Swiss bankers warn: Three quarters of retail Bitcoin investors are in the red Somewhere between 73 and 81 percent of retail Bitcoin buyers are likely to be into the negative on their investment, according to research published Monday by the Bank of International Settlements (BIS). In other words: the Bitcoin they bought is now worth less. Bitcoin is down 73 percent in the past year, and up 155 percent …
"It's a mystery, given that people don't generally use cryptocurrencies to make payments, to measure value, or to finance real-world investments"
I guess it's for the same reason folks buy lottery tickets with odd of one in many millions of winning - the dream of big bucks for no effort expended. The massive initial rise in notional value of Bitcoin rang the gamblers' wake-up bells and, just like in a casino, the prospect of losing doesn't generally get anything like as much attention as the fantasy of winning.
Sixty-odd years ago my father came to the conclusion that there was no easy way to beat racecourse bookmakers, and instead became a part-time one. Fast forward to the mid 1990s and along came the UK National Lottery. Now, in any horse race the winner will generally come from the first half-dozen in the betting; outsiders rarely win. The people who bet on outsiders without special knowledge are what is technically known as mugs and their money, the mug money, was a bookie's bread and butter.
Quite quickly after the National Lottery came into being, the mug money evaporated and has not come back. The morons who will bet on anything are not only stupid but lazy with it, and given an easy way to lose their money took up this golden opportunity with cries of great glee.
Crypto investors now are just another flavour of mug money. They are idiots and they are going to lose their investments, they just haven't realised it yet.
With the lottery though a single ticket can get you those millions. With bitcoin even if you are deluded enough to believe you will get a 100x return you'd need to invest tens of thousands to reach 'millions', let alone the 'billions' of the recent huge US lottery jackpot.
That's the problem with 'investments' like bitcoin, short term success like seeing your initial stake double in six months leads you to make stupid decisions thinking that will continue. You tell yourself "if only I had put more money in, that was a mistake I won't repeat" and throw caution to the wind. Everyone who plays the stock market even a little bit has bought a big winner and wished they'd been more bold and bought a larger chunk - or decided that winning would continue and ended up giving back their gains and maybe more.
With the lottery it doesn't work that way, you don't hit a $10 winner one week and think "wow I'm trending upwards, I should buy two lottery tickets next week!" It is pretty much all or nothing, winning means either you win the big jackpot you dream about or you get the only winning you're ever likely to see - you win enough to fund your ticket purchases for the next few weeks/months. Very very few see those "intermediate" prizes in the thousands, to the point where they could eliminate them and no one would complain.
The only difference between a smart person and a dumb person is the smart person knows how dumb they are.
Greed has nothing to do with it. Since 2008 young people and those formerly known as young, now middle aged have had sweet FA to invest in other than crypto because it is frictionless. You don't need a mortgage, you don't need a loan and you don't need a broker. You just need a few quid.
What is at play here is the massive divide between those that understand how to trade and follow markets and those that don't. Trading should be something taught at school as well as understanding tax, budgeting and other financial tools and skills...unfortunately none of this is taught at school which is why the poor will remain poor.
>Trading should be something taught at school
It is. It's taught in posh schools, to the idiot daughters/ sons of aristocrats and billionaires, who then get jobs as CEOs in merchant banks, or fintech, or whatever dodgy money laundering outfit their friends own.
Shhhhhh. Quiet. It's a gooooooood thing.
>It is. It's taught in posh schools, to the idiot daughters/ sons of aristocrats and billionaires,
They've "got people for that". The system isn't unlike a smaller central American country where a handful of families own the place, the middle class are primarily employed to service and defend their needs and the mass are generally ignored (unless they start causing trouble).
I'd actually advise small people to avoid 'markets' since they've long ceased to be a way of accumulating value and now merely provide raw material for spivs (sorry, "the financial services industry"). Before about 2000 investment was relatively boring, it had its ups and downs downs but over the long term it reliably earned about 8%. This is the sales line you'll get from a financial adviser today and the graphs (conveniently starting at the bottom, typically around 1930) will show this. After the great liberalization -- sorry, "modernization" -- of trading in the 80s and 90s returns have been more spotty, you need now to buy into something tangible and productive (resources like land or water, for example) and definitely avoid all these second and third order funds that claim to trade in this and that but actually are just part of a volcano of worthless paper.
