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Crypotocurrency

Discussion in 'Real Life Discussion' started by Ched, Dec 29, 2017.

  1. Ched

    Ched Da Trek Moderator DLP Supporter

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    I except everyone has heard about cryptocurrency by now. Bitcoin in particular has made the news lately.

    Disclaimer: I haven't been playing with cryptocurrency for long and do not truly know what I am doing.

    I expect there are people here who know a lot more about it than I do. Most of what I know I got from a trusted friend who helped me with the basics and a few online guides. Plus lurking around looking for what others seem to be investing in.

    But essentially there's three websites I use: Coinbase, GDAX, & Binance.

    Coinbase and GDAX are (apparently) owned by the same company. Coinbase is the user-friendly one with higher transfer fees. GDAX has lots better fees but you can't use your credit card there (but you can link a bank account) and it's a bit higher of a learning curve. These two websites only trade in a few of the biggest coins like bitcoin (BTC), ethereum (ETH), and litecoin (LTC).

    But you can transfer those currencies to another exchange to trade in the lesser known coins. I use Binance for this. I've heard lately that Ripple (XRP) and Tron (TRX) are two that might go up in value. So I can exchange my ETH for those on Binance.

    Right now I have a few hundred USD 'invested' in cryptocurrencies. Apart from some funds sitting around in the larger ones like BTC and ETH, I have small amounts in TRX, XRP, & STRAT. I'm most hopeful about XRP (Ripple) of those.

    There are others I'm interested in - like RaiBlocks (XRB) - that aren't available on Binance. If they turn up there I'll probably push a few dollars into them.

    What are you all doing with cryptocurrency? Got any suggestions on which coins to buy? Different websites to use? Shady discord chats to spy on for information? Just no one do anything stupid and put in money you can't afford to lose.


    P.S. If anyone wants to talk about -mining- I'd suggest a different thread. They're related but different enough I think that'd be best.
     
  2. T3t

    T3t Purple Beast of DLP Prestige DLP Supporter

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    I'm not going to give anybody investment advice, but the one thing I would be wary of right now is the influence Tether has on the market.

    Long story short (and this may contain inaccuracies, as I haven't spent a huge amount of time working out the finer details):

    Tether is supposed to be a "cryptocurrency" backed by the US Dollar - that is to say, every unit of Tether on the market should have a corresponding dollar in a bank account held by the company issuing new Tether. The "purpose" of Tether is to ease transaction costs/friction between different cryptocurrencies and markets. It's been around for a while on a relatively small scale, but recently the issuer has been putting a lot of it onto the market.

    The problem is that while they've been promising an independent audit of the backing USD for a while, they have yet to deliver. Additionally, recent leaks show that the people running Tether are the same people running Bitfinex, one of the current markets, and this was never disclosed. The way Tether is being issued is also very shady - they're closed for public sale, so nobody knows who's buying into it, but there's a lot of evidence that a few of the major markets (obviously including Bitfinex) are receiving it. The suspicion is that these major players are using Tether to pump up the value of Bitcoin (and other major cryptocurrencies) - either to purchase it with Tether generated "out of nothing", or to pump up the value of cryptocurrencies in order to profit from hype and play on the respective markets, or both (or it could be any of a million other potential scams).

    At this point is seems very unlikely that Tether actually has the USD backing it should, and when that collapses, you should expect a corresponding collapse in cryptocurrency prices as the inflated demand suddenly disappears. This is not really a secret, but there are a few factors keeping the current valuations of cryptocurrencies at sky-high rates:

    1. FOMO (fear of missing out)

    The meteoric rise of cryptocurrencies these last few months is a very tempting signal, even to people who've been paying attention to the field for a while. "What if it goes 10x again?" Well, who knows? It might! However, there's a finite amount of room for them to expand (as an upper limit, consider how much money gets moved worldwide annually; maybe a little more to account for increased wealth from reduced friction and novel financial instruments). My naive estimate is that cryptocurrencies have hit ~0.25% of that limit, but that estimate could be off by several orders of magnitude in either direction (it's more likely to be too high than too low, but there's probably also more room at the top for "expansion" of worldwide transaction volume than contraction).

    2. Public awareness

    I was getting ramen with a friend of mine a week ago around 1 AM and we were talking about crypto, and some random dude next to us interjected with his own opinions. He was not somebody who knew about this stuff five years ago, or probably even one year ago. When random people on the street are putting money into Bitcoin because it's a "sure thing" you know that the current demand is probably not reflecting the actual use-value of the technology. That said, the first Bitcoin futures market launched recently, so there's a better way to short it now. In theory that ought to impose the appropriate downward price pressure from people who think that it's overvalued (while also imposing an appropriate upward price pressure due to the financial stability added to the market).

