this post was submitted on 13 Nov 2024
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No it would not prevent the 2008 crash however if you had some money in a cryptocurrency you would be cushioned from some effects of the fallout. Not a replacement, just an addition. Having an alternative is the draw.
Hard disagree, it's evidence of its effectiveness and maturity. No primitive financial system would be capable of being used for:
Financial systems are primarily tools for fraud and zero-sum transactions, there's a line there for what is and isn't legal which is decided by the government, but it's ultimately all just taking money from one place to another and someone loses.
I had my money - which at the time include the proceedings of working a few years in Finance - spread over 3 bank accounts in 3 countries back then and came through it all with no loss whatsoever.
Further, crypto is so stupidly volatile that even stocks are better at protecting your wealth because you're actually less likely to see half its value gone in a week with stocks (incredibly unlikely, even, if you get a tracker fund on a major index).
And don't get me started on the ultimate most conservative (literally capable of surviving the collapse of modern civilization) wealth protection thing around - gold.
The point being that unless you expect the collapse of modern civilization (in which case you might try gold or, even better, tradeable essential needs like the kind of food that doesn't spoil easily such as dried pulses), the best way to safekeep your wealth is as usual Diversification, with a focus on things with a stable value, which crypto is definitely not.
This volatility isn't something inherent to all cryptocurrency - bitcoin and eth and pump and dump cryptos are just especially hot speculative assets for people who enjoy holding bags and pump and dump YouTube grifters.
Tradeable essential goods aren't a good basis for currency, they would be your best bet without the internet, but with the internet in such a collapse cryptocurrency could actually work.
Diversification is not a concept in opposition to cryptocurrency, the former is a viable financial principle for savings and investments, the latter is one type of asset (a currency) that someone can hold if they choose to if they believe that centralisation of financial institutions and growing connections between corporations and governments is a risk - for instance I would not expect S&P500 to survive a major climate or landemic catastrophy/incident, world war, especially with protectionism, and maybe I'm an alarmist prepper but while remote, these things are growing increasingly likely or if the oversight of the powers that be is undesired e.g. such as with buying drugs on the internet.
Ultimately it all comes down to that.
Cryptos are inherently volatile because they're natural Ponzi-schemes with no oversight hence no crack-downs by the Law, and have low liquidity - they pull ill all manner of greedy types, suckers and swindlers and naturally end up with boom/hope-bust/fear cycles which have large movements due to the low liquidity of them as an asset. They're also far easier to manipulate with very little investment, especially the smaller ones (exactly the ones that you claim aren't as volatile).
The Tech per se doesn't make so, it's what it allows crossed with human nature that makes it so.
Tradeable essential goods are not supposed to be currency, they're supposed to be for consumption and bartering if shit really hits the fan. I was responding to your point on using cryptos for wealth protection and now you've moved the goalposts to "currency". Yeah. barteable goods aren't good currencies, which is why we have currencies for trading rather than bartering as was was done before currencies were created.
As for the S&P 500 dying, how do you expect crypto would survive a scenario that causes that outcome, considering that the companies that hold and maintain the Internet infrastructure, from consumer ISPs all the way up to LVL1 providers are almost all publicly traded companies? If the S&P 500 dies that means companies are going bust left and right and in that kind of situation the networks needed for crypto would simply stop working (plus a lot of other infrastructure too, but the most complex and interconnected stuff would go first) and people would be down to hard cash and bartering.
The Internet might have originally been designed as ARPANET, a network supposed to survive nuclear war, but the modern Internet is a completely different beast and even ARPANET wasn't capable of maintaining connectivity to consumer homes in the event of a catastrophe, it was only supposed to keep an small number of nodes connected.
Crypto is massively dependent on modern high-tech infrastructure and would collapse well before any currency that still has notes and coins.
As for the not quite so bad stuff, the worst crash of the S&P 500 ever had less price movement from top to bottom (which might take months or even years to fully play) than any normal month for Bitcoin.
Finally, indeed Diversification can include crypto, my point was that for wealth protection purposes you can simply diversify with traditional assets to create a robust wealth protection mechanism - just as I protected myself from the 2008 crash by merely spreading my assets across different banks in different countries - (unless, that is, you're trying to protect yourself from something so bad the S&P 500 dies, in which case as I explained above and in my previous post, it's down to stuff like hard cash, gold and bartering) and crypto won't actually add any security to a diversified wealth protection portfolio, quite the contrary since it's too infrastructure dependent to work in the worst situations and too volatile to maintain a steady value in normal times and mild to bad situations.
Compared to "traditional" Finance assets, crypto's wealth protection ability is somewhere between Stocks and Derivatives and the latter are generally not sold to customers who aren't considered sophisticated exactly because Derivatives can be very very risky (worse than Crypto, even, if we're talking about stuff like Futures).
There is absolutely nothing "natural Ponzi-scheme" about cryptos inherently. They're obviously used as pump and dumps all the time but this is not inherent to the technology.
Glad you're somewhat familiar with the history of trade.
Hence if currencies die again, cryptocurrency is a viable alternative as a currency, which barter goods are not an adequate replacement for.
Idk, satellites don't really require daily maintenance in a best case scenario, nor do undersea cables, I fully expect the internet to outlive humanity altogether.
I simply don't agree with any of this whatsoever. Again, gold and bartering won't make good currency, currency is currency - like cryptocurrency or fiat currency - diversifying so not all your currency is directly dependant on the government is pretty sound financial principle. You can invest into gold but in catastrophies your attempt to barter or otherwise liquidate these assets will be troublesome. It just makes sense to me, but I'm not econ or finance, I'm a compsci.
Nevertheless I appreciate your perspective, you've definitely given me some food for thought for hedging my bets in the future.