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SEC Warns 'Extreme Caution' Over Cryptocurrency Investments As Many People Take Out Mortgages To Buy Bitcoin (qz.com)
The head of the US Securities and Exchange Commission has warned bitcoin and other cryptocurrency investors to beware of scams and criminal activity in the sector. In the financial regulator's strongest statement yet, SEC chair Jay Clayton said: "If a promoter guarantees returns, if an opportunity sounds too good to be true, or if you are pressured to act quickly, please exercise extreme caution and be aware of the risk that your investment may be lost." The warning comes at a time when many people have begun to take out mortgages to buy bitcoin. From a report: Clayton's statement was also issued the same day the SEC took regulatory action to halt an initial coin offering (ICO). "Recognize that these markets span national borders and that significant trading may occur on systems and platforms outside the United States. Your invested funds may quickly travel overseas without your knowledge," he wrote, in a sentence that was in bold. Clayton's statement referenced some of the crucial debates that have swirled around the rise and regulation of crypto-assets like bitcoins. Are these currencies? Commodities? Or securities? The statement notes in a footnote that bitcoin in the US has been designated a commodity. But the broader answer seems to be that while it depends from case to case, initial coin offerings, at least, are more likely to be scrutinized and held to the same bar as securities offerings.
Now is when you cash out, if you were wondering...
Next month, "Help me, other tax payers who aren't idiots! My mortgage is now bigger than the market value of my house. Make a law that makes the bank put my mortgage back the way it was! It's not fair!"
Don't disappoint your bird dog. Go to the range.
Stupidity is never a good investment.
They should have done that when it was at 11 bucks, not 11.000.
No, more like a giant poker game where a few people will win and a lot more will lose. Oh, and the game may or may not be fixed, but if it is, there's not a thing you can do about it.
Or more accurately, like the pyramid parties and pyramid letters that were so popular back in the early 1980s, where a bunch of people would pass money to the people at the top of the pyramid. You could make money at it, provided you brought in some greater fools to the next party to pass money to you.
Bitcoin is a zero-sum game. No one is walking away from the table with any money that didn't come from someone else's pocket. Or in some cases, from someone else's credit card, mortgage, retirement account, or college fund.
Isn't one of the key defining features of a bubble when a large number of relatively uniformed people decide to participate based on credit and margin? Tulips, the Great Crash, Great Recession, Internet Stocks, Great Recession...
Physics is nothing like religion. If it was, we'd have an easier time trying to raise money!
You don't actually make a profit until you sell the asset.... I suggest you do that NOW!
"File to fit, pound to insert, paint to match" - Aircraft Maintenance 101
I am very uneasy. There seem to several bubbles going which in aggregate or perhaps 1 to 3 happening at the same time spells disaster:
1) Cryptocurrencies. Yes, plural.
2) AI
3) Financial markets
4) Housing
5) Student loans
5) Health care
6) Tech in general, a run up in price of things such as FB and Tesla.
7) Foreign and domestic real estate
And probably more I can't think of right now. A collapse in the NYSE exchange would have a large impact on the global economy but 2 or 3 smaller ones together might have a ripple effect causing a larger collapse. I think we live in fragile times. If you look at history there were bubbles about every 10 to 20 years after the lessons of the last collapse fades from memory. We're about due.
putting the 'B' in LGBTQ+
No, tell him to hang onto it, it's always fun to see the repo truck pick up a supercar!
"When information is power, privacy is freedom" - Jah-Wren Ryel
Though I am not on the cryptocurrency bandwagon, I am glad that it is a currency that no government would be willing to bail out in the invent it crashes. So that's good news for those taxpayers that constantly bailout companies' and governments' bad decisions. So please, by all means, underwrite your mortgage for Bitcoin, I need to buy the cheap real estate on fire sales. BTW, I won't be accepting Bitcoin as rent.
Although nobody is gonna be bailing out BitCoin, you don't seem to understand how the mortgage bailout happened.
The 2008 failure came from unsupported counter-party risk (incl obscure things like credit default swaps). That caused liquidity issues with Lehman brothers and AIG and other insurance companies. The problem wasn't with the mortgages, per-se, but with people betting on the mortgages (e.g., the people offering to insure them based on complicated financial arrangements that proved unsound). If people are taking out mortgages to buy bitcoin, they are taking on the risk, but if corporations do this, they generally hedge with insurance contracts and re-insurance (how else would you justify complicated financial arrangements).
The problem is that if enough cards fall down, the corporations need the payouts from the insurance contracts. If all hell breaks loose, the companies that underwrote the insurance contracts are not going to be liquid enough to pay those out. Also, even those that thought they have bought insurance for other things (e.g., not bitcoin, not sub-prime mortgages) realize that the insurance company they paid premiums to all those years will evaporate and not make good on their payouts in other areas. This is when the bail out pressure mounts. You don't bail out the mortgages, you bail out the companies that underwrote the insurance contracts (like the US bailed out AIG for $85B and loaned JP Morgan Chase $29B to buy out the insolvent Bear Stearns) and the companies that wrote the mortgages ($200B for Freddie Mac and Fannie Mae). In comparison, only a measly $24B went for direct mortgage relief...
Fortunately, BTC is probably too small to matter today. BTC market is only $276B total vs $10T for mortgage debt (~$5T pre-Year2000). Unfortunately, the Chicago Board has opened up BitCoin Futures to ratchet things up a level. With an established futures market, it will be possible to play BTC swings w/o being limited by actual BTC holdings. BTC holding insurance contracts can be written backed by BTC futures contracts and people can speculate on those as well. We'll see how big that futures and derivatives market gets relative to the underlying BTC (in some areas, you can see 10x the market in futures/derivatives over the underlying asset).
Things are a bunch more intertwined than anyone might imagine. Get your popcorn ready, the show is about to start....
People buy early and low, speculation drives demand high with no real assets backing up the worth save pure speculation. people early sell to people buying later. More people later than earlier. People at the upper end of the pyramid make crazy profits, people who buy are left holding the bag (the larger number of masses at the base supporting the profits of the top) when this balloon pops. once upon a time we had the gold standard.
When we didn't have enough gold to back it up, so...we abandoned it for speculative currency. The one definite thing about technology, is enables us to accelerate what we normally do, making the flaws in our systems more visible. Samuel Clemens write about the stock market in Huckleberry Finn, and Sir Conan Doyle mentioned it in his writings of Sherlock Holmes as well. neither gave a pretty picture. If they could only see this...
"Imagination is more important than knowledge" - Einstein
You missed the part where the corporations knew there was no chance the insurance could pay out, but only bought it so that they could legally not have to count the debt against their balance sheet. And the part where none of those criminals went to jail.