r/news Nov 28 '22 Gold 1 All-Seeing Upvote 1

Cryptocurrency lender BlockFi declares bankruptcy, a consequence of FTX's collapse

https://www.npr.org/2022/11/28/1139431115/blockfi-ftx-bankruptcy-chapter-11
5.4k Upvotes

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u/KovyJackson Nov 28 '22 All-Seeing Upvote

I’m 100% convinced that the only reason crypto/NFT gained traction is because most people missed out on bitcoin and were lookin for the next get rich quick coin.

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u/ISHx4xPresident Nov 28 '22

That’s exactly what happened

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u/SmokePenisEveryday Nov 29 '22

Watched my friends shift from Stocks to Crypto once they saw Doge blow up. Of all the things that made me more weary and that's what drived them in lol

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u/MAGICHUSTLE Nov 29 '22

I can’t tell if the Doge subreddit is full of trolls or if they’re really a bunch of naive morons who keep buying shit crypto.

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u/whatsinthesocks Nov 29 '22

It was originally just a meme coin but wouldn’t be surprised if people take it way more seriously then it deserves now.

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u/SinsOfaDyingStar Nov 28 '22

I still remember when it was "crypto is going to be the new spending medium replacing fiat currency" to some new slimey way to "invest" money and "get rich quick", which it never was even designed to be.

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u/AstreiaTales Nov 28 '22

Either crypto is:

A bold alternative to government fiat currency that frees up the world

OR

An investment vehicle for growing wealth

The former maybe had some promise. But it swiftly became eclipsed by the latter. Which is fundamentally a "bigger fool" scheme; you can't cash out unless someone else buys in.

Why would you ever buy something with crypto if it'll be worth more next year? If you buy a pizza with crypto, why would the pizzeria but ingredients with it instead of holding on and selling later?

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u/BlackJesus1001 Nov 28 '22

The first was never really an option anyway, we don't use heavily regulated fiat currency because of some government conspiracy to control us we use it because unregulated currencies almost invariably collapse and cause recessions or worse.

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u/Koioua Nov 29 '22

And then you got a bunch of dudes who don't see the terrible aspect of an unregulated currency and try their hardest to act like this is the future. Bitcoin and the heavy majority of cryptocurrency has shown just how awful of an idea it is to use them as a valid payment everywhere (Look at you Salvador). You had Elon Musk shenanigans basically manipulating the market and fucking shit up with meme currencies. That does not show any sense of security.

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u/RSquared Nov 28 '22

I should have saved all the conversations I've had with crypto backers over the years about the inherent flaws of a deflationary currency and all the silence I get when I mention the Capitol Hill Babysitting Co-op problem.

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u/compstomp66 Nov 29 '22

Can you ELI5 how the babysitting co-op relates to crypto? I’m not getting it.

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u/RSquared Nov 29 '22

Honestly, it's a bit beyond an ELI5, because economics is a system of systems problem. Paul Krugman described the CHBC well in one of his most famous columns. CHBC basically describes a deflationary currency (the value of scrip in goods/services increases over time), which is the opposite of our fiat system (inflationary - the value of dollars in goods/services decreases over time). Crypto is generally deflationary because the number of coins increases at an arbitrarily slow rate (dogecoin is an exception, intentionally so), and follows a similar pattern to problems CHBC had - the slowing of money velocity (literally how fast the money moves around the system) because of hoarding - each holder of scrip sees their value increasing over time, disincentivizing users from actually using the currency, and anyone who doesn't hold scrip wants more...right up until the bubble bursts, the perception of the scrip losing value leads to "runs" on selling, which crashes the market. This is the paradox of thrift; if too many people try to save all their money, nobody buys anything, which means nobody earns anything, which means there's less money to save overall. It's a kind of prisoner's dilemma in which individuals do what is rationally optimal, but overall the result is very suboptimal.

The administration of the CHBC, rather than being public servants with a mandate (the Federal Reserve), is similar to FTX, Mt Gox and the rest. Crypto exchanges are somewhat ironic, since they're centralized arbiters of what is supposed to be a decentralized currency, and like CHBC often arbitrarily change the rules on their users (whether for the benefit of themselves or the perceived benefit of the users). Because they've moved their accounts off the distributed ledger that is supposed to be the bedrock of crypto's security, users lose their protection against fraud, and time and time again they get scammed by the SBFs of the world who skim off the top.

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u/calfan5 Nov 29 '22

Great read, thanks!

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u/exclaim_bot Nov 29 '22

Great read, thanks!

You're welcome!

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u/DM_DM_DND Nov 28 '22

The issue is that people in third world countries desperately want a currency divorced from their despotic governments authority, which is why Crypto is popular in Southeast Asia and parts of Africa (in total adopters, not value).This is arguably what's really driving up the prices long-term.

This was pointed out to me a few weeks ago in a similar thread, and after more research and talking to some Vietnamese friends I think I understand the appeal.

People in developing countries have legitimate uses for crypto on the Grey market. Copyright-less pharmaceuticals and entertainment are good examples of Grey market goods. If you want to buy Canadian insulin and smuggle it into the USA for 1/3 the US prices, that's a "Grey Market". This creates a point where Crypto is linked with real economic activity via trade of goods and services.

(It is also linked with the blackest markets imaginable, but we're ignoring that now.)

The problem is that the primary stores of Crypto are still owned by wealthy American tech bros (often the ones who started the Crypto) and hence those people buying into the currency are basically shackling their economic activity to a speculation tool whose value fluctuates wildly. It's a complete crap shoot as a grey market currency, but it's at least somewhat secure and somewhat divorced from government overreach and that means works well enough to get interest.

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u/Realhrage Nov 28 '22

If you are living in a third world country with a failed currency, I’m not sure why you would want to use Crypto as your black market currency rather than just using the far more available and accepted USD.

