Public Makes Millions on Plunging Crypto
cepr.netWhat a weird biased tone throughout this whole article
What is weird about it?
That shorting is terrible: there is literally no limit to what you can lose and so investors are absolutely famous for losing literally everything with often very few short positions.
So shorting should come with a lot of warnings.
How much is “the public” making? The title of the post says millions. The title of the article says trillions. The second paragraph of the article says not trillions. Sheesh
The latent argument is that crypto leads to inequality, and the low performance of crypto leads to more equality.
Equality in itself is good for the public.
However, i don't think this is a reasonable perspective. Naturally, it should also extend to stocks and real estate.
The difference being that stocks and real estate have at least a tenuous connection to actual production. Crypto has none.
> The latent argument is that crypto leads to inequality
Uh, no..? The argument is just what the OP says it is: 'investing' in crypto does nothing productive for the real economy and thus is useless to society.
Uh, you didn't read the article?
> The gang would be able to buy all sorts of things with their counterfeit money...
Formally it is not counterfeit. The issue is that you afford buying power to some people that others are not afforded - inequality.
Crypto is a zero sum game. "The Public" can't be making millions on aggregate.
Probably something like 90+% lose over longer term. And you make nothing until you sell.
Explain to me how crypto is zero sum? It can be infinity rehypothecatated..
Crypto is a box where a bunch of people put money in and get exactly the same amount out (just distributed differently).
By that logic even the Stock market is a zero sum game.
That's not true. The money you use to buy stocks gets you an ownership interest in a company that creates value. The money you put into crypto gets you a line on a distributed spreadsheet.
The money that comes out of your ownership share is tied to the success of the company, through dividends and buybacks.
That depends if you are using crypto as 1) a store of value; 2) a medium of exchange; or 3) an alternative to permission-based monetary policy. All of it depends on the jurisdiction of the fiat-to-crypto and/or crypto-to-fiat transaction.
The entire crypto market cap is about $2.8T, which makes it about 75% as big as Apple. Would the same argument make sense if the author were to say Apple employees alone "push up prices for houses, resort hotels, and all sorts of other things they do with their money". Kind of a stretch if you ask me.
But apple makes (at least in theory) a useful product that consumers value. As is pointed out in the article.
Crypto provides banking services (savings, moving money, exchanging overseas money, pensions, mortgages, ...) which in a lot of countries are normally entirely exploited by the government to the point that crypto is far superior. And yes, of course that means it's for dodging taxes, moving criminal gains, and dodging sanctions by Russia and North Korea.
But in many countries "exploited" means that the country is so corrupt that "yes, but your crypto savings can disappear overnight" is not a very good argument against crypto, because the normal system has the same problem. In some countries the very currency of the country itself has that problem, and it's not always hyperinflation. For example, I've heard quite a few times from Chinese people that they prefer bitcoin over Yuan, just for the ability to dodge the banking system. Apparently one factor is that normal people can't use Yuan outside of China without very strict limits (which is another instance of "why does anyone trade with China? They are never going to allow a fair bidirectional trading relationship with their citizens. Trading with China, you can only lose".
Crypto is also the only way Venezuelans, Egyptians, and many others ... have any banking services at all.
So I would argue crypto is a lot more useful than Apple. Just not to people living in the richest countries.
I am making the point that this asset class is not very big.
To follow the narrative: The do actual work, arguably even useful.
The article comes to a completely incorrect conclusion by fundamentally misunderstanding what moves prices. The price of Bitcoin declines in USD terms when there is more net selling of Bitcoin than buying. If Bitcoin is sold by "crypto bros", only then do they have cash to "[push] up the price of items in short supply, like houses, and tickets to big-name concerts and major sports events". If you wanted the price of other scarce assets to decline, you would hope that more capital flows into Bitcoin or Crypto or something else that you don't care about.
Ever read something that's so mind-bogglingly stupid that you have to pause and wonder (even now) if you're the stupid one?
That's me right now.
Okay, let me walk through it. I think what's going on here is an extreme double-fallacy: The idea that (1) there is a fixed supply of money (2) that consistently and fairly translates to spending power.
Both of these things are wildly wrong, rendering this article pure idiocy.
Thesis is "crypto millionaires squeeze out other consumers from high demand goods, loss of crypto value reduces demand for those and thus benefits other consumers"