07, 2021 7:18 am The Economist: "The rise of e-money, The digital currencies that matter. Get ready for Fedcoin and the e-euro"

https://webcache.googleusercontent.com/ ... clnk&gl=nl
Gosh, I hope they come up with names better than Fedcoin (not great) and e-euro (ugh).
+1.
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Re: Cryptocurrency investors should be prepared to lose all their money - Bank of England

Post by Prahasaurus »

SlowMovingInvestor wrote: Fri May 07, 2021 8:20 pm
txhill wrote: Fri May 07, 2021 8:04 pm
Ethereum behaves in many ways like stock in an AWS competitor. The Ethereum network is a platform on which apps can be deployed and used, and the act of using them requires spending ETH on transaction fees. Once Ethereum switches over to a proof of stake model (ETH 2.0), the transaction fees will be distributed to ETH holders who use their ETH to validate transactions. And even though it is in its infancy, Ethereum accounts for a huge amount of transactions and thus transaction fees--comparable to AWS in 2015.
The level of functionality in Ethereum is not remotely comparable to AWS in 2015, let alone AWS now. In terms of supporting live applications at reasonable throughput with reasonable latency, it's not comparable to AWS in 2012. Possibly not even comparable to AWS in 2010 although I didn't actually use AWS at that time. As for fees -- the amount of stuff that I could get done in AWS in 2012 (in terms of running servers with decent storage space, database/web servers, running time) for the fee required to complete a very simple transaction now in Ethereum, well it's a near laughable comparison.

Could Ethereum grow to become a major platform for running apps ? Maybe, but it's far from that now, and has some limitations that are hard to overcome while maintaining it's one advantage -- trustless consensus (which needs good use cases beyond speculation).
You are comparing a kangaroo to a sloth. Can sloths bounce at high speeds for hundreds of meters while carrying a baby? Can kangaroos climb?

AWS will never be the backbone to global finance, since nobody will trust Jeff Bezos to be a fair actor. With Ethereum, there is nobody you need to trust. Just the open source code. Visa or MasterCard have no need to "partner" with Jeff Bezos and hope he plays fair. The government of Uganda has no need to trust a US domiciled, centralized entity.
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Re: Cryptocurrency investors should be prepared to lose all their money - Bank of England

Post by watchnerd »

Kookaburra wrote: Fri May 07, 2021 10:20 pm If the crypto market gets too big, I worry the Fed will start to view it as “too big to fail”. In that it plunging to near-zero levels/values will take all other asset classes deep into the red too. I wonder if that’s what all their jaw-boning is about now, trying to prevent it from getting to that point (since their actions are clearly fueling the problem).
WSJ had an article on the size issue today.

https://www.wsj.com/articles/cryptocurr ... 1620332378
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Re: Cryptocurrency investors should be prepared to lose all their money - Bank of England

Post by SlowMovingInvestor »

Prahasaurus wrote: Fri May 07, 2021 10:56 pm
SlowMovingInvestor wrote: Fri May 07, 2021 8:20 pm
txhill wrote: Fri May 07, 2021 8:04 pm
Ethereum behaves in many ways like stock in an AWS competitor. The Ethereum network is a platform on which apps can be deployed and used, and the act of using them requires spending ETH on transaction fees. Once Ethereum switches over to a proof of stake model (ETH 2.0), the transaction fees will be distributed to ETH holders who use their ETH to validate transactions. And even though it is in its infancy, Ethereum accounts for a huge amount of transactions and thus transaction fees--comparable to AWS in 2015.
The level of functionality in Ethereum is not remotely comparable to AWS in 2015, let alone AWS now. In terms of supporting live applications at reasonable throughput with reasonable latency, it's not comparable to AWS in 2012. Possibly not even comparable to AWS in 2010 although I didn't actually use AWS at that time. As for fees -- the amount of stuff that I could get done in AWS in 2012 (in terms of running servers with decent storage space, database/web servers, running time) for the fee required to complete a very simple transaction now in Ethereum, well it's a near laughable comparison.

Could Ethereum grow to become a major platform for running apps ? Maybe, but it's far from that now, and has some limitations that are hard to overcome while maintaining it's one advantage -- trustless consensus (which needs good use cases beyond speculation).
You are comparing a kangaroo to a sloth. Can sloths bounce at high speeds for hundreds of meters while carrying a baby? Can kangaroos climb?