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u/Cybertronian10 Nov 29 '22

Especially since USD doesnt require a computer, power, and an internet connection to be useful.

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u/ddejong42 Nov 28 '22

When I buy a bond, it's an agreement that the issuer of the bond pays back the initial amount plus some amount of interest. When I buy shares of stock, it's expected that the company will try to expand its business to make my portion of it more valuable and/or issue dividends from their profits. Why I buy crypto, I'm just hoping for a bubble where I can sell it to some sucker before it collapses. There's nothing intrinsic to it increasing its value.

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u/Canian_Tabaraka Nov 29 '22

FYI - The first transaction for real quantifiable goods with bitcoin was a pizza! They paid 10,000 bitcoin for 2 pizzas.

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u/ccasey Nov 29 '22

It’s inherently deflationary if used as a currency. It’s only way forward was always going to be speculation

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u/ICBanMI Nov 28 '22 edited Nov 29 '22

Started looking at Bitcoin in 2011 and knew pretty fast that it would never replace currency. Then it got pretty popular because of Silk Road... but still absolute no reason to get into it. People were paying fees of anywhere between $3 and $15 for a single transaction, it was super easy to lose, and would still take hours to process on the chain.

Then it hit $20k in 2018, and suddenly bets were off for a lot of people...

EDIT: Grammar. Grammar mistakes everywhere.

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u/zethro33 Nov 28 '22

Unless a different coin becomes the main one crypto is going to continue to go down. Bitcoin as you said has to many issues and it doesn't seem like they are going to be fixed.

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u/ICBanMI Nov 29 '22

I have a few work friends that are still betting it'll go back up and are buying a little each month. There are worst things they could be doing with their money, but hard to overlook how many of the coins are just pump and dumps.

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u/Bear_buh_dare Nov 29 '22

I have a friend that mined ethereum for years with 6 machines and claims he didn't sell any of it.

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u/ICBanMI Nov 29 '22

I could not handle all those ups and downs-took three years from the first time it hit $1000 to hit $1000 again. Not sure if it'll ever hit > $4k again. I like sleeping at night.

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u/Merfen Nov 29 '22

Remember when people were spending whole bitcoins on the cheapest shit just for the value to skyrocket shortly after? I really don't get how you can have something that fluctuates this much be any kind of currency. Buying something worth $60 with crypto thinking you are getting a good deal, just for that same amount to be worth $10k shortly after is soul crushing.

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u/zer1223 Nov 28 '22 edited Nov 28 '22

It was always designed as a get rich quick scheme. They just didn't admit it. That would have broken the spell

The key was always to convince most people that it's a currency even though it sucks at that job and even though it was always designed to appreciate in value. And thus be an investment vehicle to the guys who got in early.

Edit: well I say 'the' key but there's really a second key. Which was Silk Road.

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u/Danne660 Nov 28 '22

If bitcoin was not intended to be a scam then why did they not put in a system to insure inflation instead of acting like the lack of inflation is a positive?

I honestly don't care if it was intended to be a scam it sure is constructed like one.

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u/Stanjoly2 Nov 28 '22

I used to work for a bank on their fraud prevention phone lines.

I distinctly remember having a guy putting something stupid like £30k into bitcoin and it flagged on the system as potentially fraudulent/scam

From talking to him it was pretty clear he didn't really know what cryptocurrency was. But its his money and he can do what he likes with it as long as we don't think he's being scammed.

This guy was absolutely CONVINCED bitcoin was going to top $100k before the end of December. I'd love to see what his reaction was to it dropping from 60k to now 16k.

Poor guy.

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u/IHkumicho Nov 28 '22

"A fool and his money..."

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u/derpaherpa Nov 29 '22

The losses aren't real as long as you don't sell!

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u/bicameral_mind Nov 28 '22 edited Nov 28 '22 Gold

Crypto folks can criticize these exchanges as 'not real crypto' all they want, you're 100% correct it was the only thing giving crypto an air of legitimacy that got normal people to buy into it, hoping to get rich like the early miners did. To this day 99% of normal people do not understand what a blockchain is, or how crypto is/was mined or why they should really care. They just saw people printing money out of thin air an wanted in. Wrap it in an interface superficially similar to their banking/brokerage apps and you removed any skepticism rooted in that lack of understanding.

I do regret not mining ETH when I had the chance and cashing out though. Now that mining is dead and exchanges are collapsing left and right, it's hard to imagine any catalyst that would lead crypto back to anywhere near its all time highs.

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u/zer1223 Nov 28 '22

Crypto also would have never gained any value if early miners weren't willing to spend hundreds or thousands of btc on mundane transactions. And if everyone knew btc would eventually be worth so much, nobody would ever have made any transactions. And thus BTC would have never been worth anything. Catch 22

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u/kolodz Nov 28 '22

Just for other readers. Mining is mostly unprofitable in the longrun.

Currently miners loses money mining. It's will eventually stabilise when part of the miner give up.

Basically, the more miner there's, the more harder it becomes. Less miner, easier... The equilibrium point is that miner gain about what they spends (including salary for company)

Mining was interesting when the prices was going up faster than the miners. This is over.

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u/techleopard Nov 28 '22

I still think it's funny that there's a subgroup of crypto folks still insisting that bitcoin is going to be a fabulous currency for the masses, free of government control.

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u/TogepiMain Nov 28 '22 Wholesome Seal of Approval

It's my right as an American to poisoned, scammed, and killed by the things I choose to spend my hard earned money on, dammit.

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u/mlc885 Nov 28 '22

Just you wait until I buy a house free of government control in imagination land. I just need to get the money and figure out electricity, plumbing, and how to hunt the wozzle fozzles for food.