Advising people to avoid the markets is very daft. Do advise against stock-picking or trying to beat the market, people should simply invest in a global tracker with the lowest possible fees (Vanguard for example).
For anyone in the UK I suggest taking a look at the personal finances blog monevator.com for how to best make your money work for you. Being on top of your finances is priceless.
That means he grew up if not rich at least very upper middle class and privileged, and probably got the genetic advantage of a high IQ on top of that.
That opens a lot of doors, and insured he had a network of friends around him who had plenty of disposable cash to invest and get his scheme off the ground.
Someone who grew up in east LA, born to a single parent who worked three jobs to get by wouldn't have that education or that friend network to get him off the ground. Unless he had a lot of friends who were drug dealers, but they aren't interested in 'investments' or anything that would require converting their cash to something else and risk attracting the attention of authorities.
...because it is frictionless...Right this moment the bitcoin mempool is clogged with tens of thousands of transactions as all the exchanges that haven't yet failed suffer bank runs. It's going to take a while to get through that backlog at an average of 4-5 transactions/second.
You can give your transaction a better chance of succeeding by paying a higher fee, but in a situation like this how do you know how much of a fee you should pay? Frictionless indeed!
I would also be surprised if it's limited to Bitcoin. My hunch is that most retail investors lured in by booming markets lose money, whether that's in crypto, property or the stock market. There's apparently dozens of programs I keep getting offered / spammed to make a fortune trading my own stocks, bonds, swaps, futures, all stuff I have no idea about and therefore wouldn't touch with a bargepole. But I guess there are many people sucked in by the idea that they're cleverer than the people who actually do it for a living and know their stuff inside out.
Or they're naturally drawn there because it's the path of least resistance?
If you want a house, you need a mortgage...which needs a good credit score...which means you have to have had debt in the past. You also need a sizeable deposit.
If you want to buy stock (and actually own the stock with associated dividends, not a virtual portion of a stock that has been loaned to you) you need a broker or a management fund...who will require a minimum deposit and various other minimum thresholds. You also have to deal with the fact that being a retail stock investor comes with various disadvantages that the "further ups" in the industry don't have to deal with, such as "trading hours" and so on. We saw this in action with GME...all the skullduggery that happened out of hours to "fix" the market...the retail trading desks shutdown "temporarily to resolve technical issues" etc.
Now if you want to buy crypto...you just need a few quid and an internet connection. Credit score? Irrelevant. Minimum deposit? There are none or at the very least, they are extremely low.
I think there is a significant proportion of people that invest in crypto because it is literally the only thing they can invest in and I think the attitude with those folks is that they might as well take a risk and invest in something, than do nothing. Doing nothing guarantees no results, doing something, even if it is high risk, still has a chance of returning some sort of result.
This reminds me of a joke about a guy that kept praying to God to win the lottery. A bloke called Dave...every week, he'd get down on his knees and pray his ass off for hours to win the lottery, he made promises to help people, share the winnings and so on, he didn't want to win for selfish reasons, he just wanted to live comfortably and to help those around him...every week "please God, if only I could win the lottery, all my problems would be solved and everyone around me will be better off!"...eventually after a few years, Dave dropped to his knees and started on his final prayer..."God, fuck you, it's been three years, I've prayed every week and I still haven't won the lottery, I'm signing off and giving up on you!"...at that moment, the clouds parted above Dave and a large angry beardy face appeared...his voice boomed "Dave, you stupid fucking bastard...you have to meet me halfway and at least buy a fucking ticket!".
If you want a house, you need a mortgage...which needs a good credit score...which means you have to have had debt in the past. You also need a sizeable deposit.
I bought my first house over the pandemic. Having been taught to maintain my accounts at a credit and not buy things I can't afford, I had never had any debt. (even for cars etc; which have always been run on the basis of bangernomics).