AWS will never be the backbone to global finance, since nobody will trust Jeff Bezos to be a fair actor. With Ethereum, there is nobody you need to trust. Just the open source code. Visa or MasterCard have no need to "partner" with Jeff Bezos and hope he plays fair. The government of Uganda has no need to trust a US domiciled, centralized entity.
I was responding to a comment about how Ethereum is comparable to AWS, I personally would not have thought of comparing them. But the appropriate comparison might be comparing a highly versatile animal like a primate, which can do lots of things very well, to a sloth since Ethereum can really do only one thing better than AWS. Any cloud service is orders of magnitude better in terms of throughput, speed, functionality, as an application environment and vastly cheaper. The amount of functionality I can get on pretty much any cloud service for what it costs to run a simple transaction on Ethereum is very notable. [ Heck, I can get a decent amount of functionality from the free tier of any cloud service]

Even NetFlix which has Amazon Prime as a direct competitor uses AWS. But if you don't trust AWS, you can use Azure or GCP or Oracle or IBM cloud.
FWIW, I think Mastercard uses Azure.

Don't trust a megacorp ? Use a smaller cloud service like Linode (which is what I use personally) or Digital Ocean, half a dozen other cloud services, a federated cloud service (which can work across multiple clouds), or set up your own open source cloud stack. You're the government of India and don't want to rely on non-Indian cloud services ? Use an Indian domiciled cloud service (*) -- after all, why would you trust a largely non Indian network like Ethereum for a vital service? Countries don't outsource vital services willingly to the UN any more than they do to the US.

Could Ethereum overcome it's limitations ? Certainly ! But one should recognize these exist.

(*) I was curious enough to do a quick Google and I see there are lots of local cloud service providers in India besides local subsidiaries of the large US providers.
Last edited by SlowMovingInvestor on Sat May 08, 2021 7:58 am, edited 1 time in total.
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Re: Cryptocurrency investors should be prepared to lose all their money - Bank of England

Post by Silly Wabbit »

Prahasaurus wrote: Fri May 07, 2021 10:56 pm AWS will never be the backbone to global finance, since nobody will trust Jeff Bezos to be a fair actor. With Ethereum, there is nobody you need to trust. Just the open source code. Visa or MasterCard have no need to "partner" with Jeff Bezos and hope he plays fair. The government of Uganda has no need to trust a US domiciled, centralized entity.
AWS, along with Azure, already has global finance as customers, including Visa and Mastercard.

I bet a lot of ETH 2.0 validators end up running on cloud provider hardware too.
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Re: Cryptocurrency investors should be prepared to lose all their money - Bank of England

Post by Prahasaurus »

SlowMovingInvestor wrote: Sat May 08, 2021 7:46 am
Prahasaurus wrote: Fri May 07, 2021 10:56 pm
SlowMovingInvestor wrote: Fri May 07, 2021 8:20 pm
txhill wrote: Fri May 07, 2021 8:04 pm
Ethereum behaves in many ways like stock in an AWS competitor. The Ethereum network is a platform on which apps can be deployed and used, and the act of using them requires spending ETH on transaction fees. Once Ethereum switches over to a proof of stake model (ETH 2.0), the transaction fees will be distributed to ETH holders who use their ETH to validate transactions. And even though it is in its infancy, Ethereum accounts for a huge amount of transactions and thus transaction fees--comparable to AWS in 2015.
The level of functionality in Ethereum is not remotely comparable to AWS in 2015, let alone AWS now. In terms of supporting live applications at reasonable throughput with reasonable latency, it's not comparable to AWS in 2012. Possibly not even comparable to AWS in 2010 although I didn't actually use AWS at that time. As for fees -- the amount of stuff that I could get done in AWS in 2012 (in terms of running servers with decent storage space, database/web servers, running time) for the fee required to complete a very simple transaction now in Ethereum, well it's a near laughable comparison.

Could Ethereum grow to become a major platform for running apps ? Maybe, but it's far from that now, and has some limitations that are hard to overcome while maintaining it's one advantage -- trustless consensus (which needs good use cases beyond speculation).
You are comparing a kangaroo to a sloth. Can sloths bounce at high speeds for hundreds of meters while carrying a baby? Can kangaroos climb?

