Crypto mania !

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JohnDindex
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Crypto mania !

Post by JohnDindex »

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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 ?
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starboi
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Re: Crypto mania !

Post by starboi »

JohnDindex wrote: Sat May 08, 2021 1:49 pm

Could a crypto bubble burst cause a financial panic ?
Yes, but so could a NASDAQ bubble burst or a real estate bubble burst.
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Re: Crypto mania !

Post by dru808 »

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 ?
Like I posted in another thread. I know coworkers and other trades that have sold all their equity and are all in on crypto, same guys that were on the gme amc wave, I always wish them the best of luck.
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Nathan Drake
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Re: Crypto mania !

Post by Nathan Drake »

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 ?
No. These stories are pretty rare. The fact that some crypto kid is a temporary paper millionaire and will likely lose it all won't have any systemic effects anymoreso than someone who strikes it rich and then gambles it away in Vegas.

The crypto firm believers are zealots and have no appreciation of risk. They went from very little to a whole lot seemingly overnight. Why would they want to bet against the horse that got them there? Their delusion that made them rich in the first place causes a mental reinforcement to stay the course or double down as it craters. The myth that crypto only ever goes up over the long-term is a fundamental flaw to their investment thesis.
Last edited by Nathan Drake on Sat May 08, 2021 2:20 pm, edited 1 time in total.
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Blue456
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Re: Crypto mania !

Post by Blue456 »

JohnDindex wrote: Sat May 08, 2021 1:49 pm What do the bogleheads think? Could a crypto bubble burst cause a financial panic ?
I want to think that our financial system is pretty well insulated from crypto.
txhill
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Re: Crypto mania !

Post by txhill »

I'd be more worried about family offices and hedge funds. That's where the real leverage and systemic risk is these days, and it's just completely out of sight unlike crypto. How many Archegos-style trading strategies are there?
runner3081
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Re: Crypto mania !

Post by runner3081 »

Stay the course, block out noise, which is Crypto.
Green Street
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Re: Crypto mania !

Post by Green Street »

Bubble this and bubble that, blah blah blah, everywhere is a bubble to people on this forum. Equities reach all time high and we’re in a bubble, give it a rest.
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Re: Crypto mania !

Post by Gadget »

Crypto is currently <2% of the world market cap according to another crypto thread. If it all goes to zero, I find it hard to believe there would be a collapse of world markets. Maybe a temporary slight dip.
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telemark
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Re: Crypto mania !

Post by telemark »

If it turns out that large institutions, say someone like AIG, are making highly leveraged bets on crypto using what is supposed to be very safe money that belongs to other people, then I would worry because I've seen how that one ends. If a bunch of newly minted millionaires suddenly go back to not being millionaires, that worries me less because it doesn't seem like a threat to the overall financial system. But I might be wrong.
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Re: Crypto mania !

Post by gwe67 »

Pay attention and you will see that there are several similar crypto posts. You crypto fans can comment there and not create a new crypto post every day. Or maybe go to another forum where this is relevant.
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Green Street
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Re: Crypto mania !

Post by Green Street »

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 ?
Isn’t it their money, so they can choose to do as they please with it? Even if the markets went down.... wouldn’t it be beneficial to you? Since you could buy VTSAX at a discount?
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HomerJ
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Re: Crypto mania !

Post by HomerJ »

I'm actually quite worried the longer it goes on.

I totally saw the housing crash coming, but I didn't care because I owned my house. I figured it would just hurt the people who borrowed too much, and banks who were dumb enough to lend to them.

But what happened was investment firms packaged those bad mortgage loans into "investment vehicles" called CDOs, which allowed the rot to spread throughout the entire financial system, and nearly brought it all down.

I fear the same may happen with crypto. At first, it was just going to hurt the people who bought bitcoin last or dogecoin last before the crash.. but now the investment firms are getting in on the action. They will find a way to repackage the crypto loans that already over-leveraged and a house of cards, and sell them to others, touting them as nearly risk-free, just like they did with CDOs (you'll own a tiny piece of a bunch of different mortgages! What are the odds they all default at the same time?) :oops:

Same with crypto. I see a monumental crash someday. Every post here about how one can loan out crypto to other people who use those loans to speculate on more crypto scares the hell out of me.