By virtue of obtaining a mortgage I think that I can say with reasonable certainty that you do not in fact need to have had debt in the past, and of course the size of the deposit is proportional to the value of the house, so if you buy something on the lowest end of the property market which needs work then it'd work out at under half the price of a new house on the other side of the road which needs work. (to finish it; which should probably have happened before the owners moved in....)
I'm guessing you have had debt, specifically a credit card. If you use a credit card like I do, essentially just as a way to make payments with all bills being paid off in full as soon as they come in, this counts as repeatedly taking out debt for a few weeks and successfully paying it. This establishes a history of credits without you having to pay any interest and is one of the safest way to increase a credit score. You are more likely to have gotten good credit terms with a history like that than if you have never used a credit card and literally have no credit record for banks to look at. You could have gotten one even under those conditions just with information about your job, savings, and income, but given that you're online and probably in a developed country, I think it's likely you have a credit card somewhere that you use.
Yes. Depending on your country, they may be more or less common, but about 62% of adults in the UK have one. Other countries vary, from Canada's 83% through the U.S.'s 66% and Germany's 57% to India's 4% (it goes further down, but I'm looking for countries where most El Reg readers are). Perhaps you're in one where credit cards are less common, but although you don't need them, they're reasonably common in many places.
I used to have one, back when finding yourself in a strange land without luggage / passport / money was a bigger annoyance than it is nowadays, but one that could be solved by walking into a hotel and asking them to put you through to American Express who would then sort you out in minutes.
I'm guessing you have had debt, specifically a credit card.
And you'd be wrong. Visa debit card.
The bank simply turned around and asked for a bank statement demonstrating my claimed salary arriving into an account for a number of months, and also my anticipated expenditures to be sure that I could afford the loan.
At one point, setting up a relationship with a broker did require the minimum deposit that you claim. Today, not so much. Online trading platforms have significantly reduced minimums and fees such that several of them have values of zero for both. Trading stocks or other exchange-traded things for a retail investor is significantly easier than cryptocurrency in many ways, although it's not really that more likely to work out. People who are new to investing often don't know what they are doing, and that holds true for stocks and cryptocurrency. Stocks are less volatile most of the time, so they're less likely to lose everything immediately, but not guaranteed at all.
Your reference to GME (to other users, an American company GameStop which was talked up by an online message board and had a surge in activity in 2020) suggests you should already know this. After all, people were buying that stock without having a clue about it. Some people suggested a reason the company could have more value. Their suggestions weren't understood and could have been lies designed to get others to buy it and increase the price so that the original buyers could sell at a profit. A lot of people made money from that. A lot of people lost it. The stock is trading 94% below its peak during that craziness. This is the chaos that comes from people gambling (it could be called investing for people who studied the situation, but since they didn't, it's no different) with things they don't understand and, in most cases, make no effort to learn about. If you put a lot of your money into something, it's useful to know something about it.
Own three houses - never had a mortgage, bank loan or credit card debt older than a month. Worked hard in two jobs at once, saved, lived frugally and built a business in IT with an initial purchase of a PC and a printer. Still living in a (very nice) rented house while the others bring in rents.
You've seen stories in mass media for a couple years talking about how people are getting rich in this new market that "will never go down", that's the time to get the hell out!
That was true with the day trader boom in tech stocks in the runup to Y2K, that was true with the house flippers in the runup to the 2008 crash, and that is proving to be true with the cryptobros pushing bitcoin.
The problem is you don't see and understand the pattern until you've lived long enough to watch it happen several times. That's why most of the day traders buying and selling Enron were young, most of the house flippers taking NINJA loans were young, and most of the crypto traders betting their future on bitcoin were young. The people who got burned day trading Enron a couple decades ago were no doubt staying far away from bitcoin.
Wait another decade and Gen Z will see its own bubble. There's no way to predict in what, but it will allow them to feel like they are at the forefront of a new paradigm and us old farts warning it is a bubble are just too backwards to see the future clearly like they do.
The canonical work is Charles Mackay's "Memoirs of Extraordinary Popular Delusions" from 1841.
The 1852 reprint, now titled "Memoirs of Extraordinary Popular Delusions and the Madness of Crowds" is available on Project Gutenberg. It is well worth a read.
