I might have made a bad decision. You can spend your whole life looking in the rear view mirror. I did that a little when Covid struck thinking "omg, I should have dumped some". But, I kept doing the same old boring stuff.Valuethinker wrote: ↑Mon May 10, 2021 9:53 amIt is leverage that causes the meltdown. Borrowing more money to invest more, with the collateral of what you already have.JohnDindex wrote: ↑Sat May 08, 2021 1:49 pm I happen to have 3 friends who are financial advisors. All 3 of them have told me a similar story in the last 30 days. They have existing clients and new prospects that are crypto millionaires. Too much to write but crazy stories, people in their 30’s worth 4-6 million dollars. The advisors are obviously pushing them to sell enough and invest normally but it’s just insane. Some of them are wanting to double down, pull money from traditional investments, and even use leverage.
One of them said to me: “ I think when this thing pops, it might trigger a collapse in markets etc”
I own no crypto and I have no desire.
What do the bogleheads think? Could a crypto bubble burst cause a financial panic ?
Which then, when the value of the collateral falls, leads to margin calls & forced liquidations. Which leads to lower prices, more margin calls, more forced liquidations.
Even in the Tech Media Telecoms aka "dot com" bubble, although the dot coms were primarily equity financed, the Media & Telecoms stocks had borrowed hundreds of billions of dollars, to dig holes in the ground and fill them with fibre optics that were often never lit. And companies had signed leases for huge amounts of office space that they then defaulted on, another form of leverage.
So, if people have found a way to leverage their crypto investments, there could be broader systemic effects of a bubble collapse.
If not, it's like your average mining bubble when it blows, only the investors who don't get out ahead of the pack get hurt. The last investors, usually the woman on the street, the little guy or gal, get hosed. The smart money is off on the next new new thing.
We'll see. I kick it around, but I often find it's the wrong reason to invest. The idea of "everyone has doubled" since January is interesting, but the market is also up 12-13%, so I started glancing at what is the overall beta of crypto. When Covid hit, bitcoin took about a 60% didn't it, while the broader market took 30%. So we haven't really seen what a downswing does to crypto at this point. Does 15% pullback give a 40% hit?
I dunno. It's interesting. I can't help but think "I should toss a few $k that way." But again, there are lots of people doing that.