AWS will never be the backbone to global finance, since nobody will trust Jeff Bezos to be a fair actor. With Ethereum, there is nobody you need to trust. Just the open source code. Visa or MasterCard have no need to "partner" with Jeff Bezos and hope he plays fair. The government of Uganda has no need to trust a US domiciled, centralized entity.
I was responding to a comment about how Ethereum is comparable to AWS. But the appropriate comparison might be comparing a highly versatile animal like a primate, which can do lots of things very well, to a sloth since Ethereum can really do only one thing better than AWS. But any cloud service is orders of magnitude better in terms of throughput, speed, functionality, as an application environment and vastly cheaper. The amount of functionality I can get on pretty much any cloud service for what it costs to run a simple transaction on Ethereum is very notable. [ Heck, I can get a decent amount of functionality from the free tier of any cloud service]

Even NetFlix which has Amazon Prime as a direct competitor uses AWS. But if you don't trust AWS, you can use Azure or GCP or Oracle or IBM cloud.
FWIW, I think Mastercard uses Azure.

Don't trust a megacorp ? Use a smaller cloud service like Linode or Digital Ocean. half a dozen other cloud services a federated cloud service, or set up your own open source cloud stack. You're the government of India and don't want to rely on non-Indian cloud services ? Use an Indian domiciled cloud service -- after all, why would you trust a largely non Indian network like Ethereum for a vital service? Countries don't outsource vital services willingly to the UN any more than they do to the US.

Could Ethereum overcome it's limitations ? Certainly ! But one should recognize these exist.
The comparison you are looking for is the fox and the hedgehog (hat tip Isiah Berlin). The fox knows many things, but the hedgehog knows just one thing, but he knows it very well...

The worst people to debate on Ethereum are engineers (note: I'm an engineer). They always get caught up on throughput and the inefficiencies of blockchains, and hence fail to see the bigger picture. I've been arguing about the future of Ethereum (and hence the future of decentralized applications) with a close friend since ETH was around 190 USD, he's still sure he's totally right. Oh well!
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Re: Cryptocurrency investors should be prepared to lose all their money - Bank of England

Post by TimeTheMarket »

It’s always been digital tulips. I’m definitely surprised it’s continued to go up and up.

I have yet to hear an explanation of how, even if digital currencies become the backbone of anything, this means the early adopters of a given, finite coin hold any intrinsic value.

Surely nobody on the planet actually still believes bitcoin will ever be a worldwide currency. It’s all speculative now.

Even if eth somehow becomes this major financial tech underpinning the world’s financial transactions, why do the current coins need any value? It seems a bit like somebody in 1990 saying the web is the future and so my copy of the current code base of HTML somehow can only go up in value... there is no reason at all a group of people can’t just decide to start with another crypto at any point in time. Which is of course what we’ve seen over and over. Many coins beyond BTC and eth have gone up thousands of percent in the past few months. Everyone is chasing this quick buck.
Username is not serious :)
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Re: Cryptocurrency investors should be prepared to lose all their money - Bank of England

Post by SlowMovingInvestor »

Prahasaurus wrote: Sat May 08, 2021 7:57 am
The worst people to debate on Ethereum are engineers (note: I'm an engineer). They always get caught up on throughput and the inefficiencies of blockchains, and hence fail to see the bigger picture. I've been arguing about the future of Ethereum (and hence the future of decentralized applications) with a close friend since ETH was around 190 USD, he's still sure he's totally right. Oh well!
Fair enough :happy.

I wasn't commenting on the future of Ethereum, just on it's very real limitations. FWIW, I vaguely remember reading a few years back that Ethereum was going to fix it's issues when it went PoS (in 2018). And it's 2021 now.
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Re: Cryptocurrency investors should be prepared to lose all their money - Bank of England

Post by txhill »

TimeTheMarket wrote: Sat May 08, 2021 7:58 am It’s always been digital tulips. I’m definitely surprised it’s continued to go up and up.

I have yet to hear an explanation of how, even if digital currencies become the backbone of anything, this means the early adopters of a given, finite coin hold any intrinsic value.

Surely nobody on the planet actually still believes bitcoin will ever be a worldwide currency. It’s all speculative now.

Even if eth somehow becomes this major financial tech underpinning the world’s financial transactions, why do the current coins need any value? It seems a bit like somebody in 1990 saying the web is the future and so my copy of the current code base of HTML somehow can only go up in value... there is no reason at all a group of people can’t just decide to start with another crypto at any point in time. Which is of course what we’ve seen over and over. Many coins beyond BTC and eth have gone up thousands of percent in the past few months. Everyone is chasing this quick buck.
This is what you sound like: “Why does stock in Facebook have any value? Anyone can copy the code and create a new platform. All they need is a billion users!”