For folks who prefer copy/paste to point&click:
https://www.gutenberg.org/files/24518/24518-h/24518-h.htm
They invest in it because it's the only thing they can invest in.
Want a house? Fuck you.
Want to buy tangible stocks? Nope, it's a loaded market that works in the favour of funds and brokers and requires masses of capital to get anywhere.
Want to start a business in a recession? Nope!
Want to chuck £50 at a shitcoin and hope for the best? Why not?
Some good advice - although obvious - from an investment fund manager was "decide before you start whether you are investing or speculating because the stock market is a very expensive place to find out.
The crypto market has proved to be an even more expensive place to find out.
Shill 1: In these uncertain economic times it can be difficult to make decent returns which is why a broadening of your portfolio can really help.
Shill 2: What do you recommend?
Shill 1: For me the answer was crypto. I don't work anymore because for my $750 investment I am getting an $11,500 a week return.
Shill 3: Same. I use Crown Prince [redacted] who is authorised by The Nigerian Central Bank.
Shill 4: I do, too and his fees are so low...
On and on it goes.
Losses are only realized upon sale
Surely you mean "gains are only realised upon sale"?
Bitcoin has literally zero underlying value. At least with shares you own a piece of that company, with fine wines you own something that hopefully tastes nice and with art you own something that's pleasing to look at. Until and unless you can palm bitcoin off to an even greater fool then everyone's sitting on a loss.
I suppose, but those "ownerships" aren't exactly very useful. With a stock, you own a piece of a company that will never listen to you about what it is doing and which the company can damage with little risk. With wine or art, I hope you actually bought it to enjoy that aspect, because if you bought either with the hope of making money and you can't, having an expensive liquid to drink won't help much if you don't appreciate the qualities that make it so expensive and you can get something nice to look at for much cheaper. Every investment comes with some risk, so I wouldn't automatically assume that something having a more obvious tangible value means that much. This doesn't mean that cryptocurrency is good (I recommend that nobody buys it as an investment), just that tangible value is no guarantee of anything.
There is in the UK (which I didn't discover until after leaving there) an exemption on capital gains tax for manufactured objects. If you buy a handcrafted or jewel encrusted watch and let it sit, you can sell it on without paying the taxes you would for the jewels alone. Classic cars are another area that benefits, if you can resist the temptation to thrash it round the countryside on weekends.
And Tesla? Not any more!
In Feb 2021 they spent $1.5bn on bitcoin and announced they'd start accepting bitcoin in payment. In May 2021 Musk tweeted that they weren't accepting bitcoin any more (he didn't say how much they'd taken in the three months). By July 2022, Tela had offloaded about 75% of its holding and overall, at the price of bitcoin then, was down $106m.
"And this group ends up fueling the profits of larger investors, who sell their holdings as new market participants drive up the price."
Like, you mean, a Ponzi schema ? Oh, the shock !
"Hughes observed in his letter that speculators would get better investment results from gambling in a casino, where a mere 56 percent of players lose "come" bets in craps or 58 percent lose playing basic strategy in blackjack."
Yep, because in normal casino gambling, you can know the odds. In the case of crypto, you'll never even estimate them, cos everything is invisible.
No, not like a Ponzi scheme. It could be like a scheme, but the specific type would be a pump and dump scheme. The different schemes have very different executions which leads to differences in detection and recovery. Importantly, a Ponzi scheme requires a central operator taking Ponzi's place, and a pump and dump scheme can work without one with individuals working, either in concert or without coordination but to the same effect.
It might also not be a scheme at all, given that the major difference between a pump and dump and a bubble is about the private thoughts of participants. Definitions are important.
Bitcoiners are not investors; they don't mind the volatility. Just sayin'
Price is only relevant if you sell back into your homeland's currency. Or use it to pay for goods or services.
But as bitcoiners are not investors, they don't like getting rid of their "better" money and just sit on their stashes.
As 90% is in circulation and about half of that hasn't moved for years: most wallets are in the plus in relation to the current price. Why should they care?
