I sometimes wonder if I'm the only one who just wants a bank to be a bank.
I've been with the same relatively small regional bank for 30 years. I have a checking account, savings account and that's it. They've been stable this entire time, and I've never worried my money was going to disappear.
As another sign of being an old man, I'm old enough to remember the phrase "as safe as money in the bank". You see, when I was a kid, the banks had been operating under decades of strong regulation by the FDIC and other agencies, and were widely considered to be a safe place to put your money.
Not that the banking sector hasn't seen its share of problems in that time. From the S&L crisis, to the home mortgage lending fraud that lead to the big crash. But in all that time, with just a little effort, you could put at least some of your money in a regular local bank, and expect it to be there tomorrow.
Bank local! If you want to speculatively invest, that's fine. But keep some money in a local bank so that you can pay your bills next month.
Pointing to the list of failed banks from the website of the government agency that insures them and makes customers whole doesn't convey as strong of a point as you might have intended.
I think it perfectly well makes the point that regional banks are much more likely to practice poor risk management and fail than larger banks. If your goal is "boring banking", having to have the FDIC come in and arrange a sale of your bank is ... not it?
> I think it perfectly well makes the point that regional banks are much more likely to practice poor risk management and fail than larger banks.
That doesn't at all follow just from the fact that a list of failed banks included many, many more smaller regional banks than larger banks:
1. I'm assuming there ARE a lot more smaller, regional banks than large banks, so you'd expect them to be the majority of a list of failed banks.
2. The failure of a single large bank affects many more customers and a lot more money than a single small bank failure.
3. It's pretty clear that large banks in the "too big to fail" category will get institutional and government support (e.g. the government even operates a "systemically important financial institutions" list), while smaller banks will be allowed to fail. While that may mean your money is safer in a larger institution, it's not really because "regional banks are much more likely to practice poor risk management and fail than larger banks".
Oh, that's a good point. I guess the most boring bank possible would probably be something like Chase.
That being said, it looks like we average around 4 regional bank failures a year in the US. There are a little under 5000 banks in the US, almost all of which are regional, so that leaves a 0.08% chance that any particular one of them will fail (all things being equal, which they probably aren't).
>I guess the most boring bank possible would probably be something like Chase
A bank like Chase has all sorts of fees and minimums for a simple checking account - which a normal regional bank doesn't.
What's the benefit to an a average person of banking with a subsidiary of a huge Wall Street bank? They don't even want your business. The only reason they are even offering consumer services is because of out of control empire building, like how JP Morgan bought Chase Manhattan.
You don't have to bank with a national brand name.
You don't have to pay a monthly fee for checking.
You don't have to have a monthly direct deposit.
You don't have to have a $1500 minimum balance (like with Chase).
And credit unions are fine of course, but banks have free checking too.
I wonder if there are a lot of people who think you will get food poisoning from any hamburger not made at a McDonald's.
Far be it from me to defend Chase. I thought they might be a good example of a “more boring” bank in the sense that the GP meant. But I agree completely that, for many people, a small bank or credit union is a much better choice.
unless you want a website with a real set of useful features, a mobile app, and a cybersecurity audit dept. My grandmother uses a small local bank in Spokane, WA. its terrible to interact with them, and I constantly have to do so because their website is garbage and their mobile app is just a wrapper around their garbage website. OTOH, Bank of America has a good mobile app and informative website. I almost never need to interact with them to do what I need to.
Most smaller businesses do not develop their own website and everything like it's 1996.
There are service providers that cater to the 99% that spare them from totally reinventing the wheel. There's a company headquartered near me, that you never heard of, that as I recall basically provides a white-label e-commerce platform to small and mid-size businesses.
A particularly fucked up website, I would bet is likely the product of a business that did have some in-house tech people years ago, and once they had something working, has prudently avoided redoing it from scratch.
Oh yeah - the bank in a box package from those SPs is totally real. The basic kind of stuff that is uniform across banking kinda works. Its the stuff that is specific to a particular bank that just seems to never be implemented.
I have a piece of equipment that I financed through Bank of Colorado. They're not even that small a bank, but I have a different account to pay my loan every month than I have to see my balance on the loan...it is not great.
This probably depends on what you're trying to get out of your bank. I currently use my bank's app, but I don't think I actually need to (the only things I do are write the occasionally check and use my debit card.)
First, it's a bit of a distraction OP's point was that they want a bank to be a bank - not that smaller banks are better than larger banks. They just happen to use a smaller bank.
Second, there are over 4,000 banks in the US. The fact that fewer than 0.1% fail per year is actually a really strong argument on how much safer banks are.
And finally that those few that did fail were insured by the US govt is the icing on the cake.
None of this was true for crypto over the past few years.
> If your goal is "boring banking", having to have the FDIC come in and arrange a sale of your bank is ... not it?