All the crypto-proponents continually compare those loans to savings accounts at banks, but leverage is where the real danger lies.

If a bunch of people or institutions owned bitcoin, and bitcoin crashed 50%, even 80%, those people would just have a lot less money.

The danger is when a crash like that takes them above 100% losses because of leverage. Where people default, and then institutions default, and other institutions (who may have had zero crypto, but were intertwined with institutions that did) are affected as well.

It happened in 2008... The longer this goes on, and the more the Wall Street geniuses get involved, the more danger I see.

I just don't know how to hedge against it...
Last edited by HomerJ on Sat May 08, 2021 2:49 pm, edited 2 times in total.
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HomerJ
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Re: Crypto mania !

Post by HomerJ »

telemark wrote: Sat May 08, 2021 2:35 pm If it turns out that large institutions, say someone like AIG, are making highly leveraged bets on crypto using what is supposed to be very safe money that belongs to other people, then I would worry because I've seen how that one ends. If a bunch of newly minted millionaires suddenly go back to not being millionaires, that worries me less because it doesn't seem like a threat to the overall financial system. But I might be wrong.
This.

I'm scared we're getting closer to AIG and company starting to dip their toes.

The crypto-enthusiasts see that as validation that crypto is a legitimate investment. I think that's naive. The big institutions want a piece of the big pile of money (U.S. Dollars) that is being generated. They don't care if it's legitimate or not.
Last edited by HomerJ on Sat May 08, 2021 2:50 pm, edited 1 time in total.
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Re: Crypto mania !

Post by anon_investor »

HomerJ wrote: Sat May 08, 2021 2:44 pm I'm actually quite worried the longer it goes on.

I totally saw the housing crash coming, but I didn't care because I owned my house. I figured it would just hurt the people who borrowed too much, and banks who were dumb enough to lend to them.

But what happened was investment firms packaged those bad mortgage loans into "investment vehicles" called CDOs, which allowed the rot to spread throughout the entire financial system, and nearly brought it all down.

I fear the same may happen with crypto. At first, it was just going to hurt the people who bought bitcoin last or dogecoin last before the crash.. but now the investment firms are getting in on the action. They will find a way to repackage the crypto loans that already over-leveraged and a house of cards, and sell them to others, touting them as nearly risk-free, just like the did with CDOs (you'll own a tiny piece of a bunch of different mortages! What are the odds they all default at the same time?)

Same with crypto. I see a monumental crash someday. Every post here about how one can loan out crypto to other people who use those loans to speculate on more crypto scares the hell out of me.

All the crypto-proponents continually compare them to savings accounts at banks, but leverage is where the real danger lies.

If a bunch of people or institutions owned bitcoin, and bitcoin crashed 50%, even 80%, those people would just have a lot less money.

The danger is when a crash like that takes them above 100% losses because of leverage. Where people default, and then institutions default, and other institutions (who may have had zero crypto, but were intertwined with institutions that did) are affected as well.

It happened in 2008... The longer this goes on, and the more the Wall Street geniuses get involved, the more danger I see.

I just don't know how to hedge against it...
Hold some good old US Savings Bonds or Treasuries.
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1789
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Re: Crypto mania !

Post by 1789 »

Dogecoin and GM has same market cap now. How is something created as a joke can have this much massive money invested in. People are nuts, no question about it.
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Re: Crypto mania !

Post by Nathan Drake »

HomerJ wrote: Sat May 08, 2021 2:44 pm I'm actually quite worried the longer it goes on.

I totally saw the housing crash coming, but I didn't care because I owned my house. I figured it would just hurt the people who borrowed too much, and banks who were dumb enough to lend to them.

But what happened was investment firms packaged those bad mortgage loans into "investment vehicles" called CDOs, which allowed the rot to spread throughout the entire financial system, and nearly brought it all down.

I fear the same may happen with crypto. At first, it was just going to hurt the people who bought bitcoin last or dogecoin last before the crash.. but now the investment firms are getting in on the action. They will find a way to repackage the crypto loans that already over-leveraged and a house of cards, and sell them to others, touting them as nearly risk-free, just like they did with CDOs (you'll own a tiny piece of a bunch of different mortgages! What are the odds they all default at the same time?) :oops:

Same with crypto. I see a monumental crash someday. Every post here about how one can loan out crypto to other people who use those loans to speculate on more crypto scares the hell out of me.