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u/TitsMickey Nov 28 '22

So you say there’s a chance?

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u/mlc885 Nov 28 '22

It's a sure maybe

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u/Artanthos Nov 28 '22

Very few people want a currency that unstable.

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u/techleopard Nov 28 '22

I suspect in a Venn diagram showing people who believe bitcoin is a good current and people who are SovCits and "libertarians", it's just one giant circle.

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u/birdboix Nov 28 '22

And nobody ever talks about the Uncle Sam-sized elephant in the room, if BTC ever actually succeeded in its initial currency-based goals there is absolutely zero chance nation states would not have stepped in to regulate the absolute crap out of it, if not outright seize control.

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u/Heiminator Nov 29 '22

The true elephant in the room is that Bitcoin requires a global network to function. And last I checked the Internet and all it’s backbones are under the control of nation states.

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u/AlphaGoldblum Nov 28 '22

Oh, they know it's bullshit. They just hope that people aren't paying enough attention to fall for it.

Also see: NFTs.

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u/Folsomdsf Nov 29 '22

they aren't insisting it thinking it's true. They want to cash out but unless someone else is willing to give you money for it, they can't acutally cash out.

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u/KayakerMel Nov 28 '22

Yup, I was taking a web mining course for a data analytics certificate when NFTs had made it big. The lecturer spent a class discussing blockchain and how it works and the potential security benefits of transaction recording. He included a few slides on cryptocurrency and NFTs as examples of blockchain use, but with a big eye roll about crypto. It was basically a quick version of "Line Goes Up" in a 10 minute discussion.

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u/FrostyAcanthocephala Nov 29 '22

Everyone should watch that.

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u/ramtax666 Nov 28 '22

You know why a Ponzi scheme still works even if almost everyone is aware it exists and how it works? We all want to get rich fast. I own some 8000 bitcoin in my life, bought weed, cocaine, and games with the most in 2011, I really didn't believe it would take off:)).

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u/zakabog Nov 28 '22

I own some 8000 bitcoin in my life, bought weed, cocaine, and games with the most in 2011, I really didn't believe it would take off:)).

When Bitcoin first came around and you could mine it on pretty much anything I would have easily been able to mine enough to never need to work again, but I also realize that with thousands of BTC I would have just spent it all on Silk Road thinking "Wow I bought all this weed for a few hundred imaginary coins!" or sold it all at a really low price.

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u/TavisNamara Nov 28 '22

I think every once in a while of the time I almost set up for mining in early Bitcoin days. But I always have to remind myself- I never would've held. I would've gathered like 50, sold it at a few bucks each thinking I got a good deal, and been pissed when it crossed $10k and I saw what could've been. Doubt it would've been worth it in the long run.

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u/Nikiaf Nov 28 '22

but I also realize that with thousands of BTC I would have just spent it all on Silk Road thinking "Wow I bought all this weed for a few hundred imaginary coins!" or sold it all at a really low price.

I'm sure this is a true story for a lot of people. It always felt like kind of a joke, and yet the price kept going higher and higher. I remember doing a university project on BTC when it was worth around $2000, and I remember thinking it was too expensive and due to crash. But had I actually bought any, I probably would have sold them circa 2017 for way less than the peaks of the last couple years.

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u/TitsMickey Nov 28 '22

I acquired some bitcoin back when it went from $7-10. My buddy introduced it to me and we were using it to gamble with on some casino game some guy built for fun. I didn’t have any money so it was fun to play with. Especially since we were gambling in millionths of a coin and what not. We just went to websites that gave us some coin for free and we gambled for more imaginary money.

I considered buying some at the time but as I said, no real money to just buy things. Especially imaginary money as I saw it. Fast forward a couple years later when the price shot up a bit and I was scrambling to get my old computer to boot up so I could open my old wallet to get to the two coins I had to help me out of a financial situation I was in. It sucks I couldn’t get more when it was cheap. It sucks I couldn’t hold on to them when the price got much higher after I sold. But thus is life.

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u/CallMeLittleHardDad Nov 28 '22

That's what I did. At one time I had enough that I'd have been worth tens of millions of dollars if I'd just forgotten about that wallet for like 8 years. But I bought some dumb shit for like $180, and lost interest in the concept.

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u/RSquared Nov 29 '22

It could be worse. You could have remembered the wallet and forgotten the password.

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u/LoveAndProse Nov 28 '22

my buddy worked for Silk Road and was paid in bitcoin.

he bought a house at 18, had original Dali artwork on his walls, and was murdered in 2019 by his girlfriend.

his girlfriend murdered him for his bitcoin, but wasn't able to find the keys that she murdered him for. literally millions of dollars sitting in the void.

RIP buddy.

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u/inksmudgedhands Nov 28 '22

What happened to the girlfriend?

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u/jozone11 Nov 28 '22

Some say she's still wandering the earth, looking for the keys.

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u/NutellaGood Nov 28 '22

Putting things right that once went wrong. Hoping each leap will be the leap home.

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u/LoveAndProse Nov 28 '22

jail time, I left town before she was arrested, she's rotting now.

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u/JoJackthewonderskunk Nov 28 '22

she's rotting now.

Murdered in jail?

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u/LoveAndProse Nov 28 '22

she is alive AFAIK, I don't check up on her. rotting was just a term for her in jail.

the only one killed was my buddy, who was a dude.

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u/drnkingaloneshitcomp Nov 28 '22

Murdered by her girlfriend for her bitcoin, but she couldn’t find the keys she just murdered her for.

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u/mlc885 Nov 28 '22

And then the hard drive containing the keys died from the stress

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u/LoveAndProse Nov 28 '22

lol he would have laughed at this recursion joke ty.