It is, actually, from a customer perspective; the FDIC comes in, replaces management, and employs the staff as temporary employees of the FDIC to keep things running smoothly. For an average customer (if they're under the $250k threshold), they come in the next business day and conduct business as usual.
Yes, that's the worst case - however in the real world the FDIC and the OTS (Office of Thrift Supervision) does their best to ensure nobody loses any amount of money regardless of their account balance.
In the case of WaMu in 2008 for instance, the OTS took possession of the bank and sold it to JPMorgan Chase. They didn't draw on the deposit insurance fund and everyone stayed whole. [1]
"According to FDIC spokeswoman LaJuan Williams-Young, 'No depositor has ever lost a penny of insured deposits since the FDIC was created in 1933.'" [2, 3]
[edit] Looks like I found one case where a bank failed and a total of $500,000 in uninsured deposits (not in a single account, in total) were forfeit. [4]
That "No depositor has ever lost a penny of insured deposits since the FDIC was created in 1933" claim is in reference to just the insured part of the deposits (as in up to the limits).
FDIC is required to go with the resolution that will cost the least to the fund. An acquirer offering to take on all Deposits rather than just insured deposits is typically not a big problem for the acquirer, and can save a surprising amount of money on the FDICs side, so most acquisition offers tend to be for all deposits rather than just insured deposits. (It also tends to keep your new customers happier if they did not lose money, which is very much an actual consideration that goes into bidding on a failing bank).
However, sometimes a bank will successfully bid for only the insured portions of deposit accounts. This happened with The Enloe State Bank in 2019, where Legend Bank's bid to acquire just the insured portions of deposit accounts.
Nevertheless, losing deposits over the insured amount in a bank closure is definitely the exception and not the norm in recent times.
Whoa, hold up there. The risks to bank stability, and customer deposit integrity, are a little higher than most people may realize.
Back in the 2007-2010 financial crisis, IndyMac Bank went under. They were a major bank on the west coast, especially the Los Angeles metro area.
And when they did, there were thousands of depositors who were over the FDIC limits for their accounts, which at the time were only $100,000 per account, not yet raised to $250,000 per account. Some were individuals, some were businesses, some were trust accounts, some were only supposed to be temporarily over the limit because they held money from a deceased person that was a life insurance payout or going through probate, and so on.
But what was really unusual in their case was that the FDIC could not find any other bank that would take over IndyMac Bank directly, and assume its debts and deposits.
So the FDIC had to create a brand new bank out of whole cloth, called IndyMac Federal Bank (note the name), to take over IndyMac Bank, before it could be dealt with further. Eventually it got acquired by One West.
Just this one bank's failure cost the FDIC eleven billion dollars. And the FDIC as an agency barely managed to stay afloat during the 2007-2010 financial crisis, because it had so many banks where it had to either manage shotgun weddings with other more-stable banks, or bail them out entirely. Of course, the FDIC had an implicit backstop from Congress, but they came damn near bumping up against their full budget during this time period.
And again, that eleven billion for that one bank was not counting all the people who were over their deposit limits -- $270 million over the limits, in total. Those people were screwed.
Well, you can have a deposit insurance scheme that fails to insure bank deposits.
IIRC this happened at least once during the eurozone crisis where national deposit schemes could not insure the cross-border activities of their banks.
Yes, you're right, however, do you have a source on how much has been lost in the last 89 years? I've had a lot of trouble finding anything more than that one bank that had $30M in assets losing $500K in total one time in Texas in the last 5 years.
The failure of IndyMac is the poster-child of the modern era - losses on uninsured deposits were certainly into the multiple hundreds of millions; it's really that case which prompted the increase of the FDIC insurance limit.
Yup. About 10,000 people (well, 10,000 depositors, some of which were actually companies or trusts or things like that, not all people) lost more than $270 million in total uninsured funds that were over the FDIC limits in the IndyMac collapse.
At my first tech job we stored our source code repo on a NetApp FAServer. Super reliable hardware, RAID4, built-in snapshots so users could recover their accidentally deleted files without sysadmin intervention. No developer lost a byte of their data once the NetApp was installed.
Until we found out that one guy had done the wrong thing and corrupted a file a few months ago. That's how we found out our backups (made with the very expensive backup software Alexandria) didn't work. And this was well before Git, so we didn't have multiple redundant repositories we could sync from to recover. The humongous NetApp rackmount RAID was 35 gigabytes if I recall correctly.
This is a problem with improving reliability through redundancy: sometimes instead of getting reliability, you just shift the failure modes to more catastrophic systemic failures, because they happen too rarely for people to assess the risks properly.
Speaking of systemic failures, everybody who's had US$10k in the bank since last year (or in other dollar-denominated assets such as T-bills) has lost US$800 of it to inflation over the last year. What else could you have you spent US$800 on? If your retirement fund has US$100k in the money market that inflation cost you US$8000.