Bitcoin is not a way to get rich quick. You need the casino cryptos for that (and accept your losses that come with that circus)
most wallets are in the plus in relation to the current price. Why should they care?
They're not 'in the plus' until they come to sell. Currently all they own is a few long random numbers which have literally zero value unless there's a greater fool round the corner willing to pay. If 3/4 of new 'investors' lose money then pretty soon there won't be any new investors. Given that new investors are the only thing giving bitcoin any value whatsoever it will drop very quickly when there aren't any.
The decline will be a bumpy ride with ups and downs but the realisation does seem to finally be dawning that bitcoin is nothing but another ponzi scheme.
> They're not 'in the plus' until they come to sell.
Correct. And that's just it. They don't even want to. It's a mindset that you have not reached and maybe never arrive at, considering the amount of misinformation that's going around.Understandable also, with all these crypto gamblers failing using their favorite cloned currency of the day.
In the mean time, banks, large companies and big established investors and even governments are trying to get more and more bitcoin on their balance, silently as they don't want to push up the price. You can follow the money literally on the blockchain and tie it to their official reports.
Developing countries have never been able to tag along financially and most of their currencies get debased quickly. It's not their governments that step into bitcoin, but their population does. It's a groundswell you will not find in the western financial press or hear about from trendy youtubers.
I don't mind the downvotes either. It's ignorance playing out. Let's see where we are in 10 years' time.
Just a small follow up: as early bitcoiners have already claimed most, it's not them that are "investing". It's the smart money right now, scrambling to get a position in what's left on the table and still to be mined the upcoming 100 years.
Don't even know why I'm explaining; whispering when the world is burning won't help much. Maybe someone without banking access but with a smartphone picks it up and help themselves to a commercial foothold...
Many people no longer trust the Fiat money system, because of crazy zero percent interest policies.
Bitcoin is finite, which makes it an attractive Wealth Store. Similar to Gold, Silver, Platinum,
If the central banks find a way back to Deutsche Mark, people will again invest in cash. In the 80s, DM was as good as gold!
I can still.remember being told how an interest rate of 3% was dangerously low. Now we have seen 10 years of zero, consequentially massive inflation. As predicted.
State oversight of banks has been craptastic and no criminal banker was ever thrown into jail. Not even the bookcooker FULD.
We now reap the fruits of lax oversight.
Think of all the hard working toiling scammers applying ransomware in the mine faces who rely on crypto to earn their daily bread. They may get hurt when the price drops suddenly - their $1 million haul suddenly worth only $200K. Let's not forget all the hard working scammers, drug lords, tax evaders, and sanction busting weapons dealers whose sweat provides the fundamental value of crypto in the first place. Perhaps crypto should be nationalized. Maybe it already effectively is because enough politicians have their fingers in the toilet bowl.
A clean flush is what's needed.
> Bitcoin is down 73 percent in the past year, and up 155 percent in the past five years.
How can it go down by more than 100%?
If you paid X amount of money for a Bitcoin and the price of Bitcoin reaches zero (which I don't think it has, so far) then you lose 100% of your "investment". How is that 155% calculated?
It can't go down by more than 100%, but the sentence refers to it going up by more than 100%, which is more possible. It went down by 73%, which is within the 0-100% possible range for it going down (unless you're willing to have it go down by a negative rate instead of going up).
That took while to parse as well
I think they are trying to say (rather badly) that the price today is 155% higher then it was 5 years ago, but the peak was a year ago and since then it has declined 73% to reach today's price (5 years + 155%).
The ones who have lost are those that jumped on during the surge to the big peak a year ago, causing the price to surge even more (assuming they hung onto them hoping for an ever higher price), whilst those who have held BC for >5 years were cashing in to make a killing.
So which one are you choosing, Bitcoin or CBDC’s?
This isn’t a joke, this is the reality. People are buying Bitcoin because they don’t want to be slaves controlled by the government’s CBDC. 105 countries are testing CBDC’s and governments want to attach it to digital ID’s and your carbon footprint.
This report is the continuing FUD to scare people away from Bitcoin adoption. The FCA saying it’s bad yet banks are buying loads of it.
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