Mon
Feb 14 2022
11:38 am
By: bizgrrl

Buyer beware. Many of you may not remember the 1980's recession. In that instance there were many people investing in high interest rate deposits that were not insured by the Federal Government. Many people lost a lot of money. Then there was the recession of 2007 where home mortgages were invested in mortgage backed securities and derivatives that failed. Many people lost their homes and home values plummeted. In both instances, the Federal Government had to intervene and spend unprecedented amounts along with unleashing unprecedented fiscal, monetary, and regulatory policies to bring the country into a recovery.

If it is too good to be true, it is.

Cryptocurrency is being advertised quite frequently. During the biggest ad fest of the year, the Super Bowl LVI, crypto was advertised at a "cost up to $7 million per 30-second spot."

Larry David of Seinfeld and Curb Your Enthusiasm had a long but amusing ad. LeBron James talked to his younger self about crypto. Movie star Matt Damon had a crypto add in the past month or so, very cool until you found out what he was selling.

Luckily there are those like Miami Heat's Jimmy Butler and music artist J. Balvin warning viewers against celebrity crypto endorsements.

"On Feb. 13, you're going to hear some of the biggest names telling you to get into crypto," Butler said. "But they don't know you or your finances. Only you do."

"The star-studded ads were the latest example of the entertainment industry's growing interest in everything blockchain."

"Critics have balked at the spectacle of the rich and famous encouraging viewers to gamble on a risky and speculative market that has been plagued by grifters. Skeptics say the cryptocurrency and NFT craze has primarily benefited wealthy early adopters — the true believers — who could afford to get in early."

"My problem is, when 98% of these NFTs will go bust in the next couple of years, it will just crush a lot of the small investors," said Anindya Ghose, a professor at New York University's Stern School of Business. "If you're Matt Damon or Paris Hilton, you can afford to lose 5% of the net worth. But for many small retail investors, five or 10% of your net worth is a nontrivial loss."

The origin of Bitcoin (the first cryptocurrrency) was to create a payment system that doesn't involve a bank, a government, or whatever. When you manage your money through a U.S. bank or credit union it is insured by the Federal Government, i.e. FDIC and NCUA. When you invest in cryptocurrency it is like putting you money in the stock market without any history to know how it flows. When cryptocurrency ebbs you lose your money, i.e. you lose your purchase of cryptocurrency.

If it is too good to be true, it is.

Then there is the energy issue. As written in the New York Times, "Bitcoin Uses More Electricity Than Many Countries.." ... "The Bitcoin network uses about the same amount of electricity as Washington State does yearly. …

...
"The process of creating Bitcoin (one of many cryptocurrencies) to spend or trade consumes around 91 terawatt-hours of electricity annually, more than is used by Finland, a nation of about 5.5 million." And, all of that energy usage produces basically nothing.

Cryptocurrency mining (creation) is also loud. A family near Jonesborough, TN, "can no longer hear the peaceful sound of the Nolichucky River in the mornings and evenings. It’s drowned out by the incessant hum made by dozens of fans cooling computer equipment at a bitcoin [cryptocurrency] mine more than a mile from their rural home."

Blockchain is "The technology at the heart of virtual currencies, e.g. cryptocurrency.  A Blockchain is a decentralized database for transaction data (ledger of transactions). As each transaction occurs, it is recorded as a “block” of data. Those transactions show the movement of an asset that can be tangible (a product) or intangible (intellectual). The data block can record the information of your choice: who, what, when, where, how much and even the condition — such as the temperature of a food shipment. The data cannot be modified. A new "block" must be added if something needs to be modified

Non-fungible tokens or NFTs are digital representations of assets (e.g. photos, videos, audio, art work, ) stored in a database (blockchain) with unique identification codes and metadata that distinguish them from each other. Unlike cryptocurrencies, they cannot be traded or exchanged at equivalency. This differs from fungible tokens like cryptocurrencies, which are identical to each other and, therefore, can be used as a medium for commercial transactions. There is an issue with counterfeiting NFTs since there is no central authority to certify a certain NFT is the original, unique or able to be moved cross platform. Ownership of an NFT does not inherently grant copyright or intellectual property rights to the digital asset a token represents, thus the original owner is allowed to create more NFTs of the same work..

If it is too good to be true, it is.

bizgrrl's picture

And as David Moon, our

And as David Moon, our resident investment specialist, mentioned in 2017, "Calling Bitcoin "Monopoly money" is an insult to Monopoly."

Moon's picture

David Moon's Bitcoin blunder

Don't place too much credibility in that guy's comments. The price of Bitcoin is up ten-fold since that piece in 2017. He makes so many mistakes I often tire of finding them.

fischbobber's picture

Tulip bulbs

The tulip market will never crash, it will just keep growing and expanding. Buy Tulip Bulbs with bitcoin, backed by the full faith and credit of Jonas, straight from his Mom's basement. Just because someone hit's the jackpot in a lottery doesn't mean it's a sound investment. Anything dependent on timing is a high risk investment. It's blockchain versus hackers.

Up Goose Creek's picture

2.5%

This is an article that will mean more to our hosts than it does to myself.

(link...)

Only 2.5% of the transactions are between users, the rest is just speculation. It's like only 2.5% of the tulip bulbs even got planted.

In addition to the phenomenal use of electricity there is also phenomenal e-waste. Not sure if it is just the equipment wearing out or a switch to newer and faster equipment.

Is this tied to the global chip shortage?

bizgrrl's picture

From David Moon,

From David Moon, Knoxnews,

"If you don’t understand something, don’t put your money in it. Period. Full stop.

"Since last fall, the collective value of major cryptocurrencies has declined at least $2 trillion — when measured in quaint, old fashioned U.S. dollars"...
...
"These collapses may prove to be temporary, offering investors a chance to buy digital currencies at a significant discount to their underlying values. Or not."

"Perhaps I’m wrong, but I’m in the “the crypto-emperor has no clothes” camp."

bizgrrl's picture

Why have cryptocurrency if it

Why have cryptocurrency if it needs to be regulated? We already have a regulated monetary system.

Tom Brady, Larry David, LaBron James all promoted buying crypto currencies.

Lesson: celebrity endorsements are worthless on any topic other than how to become a celebrity.

"It is important to note that FTX was structured in a way to avoid as much U.S. regulatory oversight as possible. It wasn’t a brokerage firm or bank, but in ways it operated a bit like each. Do not let the FTX debacle cause concern about the safety of your money at an FDIC-insured bank or an NYSE-member brokerage firm. FTX was neither."

The FDIC issued letters to five crypto companies, including FTX US,
with a cease-and-desist warning from the Federal Deposit Insurance Corporation, telling the company to stop “misleading” consumers about the insurance status of their funds.

Unlike deposits held at U.S. banks, cryptocurrencies stored with brokerages are not protected by the government.

You can confirm with the FDIC whether an institution to which you want to invest funds is covered by FDIC insurance. Just because the institution says it is so does not mean it is true.

Be careful out there.

R. Neal's picture

The exchanges are unregulated

The exchanges are unregulated grifters. The cryptocurrencies "banked" by the exchanges retain their same value (until they are stolen), which is unregulated vaporous nothing.

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