Still, be glad you're not in Argentina. Our central bank printed a trillion pesos last month, a quarter of the monetary base, and the inflation over the last year has been about 60%.
> Speaking of systemic failures, everybody who's had US$10k in the bank since last year (or in other dollar-denominated assets such as T-bills) has lost US$800 of it to inflation over the last year.
If that's a concern to you, put it in I Bonds; interest tracks inflation, so the current rate is 9.62%. Buy $15k a year, or $30k if you've a spouse.
The government here also indexed a lot of things to inflation: pensions, certain bonds, etc. So when they couldn't pay their debts about 20 years ago they started falsifying the official inflation rate. Poof, no more problem! What do you think the US government will do with I bonds if it's insolvent? It'll default, sneakily or openly.
You can't reduce the risks of systemic failure by centralizing harder. To manage risk you need to diversify, not double down.
First off, there's a big difference between a government collapsing and a government defaulting on its debt. And falsifying the inflation statistics
doesn't even officially count as defaulting on debt.
Second, even if a government collapses, ammo and MREs are probably not
a great investment.
Did you find it useful to invest
in ammo and MREs when the Burmese government collapsed? Probably
not if you're not in Burma. Do you think
Ukrainians in Mariupol who invested in ammo and MREs are the ones who
are in good shape? How about the Iraqis who stocked up before the US invasion?
No, the people who are in good shape there are the ones who left ahead of time.
I can tell you that Argentines who invested in ammo and
MREs when we defaulted on our sovereign debt
didn't end up any better off. Worse off
in some cases, because their arsenals got them
raided by the police. Some of them wrote
entertaining heavily fictionalized blogs, but they didn't come out better off.
People who left and people who organized their communities came out pretty okay.
So, let's forget about your adolescent Rambo fantasies
and refocus on realistic hedges against systemic failure and hyperinflation.
Because I can tell you from experience that living through it can suck pretty
bad, but diversifying can help a lot.
I was referring to your recommendation that people, especially the 95% of them who don't live in the US and aren't US citizens, "invest in ammo and MREs" as a way to prepare for the possibility that the US government might devalue the dollar and revise the BLS CPI computation in an unfavorable way.
It's hard to imagine a more unrealistic approach to financial planning than yours. It's up there with Charlie Manson's plan to hide in a hole in the desert until all the other white people were killed in a race war prophesied through Beatles songs.
As an insurer, sure, $250K per account owner per ownership class. (Notably, single and joint accounts are separate ownership categories, so with proper distribution of balances, a married couple with single and joint accounts at one institution, is covered up to $1,000,000 in total. $250k each in the individual category, and $250k each in the joint category.
But it also acts as a receiver of failed banks, and in that capacity can facilitate the sale of assets tied to the uninsured portion of the debts represented by account balances. Usually, this ends up with making account holders whole without limit.
> For a single individual are savings and checking accounts considered separate accounts?
Insurance limits are not by account, they are by account ownership category. Checking and savings account held as single accounts are all part of the same ownership category:
That doesn't stop you from spreading it out... while you say "only" just a down payment, it's also worth noting that a down payment is the single largest cash transaction many people will ever make. Which is all the more reason that it doesn't make sense to have a giant balance all in the same spot 99% of the time.
("A lot" of cities is also doing a lot of work in that sentence... 250k is 20% of 1.25M. That would buy you a lot of house in the vast majority of US cities.
This is a complete misunderstanding of the problem.
I invite you to read Taleb (I'm not trying to sound like a fanboy; but his ideas are literally the utterly common-sense conclusions you'll reach if you study complexity science as applied to the financial system; i.e. they are objectively and necessarily true).
I'll try to present a very simplified but rigorous case:
1. There's commercial banks (that take consumer/corporate deposit & give out loans), and investment banks that arbitrage the markets. If you allow banks to fulfill both commercial and investment roles, consumer deposits are at risk from bad investment decisions. Note that Glass–Steagall is still repealed, and banks are still allowed today to put your money at risk.
2. Many investment banks used mathematically-flawed risk models, that underestimate fat-tail risk, and therefore lead to inevitable collapse. Read Jim Rickards's testimony to the House of Representatives on this; he was LTCM's general counsel, and LTCM (a who's who of finance PhD's and Nobel Prize winners) blew up due to overconfidence in these flawed models (https://moam.info/house-testimony-rickards-committee-on-scie...).
3. The problem here is systemic risk: banks only get rescued because they're systemically important. "Systemic-ness" is mainly a function of interconnectedness of markets, i.e. systemic banks cannot fail without destroying the markets and economies. Hence banks have an incentive to become systemically important, so they'll get bailed out if they make mistakes. Risk of catastrophic system failure is incentivized.