All the crypto-proponents continually compare those loans to savings accounts at banks, but leverage is where the real danger lies.

If a bunch of people or institutions owned bitcoin, and bitcoin crashed 50%, even 80%, those people would just have a lot less money.

The danger is when a crash like that takes them above 100% losses because of leverage. Where people default, and then institutions default, and other institutions (who may have had zero crypto, but were intertwined with institutions that did) are affected as well.

It happened in 2008... The longer this goes on, and the more the Wall Street geniuses get involved, the more danger I see.

I just don't know how to hedge against it...
I agree that the bolded section is worrisome, but I do not think it is pervasive enough to cause any sort of systemic risks/damage...at least currently.
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txhill
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Re: Crypto mania !

Post by txhill »

HomerJ wrote: Sat May 08, 2021 2:44 pm I'm actually quite worried the longer it goes on.

I totally saw the housing crash coming, but I didn't care because I owned my house. I figured it would just hurt the people who borrowed too much, and banks who were dumb enough to lend to them.

But what happened was investment firms packaged those bad mortgage loans into "investment vehicles" called CDOs, which allowed the rot to spread throughout the entire financial system, and nearly brought it all down.

I fear the same may happen with crypto. At first, it was just going to hurt the people who bought bitcoin last or dogecoin last before the crash.. but now the investment firms are getting in on the action. They will find a way to repackage the crypto loans that already over-leveraged and a house of cards, and sell them to others, touting them as nearly risk-free, just like they did with CDOs (you'll own a tiny piece of a bunch of different mortgages! What are the odds they all default at the same time?) :oops:

Same with crypto. I see a monumental crash someday. Every post here about how one can loan out crypto to other people who use those loans to speculate on more crypto scares the hell out of me.

All the crypto-proponents continually compare those loans to savings accounts at banks, but leverage is where the real danger lies.

If a bunch of people or institutions owned bitcoin, and bitcoin crashed 50%, even 80%, those people would just have a lot less money.

The danger is when a crash like that takes them above 100% losses because of leverage. Where people default, and then institutions default, and other institutions (who may have had zero crypto, but were intertwined with institutions that did) are affected as well.

It happened in 2008... The longer this goes on, and the more the Wall Street geniuses get involved, the more danger I see.

I just don't know how to hedge against it...
I know we don't see eye to eye on crypto's merits, but I completely agree that there is risk in the system from overleveraging. The Fed is practically shoving leverage in people's faces because money is entirely free.

The one positive thing about crypto compared to the housing market is that it is so volatile, overleveraged positions are constantly getting liquidated. Because leverage gets flushed out with regularity, it's not so worrisome yet.

My worry is that family offices and hedge funds are taking on way more leverage in a completely hidden way. There is so much money in those investment vehicles now and they're just hidden from view. I was thinking more along the lines of Archegos with growth stocks, but it could definitely be the case that they are playing with leverage in crypto too.

I do have some confidence that a crash is at least a long ways off because Archegos blew up and hardly anyone noticed or cared.
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Re: Crypto mania !

Post by JoMoney »

I'm also of the opinion that the crypto boom will bust, and it's large enough that the fallout will have impacts to the broader investment landscape.

I don't follow it that closely, but the thing on my radar that could be most concerning is the amount of "Tether" USD Stable Coin that's involved with vast majority of crypto transactions, potentially huge amounts of leverage being used to prop it up, and lots of evidence of the assets backing Tether being dubious (to say the least.)
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Re: Crypto mania !

Post by Kookaburra »

gwe67 wrote: Sat May 08, 2021 2:42 pm
Green Street wrote: Sat May 08, 2021 2:40 pm
gwe67 wrote: Sat May 08, 2021 2:38 pm Pay attention and you will see that there are several similar crypto posts. You crypto fans can comment there and not create a new crypto post every day. Or maybe go to another forum where this is relevant.
Or you could pass by the post since you shouldn’t be interested right?
Oh, look....another new crypto post just started one minute ago.

viewtopic.php?p=5994354#p5994354
Yep ... but in my defense I also just posted a question about I-bonds, which is the polar opposite. I’m an enigma :)
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Re: Crypto mania !