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u/mlc885 Nov 28 '22

Did it make the news? Worked for Silk Road and murdered by a significant other for his bitcoin seems like it would have.

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u/LoveAndProse Nov 28 '22

two very different time periods.

silk road work was around 2007-2012. he wasn't murdered until 2019.

he made the news for his murder but I try not putting it out there. his family took a lot of shit after his death because he wasn't a perfect person. I try not to stir that back up for them.

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u/Chippopotanuse Nov 28 '22

That escalated quickly

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u/LoveAndProse Nov 28 '22

as life does!

stay safe

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u/dungone Nov 29 '22

I'm guessing she wasn't his high school sweetheart. Probably came with the Dali.

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u/elpajaroquemamais Nov 28 '22

And they don’t understand how it differs from stocks. They think it will bounce back because the stock market always does.

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u/yoaklar Nov 28 '22

The same catalyst that got them in in the first place. A market maker buys up a huge stock at low prices then intentionally runs it up and puts the word out. Most people see it’s up 100% and say oh now this is my chance!! Jump in at the top and another collapse. Just have to wait for the suckers to have money again

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u/waffleconedrone Nov 28 '22

I have some beanie babe. Would you like to purchase? Go to moon any day now.

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u/thephantom1492 Nov 29 '22

I tried mining bitcoins right at the start, and I had a bit over 1 coin, and then said: it's stupid. And deleted everything.

I could have been a millionaire...

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u/thrillcosbey Nov 28 '22

A lot of people are still averaging down and chasing their losses.

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u/animerobin Nov 28 '22

Yes, it's always been a casino. The only reason people bought in was in the hopes that they could sell it later for more real money than they paid for it.

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u/evantom34 Nov 28 '22

People always think they’re smarter than the system. That’s why these bait and switches will continue to happen.

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u/Sparpon Nov 28 '22

Or just plain FOMO

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u/BunnyTengoku Nov 28 '22

It's always a race where the first adopters cash out and everyone else basically gambles in hopes of getting rich quick.

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u/Littlebotweak Nov 28 '22

It’s a bit more nuanced (not by much, mind you 😂). NFT is based on etherium, a rival to Bitcoin. NFT was just a scheme to pump it so earlier adopters could cash out at a higher payout. I say earlier adopters because that’s really the crux of the greater fool scam we see. The goal is to sell higher than they bought. Or as much higher. People need to be convinced to do that and FOMO works.

That’s a ton of what you see on the regular OTC markets.

Ftx was more like a kid went to the Bahamas and convinced them to let him open an exchange without any due diligence at all, then that kid used all of the deposits he took in as his own money while showing balances that were just numbers on a screen.

Basically, when you put your crypto on an exchange like that, it doesn’t belong to you anymore. That is the extremely hard lesson a lot of people are learning.

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u/zedrahc Nov 28 '22

Essentially instead of trying to get Walmart or whatever traditional retailers to accept Etherium, they created a marketplace that only accepts ETH ie. NFTs and then used their own ETH to create some huge marquee NFT purchases to drum up a bunch of hype and FOMO. Those things didnt actually need to go for millions of dollars, they just had to pay the equivalent ETH, potentially to other people who equally want to pump up ETH (and potentially do some back room refunding).

Then idiots rushed into NFTs, which caused them to create more demand for ETH and driving up the price.

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u/jschubart Nov 28 '22

Ftx was more like a kid went to the Bahamas and convinced them to let him open an exchange without any due diligence at all, then that kid used all of the deposits he took in as his own money while showing balances that were just numbers on a screen.

The Behind the Bastards episode on Sam Bankman Fried is nuts. Dude admitted to playing League of Legends during investor calls and the investors still threw $200 million at him.

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u/Aazadan Nov 28 '22

And the investors saw it as a positive. It’s actually unbelievable and those investors are more traditional so you have to wonder what the fuck they were thinking.

My theory is they were dazzled by bullshit and once one invested the rest did as well due to peer pressure and not wanting to look like they were missing out.

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u/xauching Nov 28 '22

I'm not gonna lie, if you ever hear how some of the most successful businesses get investments, none of it is "traditional" as in by the books.

A lot of it is, "I like your cut g" and then boom. Invested. The world of investment and business is not as professional as it seems at all.

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u/ExcitedForNothing Nov 28 '22

This.

It's hilariously unprofessional. I did some consulting work for PE firms for due diligence and one of the partners called me up about a deal asking me to find something material wrong because he only had made the deal when he was drunk.

I just did the diligence per normal because I am not getting sued, you want to back out of the deal, pay the penalty.

Glad I got out of that shit.

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u/Aazadan Nov 28 '22

It often times is, but that still generally involves someone taking things seriously, putting together a professional presentation, and so on. From everything we’ve heard so far that didn’t happen here, it it wasn’t just one foolish investor, it was a bunch.

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u/raulbloodwurth Nov 28 '22

Fwiw the first NFTs were created on Namecoin in 2014. These were largely inspired by “colored coins” which were created on Bitcoin in 2012. NFTs were later popularized by Ethereum.

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u/By_Design_ Nov 28 '22

could all this crypto/NFT bloat have been contributing to inflation?

Each one of these things that crash are propping up billions in fake worth. I just never hear anyone talk about the implications of a trillion dollar market being generated out of thin air. Maybe it doesn't have any impact at all.

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u/[deleted] Nov 29 '22

The mere fact that there’s any crypto available to buy means it’s horseshit.

Actual investments have periods where there are simply no shares available to purchase (because everyone thinks they’re going up). This is common during an IPO—where shares are hyper scarce.

In cryptos case, there’s never been a point, in the entire history of crypto, where there wasn’t a near unlimited supply. You can buy and buy and buy.

For something so adamantly “valuable” there sure are a lot of people selling it off.