    3. Governance

    Bitcoin has some pretty serious governance issues, leading to two forks and still no Lightning Network (though apparently they've released a public test version with an official beta coming out soon). This is a complicated topic and I'm even less of an expert on this issue than the space in general. If the Lightning Network succeeds it will significantly increase the likelihood that Bitcoin remains the dominant cryptocurrency for a while, if for no other reason than network effects.

    4. ???

    There are a bunch of other things that I'm not covering or don't know about.

    tl;dr: high likelihood that there is currently a bubble caused by several concurrent issues, but even if that's true, the "true" valuation of cryptocurrencies could be much higher than it currently is due to the available space for it to expand as a fraction of worldwide transactions/value store/other use-cases. This is probably a long-run thing, though.
     
  3. Inexistence

    Inexistence Seventh Year

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    Bought into ETH at $218, and got 1 of those.
    Bought into BTC at $2500, and got 0.1 there.

    So overall put in $500ish, and now it's... Above that.. Made about $1750 if I cashed out now, but I'm not planning to. All my investments are boring and in index funds, so I wanted to get the fun from crazy volatility with a little money.

    I want to hold crypto for a long time, mainly because I support the idea very strongly, and it's a combination of two of my favourite things, finance and computer security.

    A friend got in at the same time as me, but bought a $3k mining rig, and has pumped more and more in, and apparently he's gained about $20k this year as a result. Problem with this game is you'll never be happy, because you never put in enough money.
     
  4. Caversham

    Caversham Second Year DLP Supporter

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    I bought some BTC when it was at $70 a few years ago. I sold 1/2 of that at $700 and 1/4 at $10000, and hold the remaining. I bought ETH at $10 and sold 1/2 at $400 and hold the remaining. I'm now playing with house money and don't plan to invest/gamble any new money right now.

    Several concerns I have:

    1) The cryptocurrency markets are unregulated. T3t's Tether example above is one example of this, but there is also ample evidence that there is significant tape painting, wash trading, spoof orders, front running, etc occurring. All of these are illegal in other financial markets.

    For more information on Tether see these articles (registration possibly required):
    https://seekingalpha.com/article/4129543-bitcoin-one-way-go-true
    https://seekingalpha.com/article/4131159-regulators-must-investigate-bitcoin-tether
    https://seekingalpha.com/article/4133884-bitcoin-additional-suspicious-developments

    2) Cryptocurrencies have no intrinsic value since they don't generate cash flow. They operate under the greater fool theory, much like gold.

    3) The energy required to mine bitcoins currently exceeds the energy consumption of 159 countries and is on track to consume all of the world's energy by 2020. Obviously, consuming all the world's energy by 2020 won't happen, but mining cryptocurrencies that have no intrinsic value is a major environmental concern.
    http://www.newsweek.com/bitcoin-mining-track-consume-worlds-energy-2020-744036

    4) Cryptocurrencies will eventually be regulated and taxed by governments. See South Korea and Russia over the last few days.
     
    Last edited: Dec 29, 2017
  5. T3t

    T3t Purple Beast of DLP Prestige DLP Supporter

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    Yeah, these are things I didn't cover but are definitely problems (albeit problems that are probably possible to solve/mitigate with technological advancement).

    This is not how "value" works, even for traditional currencies. Whether or not that's a problem depends on how you think currency works in general, but it's less of a problem for cryptocurrencies (in general) since they can much more easily changed/created/adapted to address problems.

    This estimate is pretty sketchy. Even assuming it was true, a linear extrapolation into the future like that is extremely unlikely to be accurate. Also, that's ignoring any further technological advances in Bitcoin (see: Lightning Network) which can significantly reduce electricity use.

    We already have "regulations" and "taxation" in the US (IANAL and this is not legal advice): the SEC has ruled that ICOs are subject to securities regulations, and the IRS has ruled that gains from cryptocurrencies are subject to taxation (whether it's income or capital gains depends on how long you hold it before selling) and is vigorously enforcing their claim with the usual hamfisted tactics.
     
    Last edited: Dec 29, 2017
  6. Caversham

    Caversham Second Year DLP Supporter

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    Intrinsic value is the inherent, underlying value of a thing. Cryptocurrencies have no intrinsic value since they are essentially numbers in a computer. US dollars have no intrinsic value because they are pieces of paper. US dollars have value, not intrinsic value, because people have confidence in the government issuing them, and confidence that other people value dollars similarly.