The value of a network is an exponential function of the number of its users. You can’t trivialize the value of users because it is extremely hard to build a robust network of users... this is true of Ethereum and it is also true of Bitcoin.
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Re: Cryptocurrency investors should be prepared to lose all their money - Bank of England

Post by txhill »

SlowMovingInvestor wrote: Sat May 08, 2021 8:04 am
Prahasaurus wrote: Sat May 08, 2021 7:57 am
The worst people to debate on Ethereum are engineers (note: I'm an engineer). They always get caught up on throughput and the inefficiencies of blockchains, and hence fail to see the bigger picture. I've been arguing about the future of Ethereum (and hence the future of decentralized applications) with a close friend since ETH was around 190 USD, he's still sure he's totally right. Oh well!
Fair enough :happy.

I wasn't commenting on the future of Ethereum, just on it's very real limitations. FWIW, I vaguely remember reading a few years back that Ethereum was going to fix it's issues when it went PoS (in 2018). And it's 2021 now.
To be fair, ethereum had potential in 2018 but unproven use—defi wasn’t really in use, nor were NFTs. Now it is apparent that smart contracts can power real use cases, and there is even more reason to believe that there are other use cases that no one has even come up with yet. So it is a different outlook now.
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Re: Cryptocurrency investors should be prepared to lose all their money - Bank of England

Post by SlowMovingInvestor »

txhill wrote: Sat May 08, 2021 8:10 am
SlowMovingInvestor wrote: Sat May 08, 2021 8:04 am
Prahasaurus wrote: Sat May 08, 2021 7:57 am
The worst people to debate on Ethereum are engineers (note: I'm an engineer). They always get caught up on throughput and the inefficiencies of blockchains, and hence fail to see the bigger picture. I've been arguing about the future of Ethereum (and hence the future of decentralized applications) with a close friend since ETH was around 190 USD, he's still sure he's totally right. Oh well!
Fair enough :happy.

I wasn't commenting on the future of Ethereum, just on it's very real limitations. FWIW, I vaguely remember reading a few years back that Ethereum was going to fix it's issues when it went PoS (in 2018). And it's 2021 now.
To be fair, ethereum had potential in 2018 but unproven use—defi wasn’t really in use, nor were NFTs. Now it is apparent that smart contracts can power real use cases, and there is even more reason to believe that there are other use cases that no one has even come up with yet. So it is a different outlook now.
I wasn't commenting on outlook, I was commenting on how Ethereum has said it would fix it's technical limitations for a while. To go back to the cloud comparison, cloud services have added lots of new features, new zones (not to mention new customers) since then.

Perhaps the decentralized nature and varying incentives for miners vs stakers are what led Ethereum to be slow in fixing it's limitations. If so -- public blockchains rely on game theoretic incentives, and if those incentives make it harder to adapt than it does for AWS, that is a notable issue.
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Re: Cryptocurrency investors should be prepared to lose all their money - Bank of England

Post by txhill »

SlowMovingInvestor wrote: Sat May 08, 2021 8:17 am
txhill wrote: Sat May 08, 2021 8:10 am
SlowMovingInvestor wrote: Sat May 08, 2021 8:04 am
Prahasaurus wrote: Sat May 08, 2021 7:57 am
The worst people to debate on Ethereum are engineers (note: I'm an engineer). They always get caught up on throughput and the inefficiencies of blockchains, and hence fail to see the bigger picture. I've been arguing about the future of Ethereum (and hence the future of decentralized applications) with a close friend since ETH was around 190 USD, he's still sure he's totally right. Oh well!
Fair enough :happy.

I wasn't commenting on the future of Ethereum, just on it's very real limitations. FWIW, I vaguely remember reading a few years back that Ethereum was going to fix it's issues when it went PoS (in 2018). And it's 2021 now.
To be fair, ethereum had potential in 2018 but unproven use—defi wasn’t really in use, nor were NFTs. Now it is apparent that smart contracts can power real use cases, and there is even more reason to believe that there are other use cases that no one has even come up with yet. So it is a different outlook now.
I wasn't commenting on outlook, I was commenting on how Ethereum has said it would fix it's technical limitations for a while. To go back to the cloud comparison, cloud services have added lots of new features, new zones (not to mention new customers) since then.
Yes I agree there is major execution risk with the coming upgrades. They really have to get it right, much harder to fix a glitch in a decentralized system than with a centralized cloud service that can be brought offline and patched. So it takes longer. And if it never comes then I willl be left holding a big bag of ETH :)
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Re: Cryptocurrency investors should be prepared to lose all their money - Bank of England

Post by watchnerd »

The Gemini Exchanges 2021 State of UK Crypto Report found that 27.5% of the people in the age group between 18-24 years old were invested in cryptocurrency. On the other end of the spectrum, just 7.4% of those that are 55 and older were crypto investors.
Of course, this report could be full of all sorts of data mining for advocacy purposes.

https://www.gemini.com/state-of-uk-crypto
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Re: Cryptocurrency investors should be prepared to lose all their money - Bank of England

Post by Always passive »

3CT_Paddler wrote: Fri May 07, 2021 7:55 pm
staustin wrote: Fri May 07, 2021 8:12 am
3CT_Paddler wrote: Fri May 07, 2021 7:59 am How the conversation could have gone...