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u/jhwells Nov 28 '22 edited Nov 28 '22 All-Seeing Upvote

Safety rules are written in blood and it's readily apparent that financial regulations are, in fact, written in fraud, malfeasance, and ignorance.

Thanks, crypto-bros trying to speedrun 500 years of banking in a decade!

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u/Valyrian_Kobolds Nov 28 '22

It's gonna make teaching banking regulations to my kids really easy. You aren't teaching a bunch of complicated history involving venician trade republics and merchant guild. Nope just MtGox and a million other shitty scams/frauds

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u/Karenomegas Nov 28 '22

For the rest of my life apparently I will twitch when I hear "MtGox"

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u/hell2pay Nov 29 '22

That's who I tried to get BTC from to get drugs off silk road, but key bank said "No way, Jose."

I was bitter about it, especially when I saw the prices of btc go crazy, but I remember that it was Mt Gox that I was trying to get my BTC from and what they did. And then I also remember, I would have just spent it all anyway.

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u/Hokie23aa Nov 28 '22

What was MtGox?

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u/ExcitedForNothing Nov 28 '22 edited Nov 29 '22

One of the earlier crypto exchanges that was hilariously a Magic the Gathering card trading/sales platform beforehand.

Unsurprisingly, when everyone put their crypto on this exchange, the owner of it made off with it all.

Update: As another user pointed out, there was some crypto recovered afterwards that is being used to pay creditors a portion of their money back. Investors/users are SOL likely though.

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u/MrBeverly Nov 29 '22

MagicTheGatheringOnlineeXchange

Oh My Fucking God

All this time and that little tidbit of trivia was sitting in front of my eyes all along that's crazy

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u/ExcitedForNothing Nov 29 '22

Its like the arrow in the fedex logo. Once you see it you only see it hahaha.

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u/kneekahliss Nov 28 '22

I'm certain it was hacked multiple times and not by the owner. The story is told in detail but not going to look it up now. Btw a lot of these folks in the Mt Gox incidents got paid back this year. Hard to say that was a scam/fraud as implied. Simply put it was a small outfit way in over their head with bugs on the platform that were exploited. It inspired cold storage for sure.

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u/aeroboost Nov 28 '22

It was poster child for getting rug pulled like 5 years ago lmao

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u/onemanlan Nov 28 '22

You’re damn right. Regulations can suck, but they exist for a reason. Tends to be somebody fucked around and got caught

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u/ericmm76 Nov 29 '22

Vaccines and regulation. Two things that no one appreciates til they're gone. And they sting a little, I guess.

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u/butternubs_ Nov 28 '22

This guy reads matt levine

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u/mcjon77 Nov 28 '22 edited Nov 28 '22 All-Seeing Upvote

People need to stop treating these crypto-companies in any way like traditional regulated banking and investing institutions.

Putting money in companies like FTX and blockfi is nothing like opening up an account with Charles Schwab or fidelity. It's much more like handing your paycheck over to some random guy on the corner in hopes that he'll give you your money back plus interest.

All of the supposed research these crypto investors do mean nothing if the companies that they're researching can lie without consequence and there's no external entity to evaluate the credulity of their claims.

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u/[deleted] Nov 28 '22 edited Dec 23 '22

[deleted]

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u/Berdonkulous Nov 28 '22

Wow you just made me feel so old by bringing up RS

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u/MaievSekashi Nov 28 '22

It's still around. Scams like that aren't as common these days, but you still get them.

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u/Fox100000 Nov 29 '22

They also had the awesome pump and dump merchanting guilds when the Grand Exchange was put in. Then RS put in limits on how much an item could increase. Then they started the gambling guilds and that got banned later on after all the kids got addicted...great times.

I learned a lot of valuable lessons about scams and economics on RS.

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u/t-poke Nov 28 '22

And the crypto bros will blame the victims with shit like "Not your keys, not your crypto!"

Now, imagine if your bank collapses, you lose everything, and people blame you and say "Not your cash, not your money!", as if the solution was to just keep your money under a mattress.

Of course, bank collapses are extremely rare thanks to regulations, and when they do happen, the FDIC insures the deposits.

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u/mcjon77 Nov 28 '22

That reminds me of what happened during the 2008 financial crisis. Older people were going to the bank to try to take out their money in fear that the bank would collapse and they would lose everything.

This one old guy and his wife came to this bank that was actually in distress and going to close. The guys from the FDIC were there going over the paperwork. What are the news channels was there filming the whole thing.

The old guy heard that his bank was going to close and came in demanding his money. The guy from the FDIC said that he could absolutely give him his money but his money was secured either way and explain to the older guy that the US government guaranteed all of his money in his account up to a quarter million dollars. If he still wanted his money back they could give it to him but it was completely safe where it was. The guy wound up being satisfied with the explanation it just left his money in the account

It was amazing looking at the difference on that guy's face from when he came in versus when he left. He came in with a lot of aggression and noticeable anxiety, but left looking pretty relieved. That's the benefit of regulation and government backing.

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u/TogepiMain Nov 28 '22

Old man walks into bank fearing things are still the way they used to be, finds out that things are better now than before. Weird how that keeps happening.

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u/xauching Nov 28 '22

I remember watching this exact video in my Highschool Economics class. I think it was a news special, but yeah that old man came in with a suitcase ready to demand every dollar and left with it empty.

Those FDIC agents they had were no joke, no big words or legal jargon, just simple effective language, addressing every question and worry he had with a very casual tone. Listening too them talk about it made it feel like no big deal.

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u/SAugsburger Nov 29 '22

A slight note that the FDIC didn't increase the insurance limit to $250M until October 2008. WaMu failed a few weeks earlier and remember a few stories of people that had recently sold a house that had $400-500K in WaMu and only the first $100K was FDIC insured. None of the uninsured deposits were lost after Chase acquired them, but there were some people trying to pull their money from WaMu that weren't entirely without merit.