    Your link is wrong, but my understanding is that the number of people reporting cryptocurrency transactions on their tax returns is most likely very small (even though it is illegal not to) and I believe the IRS will have significant problems enforcing collection for exchanges based outside of the US.
     
    Last edited: Dec 29, 2017
  7. T3t

    T3t Purple Beast of DLP Prestige DLP Supporter

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    Fixed link, thanks.

    W.r.t intrinsic value, I thought you were making a distinction between conventional currency and cryptocurrency. I agree that neither conventional nor cryptocurrency have any intrinsic value (well, you could always use conventional currency as tinder in those places where the legal regime allows it).

    I also agree that most people who have significantly appreciated cryptocurrency assets will not be inclined to voluntarily report their gains to the IRS. The current problem is that most major international cryptocurrency markets do not make it easy to withdraw funds as USD. The growing number of major retailers that accept Bitcoin as payment makes living "off the grid" in the financial sense ever more possible, but does little to make it easier to hide millions of dollars of usable USD from the IRS. I'm sure a clever tax lawyer might come up with some solutions, but I am not a tax lawyer (or any sort of lawyer). Unfortunately I'm also not in a position where I need to "worry" about minimizing my tax burden vis-à-vis Bitcoin.
     
  8. Darth_Revan

    Darth_Revan Secret Squirrel Prestige DLP Supporter

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    People should be a lot more leery of cryptocurrencies, especially Bitcoin, than they are at present. I think the market is wildly overvalued and driven by mindless speculation.

    My main concern is in who the Bitcoin miners are, and who is selling newly mined coins into the market. Forbes, I think, had an interesting article on this a little while ago. The tl;dr version is that mining is increasingly being done by shady characters who are selling the coins for real-world cash, and then using it for nefarious purposes. I think investors would be much less likely to buy into it if they realised it's possible they might be single-handedly funding a drug cartel, or the North Korean missile program, or some other crazy thing.
     
  9. Ched

    Ched Da Trek Moderator DLP Supporter

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    Before I traded the first time I looked this up, because I'm determined not to accidentally break any laws.

    Taxes FAQ from Coinbase for that site (and presumably GDAX as well). I'm not sure about Binance, but I see that you can export a complete Trade History - I am hopeful that will be enough for my CPA.

    I should also note that, like @Inexistence, I am playing with this because I find it sort of fun. I haven't changed the amount of funds I'm feeding into my retirement plan, etc. This isn't 'gambling' in the sense that going to a casino is, but getting in this late is definitely a gamble. The markets are (probably) artificially high. It's a lot more volatile than stocks are. There are loads of others issues as outlined above.

    But I'm hopeful that I'll end up with more than I started with, and playing with the smaller currencies really has been sort of fun.

    But because I'm looking at it for fun I wouldn't have gotten in at all if I was worried about breaking the law on accident with the IRS - not remotely worth it.
     
    Last edited: Dec 29, 2017
  10. Perspicacity

    Perspicacity High Score: 3,994 Prestige DLP Supporter

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    I bought several BTC on a whim back in the ~2013 time frame, using Coinbase (which was buggy as a platform at the time, as those who traded back then can no doubt confirm) and have been trying to sell off at least 50% of current holdings for over a month now. Coinbase has a limit of $10k/week ($15k/week if you do a separate authentication) per bank account for buys/sells, which is limiting. My day job requires a security clearance and that I don't screw around with instruments that'd look like suspicious transfers from foreign entities, so I can't just go to Wells Fargo, make a few dozen accounts, and cash out overnight. (I'm playing with fire as is with BTC traceability, having to explain hundreds of thousands of dollars of "where the fuck did this come from?" income in my reinvestigation.) I've modest holdings in Etherium and Litecoin as well, which have appreciated handsomely, though I'm holding them for now. No sense adding insult to injury.

    I've extracted enough out of BTC so far to cover my initial stake several times over. In all, not a bad ROI, though I tell everyone I'm not smart, just lucky. And I've tens of thousands of dollars of high-risk investments that didn't pay off and BTC could have easily been more of the same. Were I coming to BTC today, I'd not touch it. But back then, when it first started to be a thing? Why not take a chance? (Hell, I wouldn't be surprised if @Giovanni were a hundred-millionaire from his cryptocurrency endeavors back in the day.)

    Some of the fundamentals for BTC are not being talked about in the scornful media: Cryptocurrency will be the preferred way cannabis is bought and sold in the U.S. since they've no access to proper finance and banking channels. This is unlikely to change so long as the GOP controls all of government and Jeff Sessions leads the crackdown on cannabis.
     