Government official: "Digital currency has no intrinsic value!"
Reporter: "Speaking of intrinsic value, can you talk to us about our currency and how it..."
Government official: "This press conference is over"

PS I agree that digital currency has no intrinsic value. I can come up with a new currency tomorrow and if I can get the crowd to join in, all of the early adopters can become fabulously rich. Of course once you start going down this road enough times, the crowds will realize the foolishness of this game and the gig is up.
you could use the same language to describe many ipo's dating back to the tech bubble (theglobe, vonage, pets.com, just to name a few).. investment bankers bring 'companies' to market with inflated valuations and projections.. earn high fees, exit, etc.

I don't own bitcoin but this isn't anything new.. that said, I do agree with Munger's comments yesterday in particular.
If I own a fractional piece of a company I have a claim to future profits in the form of a dividend. I own something tangible, even if the valuation is way off. Same thing with a bond.

With digital currency what underlying value do you own? Think about it this way... if tomorrow there is a better alternative to Bitcoin and a large group of people decide to switch, what would happen to Bitcoin?
So Gold is not for you either?
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Re: Cryptocurrency investors should be prepared to lose all their money - Bank of England

Post by Prahasaurus »

A good summary (24 tweets) on why I'm so bullish on Ethereum:

https://twitter.com/CroissantEth/status ... 9990893571

An excerpt:
6. Developers

Whether you like it or not, no serious project is building (primarily) on a network like $BSC, $ETH has all of the attention in the space

A total of 94 out of the top 100 crypto projects are built on $ETH, with more than:

-3,000 dapps
-200K ERC20’s
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Re: Cryptocurrency investors should be prepared to lose all their money - Bank of England

Post by TimeTheMarket »

txhill wrote: Sat May 08, 2021 8:08 am
TimeTheMarket wrote: Sat May 08, 2021 7:58 am It’s always been digital tulips. I’m definitely surprised it’s continued to go up and up.

I have yet to hear an explanation of how, even if digital currencies become the backbone of anything, this means the early adopters of a given, finite coin hold any intrinsic value.

Surely nobody on the planet actually still believes bitcoin will ever be a worldwide currency. It’s all speculative now.

Even if eth somehow becomes this major financial tech underpinning the world’s financial transactions, why do the current coins need any value? It seems a bit like somebody in 1990 saying the web is the future and so my copy of the current code base of HTML somehow can only go up in value... there is no reason at all a group of people can’t just decide to start with another crypto at any point in time. Which is of course what we’ve seen over and over. Many coins beyond BTC and eth have gone up thousands of percent in the past few months. Everyone is chasing this quick buck.
This is what you sound like: “Why does stock in Facebook have any value? Anyone can copy the code and create a new platform. All they need is a billion users!”

The value of a network is an exponential function of the number of its users. You can’t trivialize the value of users because it is extremely hard to build a robust network of users... this is true of Ethereum and it is also true of Bitcoin.
Point taken but here is another: the cost to join Facebook is the same now as it was ten years ago. Imagine if each new user increased the cost of the next. People would be highly motivated to find a new network to be involved in.
Username is not serious :)
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Re: Cryptocurrency investors should be prepared to lose all their money - Bank of England

Post by FrancisK »

First of all, funny to see that everybody is buying crypto but nobody is actually using it for what it is. All my friends are buying Bitcoin and Etherium but I don’t know any of them using these crypto to actually buy stuff (as a currency of payment).

That alone already surprises me.

But then, even if it was the case, at the end of the day these crypto currencies are just currencies....who would invest in buying USD or EUR (other than traders or hedgers)?
How investing in a currency (whether digital or traditional) can be considered like a good investment plan for the long term?

Who really need dogecoin in his/her daily life right now? I can safely say no one really needs it. Not only it doesn’t have any intrinsic value but it’s just useless (from a practical point of view).
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