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?)
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...