Post by Green Street »

Kookaburra wrote: Sat May 08, 2021 2:59 pm
gwe67 wrote: Sat May 08, 2021 2:42 pm
Green Street wrote: Sat May 08, 2021 2:40 pm
gwe67 wrote: Sat May 08, 2021 2:38 pm Pay attention and you will see that there are several similar crypto posts. You crypto fans can comment there and not create a new crypto post every day. Or maybe go to another forum where this is relevant.
Or you could pass by the post since you shouldn’t be interested right?
Oh, look....another new crypto post just started one minute ago.

viewtopic.php?p=5994354#p5994354
Yep ... but in my defense I also just posted a question about I-bonds, which is the polar opposite. I’m an enigma :)
Lol
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wmvink
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Re: Crypto mania !

Post by wmvink »

JoMoney wrote: Sat May 08, 2021 2:56 pm I'm also of the opinion that the crypto boom will bust, and it's large enough that the fallout will have impacts to the broader investment landscape.

I don't follow it that closely, but the thing on my radar that could be most concerning is the amount of "Tether" USD Stable Coin that's involved with vast majority of crypto transactions, potentially huge amounts of leverage being used to prop it up, and lots of evidence of the assets backing Tether being dubious (to say the least.)
Well at least for the next 2 years, Tether will be transparent about their financials. The settlement with the NY AG included the requirement to provide quarterly reports.

There's already a bit of a premium on holding Tether over USDC or GUSD (interest on Tether is higher) so the market acknowledges there is some amount of risk there...
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JoMoney
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Re: Crypto mania !

Post by JoMoney »

wmvink wrote: Sat May 08, 2021 3:37 pm
JoMoney wrote: Sat May 08, 2021 2:56 pm I'm also of the opinion that the crypto boom will bust, and it's large enough that the fallout will have impacts to the broader investment landscape.

I don't follow it that closely, but the thing on my radar that could be most concerning is the amount of "Tether" USD Stable Coin that's involved with vast majority of crypto transactions, potentially huge amounts of leverage being used to prop it up, and lots of evidence of the assets backing Tether being dubious (to say the least.)
Well at least for the next 2 years, Tether will be transparent about their financials. The settlement with the NY AG included the requirement to provide quarterly reports.

There's already a bit of a premium on holding Tether over USDC or GUSD (interest on Tether is higher) so the market acknowledges there is some amount of risk there...
Apparently the disclosure requirements are due starting May 19th... coming up soon, will be interesting to see what comes out in the disclosures.
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Re: Crypto mania !

Post by Yesterdaysnews »

It’s unfortunate this bogleheads forum is being turned into a crypto forum… strange times indeed. I’ll just stay fully invested in my boring VG ETFs I guess.
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Re: Crypto mania !

Post by SlowMovingInvestor »

JohnDindex wrote: Sat May 08, 2021 1:49 pm What do the bogleheads think? Could a crypto bubble burst cause a financial panic ?
No. It might have an impact on COIN, a few speculative stocks such as RIOT, MSTR. Maybe a minor impact on NVIDIA and even AMD, TSLA. Possibly on some collectible markets (although it seems like crypto HNWs invest mostly in NFTs). Possibly a few hedge funds that have been playing with it.

But the impact on the real economy and 'real' financial markets should be minor, unless FI desks have large speculative positions in it (which I doubt). One side effect of the technical limitations and high gas prices of say Ethereum (see my previous posts) is that it's used very minimally for non crypto apps.
Last edited by SlowMovingInvestor on Sat May 08, 2021 4:11 pm, edited 1 time in total.
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Re: Crypto mania !

Post by make_a_better_world »

Financial markets will not collapse if the cryptocurrency markets dry up. Besides the crypto market being incredibly tiny in comparison, financial firms were at risk in the housing bubble because they had to hold toxic debt on their own books while repackaging to sell to the unsuspecting. And the regulatory agencies overlooked it because it was dealings in home mortgages assumed to be safe. These flaws do not exist in the same way in the cryptocurrency market. All that will happen is a tiny amount of wealth in the grand scheme of things will transfer from many to few.
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Re: Crypto mania !

Post by drk »

For what it's worth, crypto exchanges have started offering derivatives on actual securities ("tokenized stock trading"). If Bitcoin implodes again, that's where I'd expect the contagion to jump to real assets.
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Re: Crypto mania !