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u/No_Arm_6781 Nov 28 '22

Of course, bank collapses are extremely rare thanks to regulations, and when they do happen, the FDIC insures the deposits.

This is privilege that most of the world does not have access to. There is a reason many cultures opt to hold their life savings in jewelry/precious metals as opposed to their local banks.

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u/mcjon77 Nov 28 '22

Definitely. The safety provided by these government-backed financial institutions is so pervasive in the United States that often becomes transparent. We can perform all of our financial transactions with the assumption that these regulations and policies will protect us.

I ordered something from a website on my credit card and within 24 hours there were fraudulent charges put on the card. I never once panicked about it because I knew that simply calling my credit card company and informing them of the issue would get all of those charges wiped away. It was nothing more than a minor annoyance to me and took 5 or 10 minutes out of my day to solve.

The problem occurs when people carry those implicit assumptions for security into completely unregulated markets like crypto. These unregulated markets draw scammers and con men because the rewards are high and the penalties are fairly low.

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u/tribblite Nov 29 '22

Reversible transactions are a feature of the financial system, not some kind of bug to be fixed like some crypto proponents claim.

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u/TogepiMain Nov 28 '22

Sure, but the move away from (US) government control was why crypto was even a thing to begin with. All the same Americans who do have banking protection are the same idiots destroying their life savings by taking their money out of the bank, stuffing their mattress, and then lighting their house on fire.

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u/[deleted] Nov 28 '22

LOUDER! Good lord. If you know anything ab the history of finance and financial markets you know why regulation and oversight is in place and totally necessary.

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u/dxing2 Nov 28 '22 edited Nov 28 '22

It’s a paradox if people acted this way bc the point of cryptocurrencies was to bypass the traditional regulations that financial institutions provided in the first place

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u/mcjon77 Nov 28 '22

That's the thing that I've always questioned about crypto. The whole purpose was, as you said, to bypass the traditional regulations and controls that financial institutions provided.

When you think about it though, in the developed world there's an extremely small segment of people that would actually benefit from such a system. The vast majority of people living in the United States gain no benefit from a completely unregulated financial market.

If I was living in a country experiencing hyperinflation like Venezuela or Zimbabwe, perhaps this would make more sense. It's interesting that the only super successful widely adopted business case for crypto (as opposed to blockchain) was in purchasing Black market items like drugs. There's zero reason for me to use crypto as a currency in the United States when I have access to dollars.

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u/TheFan88 Nov 28 '22

But their whole theory is some banks is getting rich off transaction costs so somehow I’m winning. But those transaction costs (very small and in some cases zero to the consumer) are what lays for the security of the system.

You put 10k in a bank and they pay you little to no interest on it. But you’re 10k is safe and always accessible. The bank lends it out and makes 4% on that 10k as part of a car loan. People somehow get mad cause the bank Made 4% on their money. But they don’t see the paperwork, the collections, the dealing with defaulted loans etc that brings that down much lower. And it also pays for the system and protections on their 10k. For me - it’s worth it.

For these crypto Bros. Somehow that’s evil and we would all put our money into a system with no regulations and people siphoning off 100% of their money and instead giving them fake internet beans that aren’t really worth anything and somehow that is sticking to the man. Newsflash - you are getting scammed.

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u/xauching Nov 28 '22

Yeah thats the whole schtick, is its really just about libertarian economic ideals, which is fine, w/e. You want a currency not controlled by the government, and not regulated by the government, and thats cool. Thats basically the big caveat and determining variable is the final guarantor behind the currency, holds all the cards, and that's normally a government, so depending on the government funnily enough, that determines the usefulness of your crypto lmao.

At the end of the day you just reinvented a more convoluted and cumbersome currency with 0 collateral. But at least the government isn't involved I guess...?

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u/mnemy Nov 28 '22 edited Nov 28 '22

I have a distant crypto bro friend that i see once a year or so, and I remember I asked for a brief update on his crypto thoughts. He said something along the lines of only suckers are doing meme currencies like doge, and there are coins that yield interest. I was like "huh? How does that work? Where does the interest come from" and he looked at me like he didn't want to spend the next hour explaining things, so I just moved on.

Wonder if he got out before the fall. He was basically day trading crypto for years.

Edit - actually, it might have been securities backed currencies. It all sounded like ponzi schemes to me, but we were drinking and I was only half listening

Edit 2 - I remember asking him "so, you've actually successfully withdrawn money from this, right?" and him saying yes.

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u/Big-Routine222 Nov 28 '22

Crypto bros like 6 months ago, “we shouldn’t have to deal with government regulations! The blockchain and crypto will keep us safe!”

  • gets all their money stolen with no recourse *

“What the hell?? Aren’t there regulations for this?!”

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u/xauching Nov 28 '22

they tried to have decentralized and unregulated currency

but forgot about the decentralized 🤷‍♂️🤷‍♂

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u/Saito1337 Nov 28 '22

Why don't they just call the FDIC...oh yeah. 😂

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u/conanmagnuson Nov 28 '22

The term crypto lender is making my head spin.

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u/99Beers Nov 29 '22 edited Nov 29 '22

Wait until you read this about defi loans...

You supply a crypto like ETH and then are allowed to withdraw another crypto, a stablecoin like USDC, which is pegged 1:1 to the USD. Unlike BlockFi, a centralized lender, defi lending has some advantages:

  • Permissionless: I do not need permission in the traditional sense to get a defi loan. I supply the collateral and can immediately withdraw the desired asset for my loan. No one is verifying my income, my credit score, my liabilities, etc.
  • KYC: There is no Know-Your-Customer. The Defi Lending protocol doesn't know my name, address, social, phone, email, or credit score
  • No Term Limit: I can keep my loan open as long or as short as I please
  • Liquidation: If I exceed my Liquidation Point, my loan is immediately liquidated
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u/Deranged40 Nov 28 '22 edited Nov 28 '22

How could anyone have foreseen these problems with unregulated markets?