  11. Immet

    Immet Seventh Year

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    For me, bitcoins as a cryptocurrency are bullshit until the time it takes to transfer money is less than 5 seconds. At the moment, the time it takes is anywhere between half an hour and 16 hours. (depending on how much you bribe miners to do your transactions first)

    Until it is an equivalent level of speed as using a debit card, then for the majority of people it is a cryptoinvestment rather than a cryptocurrency. Note that since a single bitcoin transaction currently requires six confirmations, each taking on average 10 minutes, this means that in my view bitcoin can never be a true currency.
     
  12. World

    World Oberstgruppenführer Moderator DLP Supporter

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    I put some money that had been lying around (just a portion) into Crypto a few weeks ago (when BTC dropped after hitting $20k). Like many I went through Coinbase and GDax to Binance. I‘m holding a number of coins, and am more or less enjoying the ups and downs.

    I don‘t trust Tether either- it‘ll probably drag down the market once it bursts
     
  13. Sully

    Sully Seventh Year

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    I'm really interested in pursuing a venture like this. Assuming that it doesn't all go to shit, the amount you get from mining is going to significantly decrease until we mine the whole 21 million bitcoins. Did your friend say what his electricity costs were like over the period of time spent mining? Supposedly, your bill skyrockets.

    Really interesting idea about some guy who setup a bitcoin mining farm in the desert using solar power:

    https://www.reddit.com/r/Bitcoin/comments/6kk5dp/i_am_mining_in_the_desert_using_100_solar_and_i/

    Any takers?
     
  14. Inexistence

    Inexistence Seventh Year

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    I don't know the full details, but his electricity bill about triples. He wasn't mining bitcoin, he mines ethereum and litecoin as far as I know. The main problem I have with crypto is the environmental impact, but I hear there are methods on the way that should stop this kind of thing.
     
  15. awinarock

    awinarock Heir

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    Tbh, I think investors really couldn't give a rats ass what their money is being indirectly used for as long as it's making them more money. That being said, it's true that a lot of reports are coming out that cryptocurrency is being used increasingly for shady shit and is likely to see an increase. This is only really important to the market that governments might start to impose regulations that might have a negative impact on the value of cryptocurrencies, if not outright try to ban them all together like China.
     
  16. Immet

    Immet Seventh Year

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    Of course it's being used for shady shit and going to increase being used for shady shit. It's literally impossible to buy something in less than half an hour and can take up to 16 hours of waiting (during which time the original possessor can cancel the transaction). Of course it won't be used for day to day transactions and will be mainly used when people are more worried about anonymity than ease which is mostly shady shit.

    Why is this a surprise to anyone? Just imagine going to buy groceries, getting to the counter, then waiting 2-3 hours for the register to acknowledge that you've paid for the item. Or even just online if Amazon stopped doing Prime or next day deliveries because it can't reliably make sure it receives money before it sends it for delivery.

    If bitcoin can't be an alternative currency (and it can't if the latency stays variable between 30 minutes to 16 hours) then the current valuation based on being an alternative currency in the future is wrong and it is an overvalued bubble based on illegal activity and speculation.

    I'd love for this to be wrong, so if any of you can explain why this logic is wrong it would be appreciated.

    (and before someone points out that cheques are a method of payment that can bounce, they can't be used online and more and more shops refuse to accept them. It was planned to stop using them altogether 2 years back until they changed plans to wait out the older generation to die before ending them)
     
    Last edited: Jan 1, 2018
  17. awinarock

    awinarock Heir

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    It's value goes beyond just anonymity. It's nice to have some backup currency (that can be used anywhere) on hand in case the currency of the country you're living isn't worth the paper it's printed on.
     
  18. Darth_Revan

    Darth_Revan Secret Squirrel Prestige DLP Supporter

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    That's why you have reserve currencies, like dollars, euros, or pounds. Bitcoin is useless as a reserve currency.
     
  19. Immet

    Immet Seventh Year

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    You've missed what I am saying.

    It's value as a backup currency is terrible, because it's value as a currency in itself is terrible, because it takes too long to transfer money.

    I'd like an explanation as to how waiting up to 16 hours to transfer money does not stop it being used as a useful currency face to face or stop it being a useful currency online for next day deliveries.
     
  20. Johnnyseattle

    Johnnyseattle Auror DLP Supporter

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    What am I doing with cryptocurrency?

    Hoping it all dies, so video card prices will go back down again, and I won't have to wait a month or more for one when I do actually order it.