Post by SlowMovingInvestor »

Green Street wrote: Sat May 08, 2021 2:39 pm
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 ?
Isn’t it their money, so they can choose to do as they please with it? Even if the markets went down.... wouldn’t it be beneficial to you? Since you could buy VTSAX at a discount?
When did OP say they couldn't do as they pleased ? He just said he was concerned about broader impact. And a financial panic tends to bubble over into the real world, so it's not beneficial to anyone but those who undertake 'Big Shorts'.

Not that I think a financial panic is likely to occur.
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Re: Crypto mania !

Post by Jimsad »

My wife’s friend apparently is a crypto success story and my wife has been after me to buy Doge coin for a few weeks now
So we just opened Robinhood account to do so with Money we were willing to lose !
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Re: Crypto mania !

Post by Green Street »

SlowMovingInvestor wrote: Sat May 08, 2021 4:23 pm
Green Street wrote: Sat May 08, 2021 2:39 pm
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 ?
Isn’t it their money, so they can choose to do as they please with it? Even if the markets went down.... wouldn’t it be beneficial to you? Since you could buy VTSAX at a discount?
When did OP say they couldn't do as they pleased ? He just said he was concerned about broader impact. And a financial panic tends to bubble over into the real world, so it's not beneficial to anyone but those who undertake 'Big Shorts'.

Not that I think a financial panic is likely to occur.
So it’s not beneficial when markets panic, and you can pick up stocks or index funds at a better price?
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Re: Crypto mania !

Post by Jimsad »

Thanks to her , 1 % of our portfolio is in crypto’s now
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Re: Crypto mania !

Post by txhill »

Jimsad wrote: Sat May 08, 2021 4:32 pm My wife’s friend apparently is a crypto success story and my wife has been after me to buy Doge coin for a few weeks now
So we just opened Robinhood account to do so with Money we were willing to lose !
If you don't make a doge meme after you buy doge, you're doing it wrong. So please get to work
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Re: Crypto mania !

Post by wmvink »

Total market cap of all listed companies globally is ~$100T.
Total market cap of all crypto globally is ~$2.5T.

If crypto crashes to 50% of today's value, that wipes $1.25T off balance sheets and savings accounts everywhere. That's significant, in particular because it's such a liquid asset class (unlike e.g. real estate).

I would be surprised if it didn't have any effect on the real economy..... Just look at the housing market.... all of a sudden, everyone who can afford to buy in a certain segment because of their crypto holdings will now have to go one segment lower...
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Re: Crypto mania !

Post by livesoft »

There are currently 9 threads that have crypto in the thread title on my landing page for bogleheads.org.

It's CRYPTO FOMO!

I do not own any, but my spouse is asking about it.
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Re: Crypto mania !

Post by surfstar »

HomerJ wrote: Sat May 08, 2021 2:48 pm
telemark wrote: Sat May 08, 2021 2:35 pm If it turns out that large institutions, say someone like AIG, are making highly leveraged bets on crypto using what is supposed to be very safe money that belongs to other people, then I would worry because I've seen how that one ends. If a bunch of newly minted millionaires suddenly go back to not being millionaires, that worries me less because it doesn't seem like a threat to the overall financial system. But I might be wrong.
This.

I'm scared we're getting closer to AIG and company starting to dip their toes.

The crypto-enthusiasts see that as validation that crypto is a legitimate investment. I think that's naive. The big institutions want a piece of the big pile of money (U.S. Dollars) that is being generated. They don't care if it's legitimate or not.
Goldman Sachs executed its first cryptocurrency trades and formalized the set-up of its bitcoin desk on Friday, two months after the US bank announced that it would re-enter the fledgling market.

In a memo sent to staff on Thursday, seen by the Financial Times, Rajesh Venkataramani, head of major currencies, informed staff that the bank had “successfully executed” trades of two types of bitcoin-linked derivatives.


https://www.ft.com/content/5ec1d0aa-799 ... 7f7b44faac
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Re: Crypto mania !

Post by txhill »

livesoft wrote: Sat May 08, 2021 4:41 pm There are currently 9 threads that have crypto in the thread title on my landing page for bogleheads.org.

It's CRYPTO FOMO!