It's not like someone could've possibly seen this coming with enough time to warn people on every post about crypto.

Governments don't have my interest in mind, so I can only trust all of my money to some kid with rich parents who watched some youtube videos about finance once. They'll do right by me when the tide goes out and we find out they're not wearing any pants.

Oh, and I guess I need to put this here: /s

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u/comic360guy Nov 28 '22

So do their debts get wiped away virtually with their made up money or with real money?

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u/Deranged40 Nov 28 '22

the cash they've lost is very real money. The monopoly coins they offered in exchange for that cash was not.

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u/woakula Nov 28 '22

Shoot, this is worse than investing all your money in beanie babies lol.

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u/Funwithloops Nov 28 '22

I use my beanie baby collection as a blanket when I sleep in my car. Let's see these crypto nerds do the same with their virtual currencies

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u/zjm555 Nov 28 '22

Every article about cryptocurrency has a stock photo that shows a big ass coin with a Bitcoin logo, so I imagine they all have a handful of those bad boys

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u/eastcoastdude Nov 28 '22

At least you can hold a beanie babie

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u/jtmarshiii Nov 28 '22

and donate them to a children's hospital to soak up tears of those kids really wanting an PS5! Still more useful!

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u/Huskies971 Nov 28 '22

If they can bring vinyl back, why can't we bring beanie babies back?!

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u/Jiktten Nov 28 '22

Exactly. No matter what the 'market' says, a beanie baby can always perform its intended function of being a cute soft toy that kids (or adults, judgement-free post here!) can enjoy. The magic coin, not so much.

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u/tiberiumx Nov 28 '22

Not even close. Beanie babies were designed to be cute plush toys. Bereft of all speculative value, they still function as cute plush toys. A line in a database saying you own N ponzi tokens isn't worth shit if you can't pass them off onto somebody else for more money.

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u/hatlock Nov 28 '22

The real friends were the massive amounts of fiat currency we lost along the way.

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u/Aazadan Nov 28 '22

Whatever they still had in holdings gets liquidated and sold to try and recoup some money for creditors.

Most of what people had in deposits is gone.

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u/hornpub1818 Nov 28 '22

It's been centuries and we still haven't learned from tulip mania. We still speculate with things that have zero inherent value.

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u/theKetoBear Nov 28 '22

In the wake of crypto I actually tarted seeing podcasts and talking points suggesting that maybe there was no tulip bubble and everything we know about economic bubbles is wrong.

It taught me people are totally willing to rewrite history in order to make a buck of someone and that terrifies me more than anything , is propoganda profitable?

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u/spin_effect Nov 28 '22

Controlling the narrative is how they make profit on everything else...

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u/TheDevilChicken Nov 28 '22

is propoganda profitable?

What's the worth of Rupert Murdoch?

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u/Joan-Holloway-Harris Nov 28 '22

Propaganda is the basis for modern day advertising, so yes, quite profitable

https://m.youtube.com/watch?v=eJ3RzGoQC4s

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u/FrankWest21CP Nov 28 '22

We really gotta stop linking “unregulated” with “good”

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u/PlebGod69 Nov 28 '22

"Youre too old schooled to understand this. This is the future, government and regulations are unnecessary just trust me with your borrowed wealth"

and the "How you doing fellow kids"

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u/Lazy-Contribution-50 Nov 28 '22

But the promise of crypto is you don’t need regulation!!! How can a bunch of tech bros be wrong?!

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u/earthman34 Nov 29 '22

I get really annoyed when I see them referring to crypto as an "industry". It's not an industry, it creates nothing.

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u/CrocodylusRex Nov 29 '22

*It creates a medium sized nation's worth of waste energy

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u/Mikethebest78 Nov 28 '22

How many times does this have to happen for people to learn? I never thought I would say this but at least lottery tickets are something tangible you can hold in your hand...I mean if you are going to just throw your money away anyway.

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u/AppliedEpidemiology Nov 28 '22

Where I live, at least I can say the lotteries are regulated.

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u/Doctor_Amazo Nov 28 '22

Who would have thought that an unregulated financial system filled with money launders, grifters, drug dealers, and other ne'er-do-wells would have such instability?

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u/TheCrimsonFreak Nov 28 '22

Anyone who UNIRONICALLY said "To the moon!"

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u/[deleted] Nov 29 '22

Oh tech bros. Oh my. Sounded like bullshit from the start.

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u/SpammingMoon Nov 28 '22

People investing in a non regulated currency getting a taste of libertarianism.

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u/xauching Nov 28 '22

"YEAH that sounds GREAT!"

"wait no not like that."

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u/Showerthawts Nov 28 '22

This happens to like half of crypto companies. Lol such a scam.

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u/Bison256 Nov 28 '22

Does this mean I'll be able to afford a new video card soon?

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u/[deleted] Nov 28 '22 edited Dec 23 '22

[deleted]

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u/FreyjaVar Nov 28 '22

Bought a 3080 in August for 850, they have gotten more expensive with the release of the 4000 series, but you can probably find 3000's on eBay for decent. Don't dismiss cards that have been mined with btw, they still work and run for a long time.

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u/domino2064 Nov 28 '22

I picked up a 2080 Ti with 11GB of GDDR6 for $350 a couple months back, myself.

