• Benkei
    5.9k
    This is in principle less risk because it's irrelevant what the markets do, whereas index funds will crater during recessions.
  • ssu
    6.5k
    Why not just use a normal investment rather than the cryptocurrency scam? Apparently the standard index funds have an annual return of around 10%.Michael
    Index funds may really not be the great investment now, just as @Benkei noted.
  • Michael
    11.8k
    This is in principle less risk because it's irrelevant what the markets do, whereas index funds will crater during recessions.Benkei

    What to Expect From Crypto in a Recession

    The cryptocurrency market simply hasn't been around long enough for us to get an idea on how it behaves in a significant recession. The first cryptocurrency invented was Bitcoin (BTC -2.21%) in 2009, and much has changed since then. However, there are a handful of periods of poor economic performance in the last 13 years that we can look at to get an idea on what crypto's future might hold if a full-scale recession ensues.

    One of the few periods of economic instability since 2009 occurred in 2015. After 2014, GDP grew, albeit at incrementally slower rates each quarter and eventually bottoming out at a 0.1% growth rate in the fourth quarter of 2015.

    The S&P 500 also posted its first negative year since the Great Recession in 2015. During this time, the crypto asset class was utterly pummeled. The collective market cap of all cryptocurrencies fell by nearly 70% from the beginning of 2014 before hitting a low in mid-2015.

    Another period of recent economic instability came in 2018. Similar to 2015, the nation's GDP grew, but by a smaller amount each quarter and eventually fell to just a 1.3% growth rate. In 2018 the S&P 500 posted its worst year since the Great Recession and lost 6% of its value.

    Crypto investors who have been around since 2018 are likely aware of the woes that year brought. After peaking at roughly $750 billion, the cryptocurrency market cap tumbled and eventually fell to as low as just $107 billion, representing a catastrophic 85% decline. Bitcoin fell from about $19,000 to just above $3,000.

    It's abundantly clear that during periods of slowing economic growth cryptocurrencies are not spared. In fact, they're often hit the hardest. When recession fears arise, it isn't uncommon for cryptocurrencies to lose three-quarters of their value during these times.

    Cryptocurrencies are far more volatile than normal stock, and unlike normal stock have no real underlying value. It's all just a confidence scam.
  • Michael
    11.8k
    I have a stocks & shares ISA. From 31st Oct 2020 to 30th April 2022 it went up 23.65%.
  • Tzeentch
    2.1k
    Cryptocurrencies are far more volatile than normal stock, and unlike normal stock have no real underlying value. It's all just a confidence scam.Michael

    FIAT currency is the real confidence scam.

    The underlying value of cryptocurrency is that it is a scarce, independent means of exchanging value, much like gold and other precious metals. In fact, you'll find that a lot of people who invest in gold also invest in cryptocurrency for many of the same reasons.

    With financial repression looming on the horizon, and irresponsible economic policies running rampant, I'd say there are very good reasons to invest in both. For one, it's a lot easier to pay for things with cryptocurrency as opposed to gold. I'd stick with Bitcoin though.
  • Michael
    11.8k
    FIAT currency is the real confidence scam.Tzeentch

    When it's legal tender, backed by the government, it's not a confidence scam.

    For one, it's a lot easier to pay for things with cryptocurrency as opposed to gold. I'd stick with Bitcoin though.Tzeentch

    I'd stick with pound sterling.
  • Tzeentch
    2.1k
    Isn't that being devalued by about ~10% per year as we speak?
  • Michael
    11.8k
    Down 9% on the dollar from this time last year.

    Bitcoin is down 72% on the dollar from this time last year.

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  • Tzeentch
    2.1k
    Well, that was the big hype period which was obviously not representative of the actual value of Bitcoin. I don't think anyone with a bit of understanding would think that was a good time to buy in.
  • Michael
    11.8k
    Well, that was the big hype period which was obviously not representative of the actual value of Bitcoin.Tzeentch

    All cryptocurrency is a big hype period. It's all a confidence scam. It has no actual value.

    What makes one cryptocurrency worth what it is, or worth more than some other cryptocurrency? It's all make believe.
  • Tzeentch
    2.1k
    Cryptocurrency has more characteristics of actual money than FIAT currency has, so what can I say.
  • Michael
    11.8k
    Fiat currencies are legal tender. We get paid in it, we pay our taxes in it, and I can go to the shops and buy milk with it. It's mostly stable, with any big fluctuations the result of real world economic changes.

    What can you do with Bitcoin? It's just a speculative vehicle that people buy with real money in the hopes that they can sell it for even more real money, and which is ridiculously volatile, often with no rhyme or reason as to why it's perceived value changes.

    I think it's foolish to think of cryptocurrencies as being a "better" currency, or a good investment. I think you need to be more honest and accept that it's just a get rich quick scheme that some get lucky with.
  • Tzeentch
    2.1k
    Fiat currencies are legal tender. We get paid in it, we pay our taxes in it, and I can go to the shops and buy milk with it.Michael

    It's value is controlled by whoever controls the printing press.

    Scarcity is perhaps the most important characteristic of money, and fiat currency does not check that box.

    I think you need to be more honest and accept that it's just a get rich quick scheme that some get lucky with.Michael

    The fact is that that is exactly what it is not. The hordes of people with zero market understanding who voluntarily jumped on the crypto bandwagon and treated it like it was a way to "get rich quick" have no one but themselves to blame. Investing isn't for everyone, and it certainly isn't for the ignorant.

    It has nothing to do with the inherent value of cryptocurrency - an independent, scarce means of exchanging value.
  • Benkei
    5.9k
    Market movements in crypto are irrelevant to me because I'm only holding stable coins with a guaranteed 1 on 1 conversion. Downward fluctuations in market value in crypto need to be covered by additional collateral by borrowers or part of their collateral gets sold to pay off part of the loan until the LTV is within range again. I'm not running any market risk, whereas index funds do.
  • Benkei
    5.9k
    So BlockFi also crashed which is a competitor of Nexo offering a similar service as I'm using. Turns out Nexo moved all its crypto out of FTX beginning of November before it crashed. I wonder what tipped then off.

    There's a lot of incestuous lending going around in the background which creates all sorts of counterparty risk without any level of transparancy or oversight. It does seem so far, on average, European crypto institutions are not as leveraged or risk taking as their US counterparts.
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