I do not own any, but my spouse is asking about it.
I have to agree the volume has increased here even just today. I've been talking crypto on this forum for a couple of months now and activity seems to have skyrocketed all of a sudden. Is it the Elon on SNL / DOGE effect? Maybe we're going to see the top of the crypto bull market sooner than later...
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Re: Crypto mania !

Post by SlowMovingInvestor »

Green Street wrote: Sat May 08, 2021 4:33 pm
So it’s not beneficial when markets panic, and you can pick up stocks or index funds at a better price?
Do you think 1929 was beneficial ? Or even 2008 ?

1929 is an extreme case, but market panics don't take place in a vacuum. And they don't always come back very quickly (as happened last year). For someone who's working, panics can impact their jobs, or the jobs/prospects of family members/children. Or their house values, turning them upside down and making it harder to move, as happened post 2008. Lots of layoff post dotcom crash or post 2009.

Those are far more important to most people than the ability to pick up a few shares at a discount. It took a long time for many stocks to recover from the dotcom crash, and many didn't recover. Now, if you're a Big Shorter or a vulture' funds that scooped up SFH at a discount, yes, you'll win big, but most people won't.

Even if my job were totally secure and I could make money from picking up index funds at a lower price in a panic, I would not want one simply because of the impact on those less well positioned.
Last edited by SlowMovingInvestor on Sat May 08, 2021 4:57 pm, edited 2 times in total.
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anon_investor
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Re: Crypto mania !

Post by anon_investor »

livesoft wrote: Sat May 08, 2021 4:41 pm There are currently 9 threads that have crypto in the thread title on my landing page for bogleheads.org.

It's CRYPTO FOMO!

I do not own any, but my spouse is asking about it.
Sounds like a few months ago with all those ARK ETF threads... then a 30% drop...
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Re: Crypto mania !

Post by SlowMovingInvestor »

surfstar wrote: Sat May 08, 2021 4:45 pm
Goldman Sachs executed its first cryptocurrency trades and formalized the set-up of its bitcoin desk on Friday, two months after the US bank announced that it would re-enter the fledgling market.

In a memo sent to staff on Thursday, seen by the Financial Times, Rajesh Venkataramani, head of major currencies, informed staff that the bank had “successfully executed” trades of two types of bitcoin-linked derivatives.


https://www.ft.com/content/5ec1d0aa-799 ... 7f7b44faac
It might just be standard arbitrage -- futures vs spot price. That would not be really risky.
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Re: Crypto mania !

Post by Jimsad »

livesoft wrote: Sat May 08, 2021 4:41 pm
I do not own any, but my spouse is asking about it.
Same situation !
I bought some to keep peace at home
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Re: Crypto mania !

Post by Green Street »

SlowMovingInvestor wrote: Sat May 08, 2021 4:52 pm
Green Street wrote: Sat May 08, 2021 4:33 pm
So it’s not beneficial when markets panic, and you can pick up stocks or index funds at a better price?
Do you think 1929 was beneficial ? Or even 2008 ?

1929 is an extreme case, but market panics don't take place in a vacuum. And they don't always come back very quickly (as happened last year). For someone who's working, panics can impact their jobs, or the jobs/prospects of family members/children. Or their house values, turning them upside down and making it harder to move, as happened post 2008. Lots of layoff post dotcom crash or post 2009.

Those are far more important to most people than the ability to pick up a few shares at a discount. It took a long time for many stocks to recover from the dotcom crash, and many didn't recover. Now, if you're a Big Shorter or a vulture' funds that scooped up SFH at a discount, yes, you'll win big, but most people won't.

Even if my job were totally secure and I could make money from picking up index funds at a lower price in a panic, I would not want one simply because of the impact on those less well positioned.
I guess that’s where we differ, I’ll pick up every share I can get my hands on as I did with 2008 and 2020.
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Re: Crypto mania !

Post by ballons »

HomerJ wrote: Sat May 08, 2021 2:44 pm Same with crypto. I see a monumental crash someday. Every post here about how one can loan out crypto to other people who use those loans to speculate on more crypto scares the hell out of me.

All the crypto-proponents continually compare those loans to savings accounts at banks, but leverage is where the real danger lies.

If a bunch of people or institutions owned bitcoin, and bitcoin crashed 50%, even 80%, those people would just have a lot less money.