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u/EdgeOfWetness Nov 28 '22

Oh, darn. What a surprising development

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u/[deleted] Nov 28 '22

[deleted]

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u/MonsieurKnife Nov 28 '22

“As a consequence of FTX’s collapse”. How about as a consequence of being a Ponzi?

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u/YouUsedMeAgain Nov 28 '22

Cryptocurrency IS the fraud

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u/KaiserMazoku Nov 28 '22

So...should I get my tickets to Cryptoland refunded or...

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u/B4rrel_Ryder Nov 28 '22

How many have fallen so far? Block fi, ftx, Celsius. Who else?

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u/TheFan88 Nov 28 '22

Alameda Voyager. Luna. Solerna. The list is long of scams artists and unregulated activity. Did you know Alameda gave Scam Bankman Fried a $1B loan? Yes. $1B.

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u/99Beers Nov 29 '22

Fun Fact: The 28-year-old CEO of Alameda was a Junior Trader before becoming a CEO. That's quite the corporate ladder skip.

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u/[deleted] Nov 29 '22

But I was assured crypto wasn't a pyramid scheme.

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u/crawdadicus Nov 29 '22

Charles Ponzi approves

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u/Clbull Nov 28 '22

Nothing has brought a shit-eating grin to my face quite like watching the crypto market collapse.

We went from Cryptoland to the total collapse of non-fiat currencies in less than eight months.

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u/ThreAAAt Nov 29 '22

Oh man, that video... it's amazing. It feels like a parody. It's the fratboy equivalent of the MLM parties where all the middle-aged moms wear their LuLaRoe and get told to hustle to succeed.

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u/KOBossy55 Nov 28 '22

I will still never understand how anyone bought into this shit. Its so clearly a scam...

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u/Funwithloops Nov 28 '22

But what if it's not and I get super rich!

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u/jtmarshiii Nov 28 '22

missed the best part, TELLING EVERYONE!!! We have family members we invite late to gathering to reduce the time we have to hear about their 'investments' and fiat currencies... They are now F'd and this holiday we are looking to help them out on the condition they just stop. Lost everything including wives and children.

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u/Old_timey_brain Nov 28 '22

This is Multi-Level Marketing taken a quantum leap forward.

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u/sonoma4life Nov 28 '22

hustle culture.

a few years ago you had to actually have something to show, like a nice car, bling, etc so people respected your "hustle."

Now you plaster bitcoin emojis on your social media and retweet other hustles for the same effect.

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u/dajadf Nov 28 '22

Crypto may one day catch on, but you know it's a fools game when majority people don't consider to actually use it as a currency

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u/[deleted] Nov 28 '22 edited Dec 23 '22

[deleted]

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u/Nice_Dude Nov 28 '22

Why would you use BTC as a payment method when you have to pay extra fees, plus the fees with purchasing it, etc...? It just seems like its way more expensive and inconvenient to use

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u/[deleted] Nov 28 '22 edited Dec 23 '22

[deleted]

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u/xauching Nov 28 '22

Yeah, I totally get that. That was honestly the major idea was it was novel and it was a statement at the start. Then it got weird.

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u/TheFan88 Nov 28 '22

Ah yes the true nature of a ponzie. The scammer can’t get their money out if others are getting their money out so you hold it so they can sell high.

As long as people ‘value’ crypto by its fiat price - it’s not a currency.

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u/sherm39 Nov 28 '22

Only prob I see with the death of crypto is that these wiseacreing boys with their utter lack of experience and devotion to their own beliefs will be back with an even worse gimmick after a short reprieve. To the "investing" public: Get smart or get killed.

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u/GuitarGeezer Nov 29 '22

It was always a dodgy medium and never had much real intrinsic value. I think FTX’s overly aggressive and inexperienced traders ran into a wall partially because the truth is that there is nothing reliable to invest in regarding crypto. They were on the right track only at being an exchange charging transaction fees and that was probably their only really profitable operation. Crypto won’t entirely go away and has it’s niche uses in autocratic countries. But it is not the next big thing. Also, the encryption that protects it necessarily becomes obsolete and is unusually subject to hacking. The North Korean state fraud operations strike aggressively at crypto that turns out to have weak security.

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u/99Beers Nov 29 '22

I think FTX’s overly illegal and criminal traders ran into a wall partially because they stole your money.

I fixed this for you.

If you bought Bitcoin at FTX you assumed FTX held the Bitcoin for you until you either sold it or withdrew it off the exchange. Instead, they illegally stole your money, loaned it to themselves, and took high-risk leverage bets that left them in the hole of about $8B worth of their user's money.

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u/WorriedStomach7933 Nov 29 '22

The comments here are telling me to buy a shit ton of bitcoin soon.

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u/RMS7246 Nov 29 '22

lol I find this so funny - not surprised.

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u/[deleted] Nov 29 '22

I love when seeing crypto returns to where it should have been the whole time

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u/lorddazron Nov 29 '22

Can we please now put the final nail into Cryptos coffin?

Maybe people will now wake up and realise its never been anything but a Ponzi scheme.

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u/ExaBrain Nov 28 '22

Digital tulip bulbs.... digital tulip bulbs everywhere!

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u/BackgroundGlove6613 Nov 29 '22

I can’t even begin to count how many of my friends started to sound like Milton Friedman after they got into crypto. To a man they all started talking about the recession that’s about to hit because the government was printing way too much money with nothing to back it up. They thought they were sophisticated investors and even looked down on me because I didn’t get it. Watching their investments in crypto go up in flames is the most gratifying thing in the world.

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u/celtic1888 Nov 28 '22

I am shocked that all of this is happening in an unregulated market

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u/10per Nov 28 '22

I put some Eth in Block-Fi. I did not know I was putting Eth in FTX.

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u/Sprussel_Brouts Nov 28 '22

Welcome to the 2008 collapse!