The danger is when a crash like that takes them above 100% losses because of leverage. Where people default, and then institutions default, and other institutions (who may have had zero crypto, but were intertwined with institutions that did) are affected as well.

It happened in 2008... The longer this goes on, and the more the Wall Street geniuses get involved, the more danger I see.

I just don't know how to hedge against it...
I like your optimism that dog coins have a price floor that is greater than zero.

Start worrying if GAAP rules come out allowing dog coins to be treated as cash equivalents.

Sell rope when people want to hang themselves. Short the businesses boasting about their dog coin holdings.
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Re: Crypto mania !

Post by HomerJ »

Jimsad wrote: Sat May 08, 2021 4:34 pm Thanks to her , 1 % of our portfolio is in crypto’s now
Get it in writing that this was her idea. :)
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Re: Crypto mania !

Post by SlowMovingInvestor »

Green Street wrote: Sat May 08, 2021 4:59 pm
SlowMovingInvestor wrote: Sat May 08, 2021 4:52 pm
Green Street wrote: Sat May 08, 2021 4:33 pm
So it’s not beneficial when markets panic, and you can pick up stocks or index funds at a better price?
Do you think 1929 was beneficial ? Or even 2008 ?

1929 is an extreme case, but market panics don't take place in a vacuum. And they don't always come back very quickly (as happened last year). For someone who's working, panics can impact their jobs, or the jobs/prospects of family members/children. Or their house values, turning them upside down and making it harder to move, as happened post 2008. Lots of layoff post dotcom crash or post 2009.

Those are far more important to most people than the ability to pick up a few shares at a discount. It took a long time for many stocks to recover from the dotcom crash, and many didn't recover. Now, if you're a Big Shorter or a vulture' funds that scooped up SFH at a discount, yes, you'll win big, but most people won't.

Even if my job were totally secure and I could make money from picking up index funds at a lower price in a panic, I would not want one simply because of the impact on those less well positioned.
I guess that’s where we differ, I’ll pick up every share I can get my hands on as I did with 2008 and 2020.
2020 was an unusual case, because it was driven by a non financial markets event. But yes, I certainly wish that event had not occurred and the market had not crashed.

I continued my DCA through 2008. But I would never say it was beneficial and I'd much rather it had never happened because of the damage to the general economy and the lives, occupations and aspirations of many people. If you really think it was beneficial and want another panic -- well, I'd say our POVs are vastly different.

What about 1929 ? Do you think that was beneficial too ?
Last edited by SlowMovingInvestor on Sat May 08, 2021 5:17 pm, edited 2 times in total.
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Re: Crypto mania !

Post by HomerJ »

surfstar wrote: Sat May 08, 2021 4:45 pm
HomerJ wrote: Sat May 08, 2021 2:48 pm
telemark wrote: Sat May 08, 2021 2:35 pm If it turns out that large institutions, say someone like AIG, are making highly leveraged bets on crypto using what is supposed to be very safe money that belongs to other people, then I would worry because I've seen how that one ends. If a bunch of newly minted millionaires suddenly go back to not being millionaires, that worries me less because it doesn't seem like a threat to the overall financial system. But I might be wrong.
This.

I'm scared we're getting closer to AIG and company starting to dip their toes.

The crypto-enthusiasts see that as validation that crypto is a legitimate investment. I think that's naive. The big institutions want a piece of the big pile of money (U.S. Dollars) that is being generated. They don't care if it's legitimate or not.
Goldman Sachs executed its first cryptocurrency trades and formalized the set-up of its bitcoin desk on Friday, two months after the US bank announced that it would re-enter the fledgling market.

In a memo sent to staff on Thursday, seen by the Financial Times, Rajesh Venkataramani, head of major currencies, informed staff that the bank had “successfully executed” trades of two types of bitcoin-linked derivatives.


https://www.ft.com/content/5ec1d0aa-799 ... 7f7b44faac
Yeah, this isn't going to end well :(

"In our view, however, derivatives are financial weapons of mass destruction, carrying dangers that, while now latent, are potentially lethal."
-Warren Buffet
SlowMovingInvestor wrote: Sat May 08, 2021 4:56 pm It might just be standard arbitrage -- futures vs spot price. That would not be really risky.
I hope you're right.
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Re: Crypto mania !

Post by ballons »

HomerJ wrote: Sat May 08, 2021 5:02 pm
Jimsad wrote: Sat May 08, 2021 4:34 pm Thanks to her , 1 % of our portfolio is in crypto’s now
Get it in writing that this was her idea. :)
I wonder how big of a surge in divorces there will be from the dog coin bubble.

Going up = "I can do better with my 50% share!"
Going down = "I blame you for these losses!"
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Re: Crypto mania !

Post by livesoft »

This reminds of when we were newlyweds. We divided a stash of money and invested it in our own separate ways. The deal was: Whoever made the most money in one year would get to spend the gains or was it the difference? We both lost money. :(
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Re: Crypto mania !

Post by Robert T »

.
The frequency, breadth, and fervor in which crypto conversations are happening now is likely not a good buy signal.

Indeed it is interesting to see the evolution of some investors from pure index fund investors to almost pure crypto traders, each now speaking with a tone of authority and foresight on crypto markets.

In my view the investment process is to maximize the likelihood of achieving a target outcome (eg retirement income etc). i.e. to reduce the likely dispersion of outcomes around a particular target. Crypto currencies seem to do the opposite with its level of volatility dwarfing other assets.

I can see the appeal of Bitcoin in countries in macroeconomic crisis with few other options (e.g. Lebanon, Venezuela, and some other South American and African countries), where inflation is high double or triple digits, and businesses struggle to operate which itself increases the dispersion of likely outcomes.

But thankfully I have more options.

Robert
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Re: Crypto mania !

Post by ApeAttack »

Kookaburra wrote: Sat May 08, 2021 2:59 pm
gwe67 wrote: Sat May 08, 2021 2:42 pm
Green Street wrote: Sat May 08, 2021 2:40 pm
gwe67 wrote: Sat May 08, 2021 2:38 pm Pay attention and you will see that there are several similar crypto posts. You crypto fans can comment there and not create a new crypto post every day. Or maybe go to another forum where this is relevant.
Or you could pass by the post since you shouldn’t be interested right?
Oh, look....another new crypto post just started one minute ago.

viewtopic.php?p=5994354#p5994354
Yep ... but in my defense I also just posted a question about I-bonds, which is the polar opposite. I’m an enigma :)
The world needs more I-Bond threads!
May all your index funds gain +0.5% today.
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Re: Crypto mania !

Post by Green Street »

SlowMovingInvestor wrote: Sat May 08, 2021 5:04 pm
Green Street wrote: Sat May 08, 2021 4:59 pm
SlowMovingInvestor wrote: Sat May 08, 2021 4:52 pm
Green Street wrote: Sat May 08, 2021 4:33 pm
So it’s not beneficial when markets panic, and you can pick up stocks or index funds at a better price?
Do you think 1929 was beneficial ? Or even 2008 ?

1929 is an extreme case, but market panics don't take place in a vacuum. And they don't always come back very quickly (as happened last year). For someone who's working, panics can impact their jobs, or the jobs/prospects of family members/children. Or their house values, turning them upside down and making it harder to move, as happened post 2008. Lots of layoff post dotcom crash or post 2009.

Those are far more important to most people than the ability to pick up a few shares at a discount. It took a long time for many stocks to recover from the dotcom crash, and many didn't recover. Now, if you're a Big Shorter or a vulture' funds that scooped up SFH at a discount, yes, you'll win big, but most people won't.

Even if my job were totally secure and I could make money from picking up index funds at a lower price in a panic, I would not want one simply because of the impact on those less well positioned.
I guess that’s where we differ, I’ll pick up every share I can get my hands on as I did with 2008 and 2020.
2020 was an unusual case, because it was driven by a non financial markets event. But yes, I certainly wish that event had not occurred and the market had not crashed.

I continued my DCA through 2008. But I would never say it was beneficial and I'd much rather it had never happened because of the damage to the general economy and the lives, occupations and aspirations of many people. If you really think it was beneficial and want another panic -- well, I'd say our POVs are vastly different.

What about 1929 ? Do you think that was beneficial too ?
I wasn’t alive then, but I’m sure whatever businesses and regulation that came out of it lined up the recovery that came after. 1999 the same thing but if I had money then I’m sure I would’ve thrown many dollars at the market. Collapses tend to show vulnerabilities and they get patched up, part of the ups and downs of the market.
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