4. Small banks failing is normal. FDIC insures deposits to a certain amount; no Average Joe gets wiped out, bank investors do. The key point (covered in Taleb's Antifragile book) is that individual survival (agent) and ecosystem survival (system) are often at odds. Animal evolution requires death, since that's the filtering process; if everyone survived, no natural selection occurs, no evolution, and pathological mutations would eventually accumulate and wipe the species out. A healthy banking industry is one in which banks fail regularly, without impacting consumers (thanks to FDIC), and where bankers who worked at those banks get wiped out financially too, and don't just walk away with bonuses. Then, they'd have an incentives to stop using known-defective quant risk models. Contrary to popular opinion skin in the game isn't about incentives but about filtering (if you fail at the game, you personally suffer the consequences and cannot continue playing).
Many problems in the world stem from misunderstandings of either complex systems theory (an actual scientific discipline that should be taught in high school), math (mostly dimensionality and fat-tailedness) and probability theory. Without a basic understanding of these, people simply don't have the tools to understand or discuss much of the modern world.
The consequences can be seen in systemic financial failures; in ineffective pandemic responses; and in much of social science. See for example:
Note: that Jim Rickards testimony link is the only good one I've found. He was given little time in committee, and had to essentially rush through his points (reducing entire paragraphs or sometimes entire pages to a sentence); so if you look at the 'official' House transcript you'll miss out most of his supporting arguments. Despite the "moam.info" site looking strange, I can confirm the submitted testimony is the original, authentic version.
This is the link to his verbal testimony, and you can see how shortened it is:
Aren't retail and investment banking separate spaces? Aren't depository accounts insured to the tune of a quarter of a million dollars by the FDIC? Isn't Voyager a crypto exchange?
I tend to keep my money in local credit unions as well, but I'm struggling to understand how this discussion is germane to Voyager's actions here.
Because Voyager has tried to position itself as a crypto-based alternative to banking. From the front page:
> Build your wealth
> Earn up to 12% annual rewards. Beat your bank by earning top rewards each month on 39 digital assets with no lockups.
They explicitly touted their benefits over using a traditional bank before they issued this notice. They also issued debit cards that they are now deactivating.
Fundamentally, crypto has staked its future on replacing the banking system, citing various issues with the Fed, etc. But the regulatory environment in banking (the FDIC) creates a much more stable environment in which to transact than these platforms do.
In particular, the Voyager home page says that "USD" and "cash" deposits are FDIC-insured, while the debit card landing page talks about how you can earn rewards while "spend[ing] USD Coin like cash".
I can easily imagine a naive consumer coming away from this with the incorrect impression that USD Coin deposits, being equivalent to USD, are insured to the same extent.
They can be the same. Voyager looks like they have their sweep account as a brokered deposit with an FDIC insured bank. This similar to other investment firms. I think Etrade lets you have up to $1M for FDIC insurance spread across 4 banks but you have to set it otherwise it sits in a money market or equiv.
Good thing is that voyager shouldn't be able to touch money in the sweep accounts.
>the Financial Services Modernization Act of 1999...repealed part of the Glass–Steagall Act of 1933, removing barriers in the market among banking companies, securities companies, and insurance companies that prohibited any one institution from acting as any combination of an investment bank, a commercial bank, and an insurance company
FDIC insurance ends up being the main guarantee of safety, especially in the modern era of 0% reserve requirements.
The 4.5% is the baseline; subject to additional stress capital buffer (based on DFAST supervisory stress-test results) and systematically-important institution weighting.
which means the tests are not stressing. That is a good thing as they test for conditions that previously resulted in crashes. But it could also be a bad thing if the banks adapted to formally pass tests while straining their business with schemes that are overlooked
The conclusion during COVID was that the stress tests were too stringent and COVID was much better for the banks than worst case stress tests.
Basically stress tests simulate large drops in asset values, but during COVID the trading desks made bucketloads of money when volatility was high. The financial sector is pretty resilient these days, the risky stuff mostly moved off bank balance sheets into private funds not subject to the same regulatory requirements.
We do know, at least from the last crisis, that so far the US stress tests have been effective at accurately gauging bank strength.
(This is in contrast to the ECB stress tests during the Euro crisis, where repeatedly banks that had passed a stress test ended up needing bailouts or falling over.)
>especially in the modern era of 0% reserve requirements.
Total red herring; reserve requirements went away but they were irrelevant because banks were holding massively in excess of the required reserves in any case.
Couldn’t agree more. Been banking with a not-for-profit credit union for over 15 years. Never been charged unreasonable fees, great customer service, solid and simple app/website. I don’t want banking to be “exciting”
My bank makes money off of me every month, even though I have the "free" checking account. They offer an historically low interest rate on the savings account, and I know they're making money off that too.
“ Voyager Digital Ltd. is a fast-growing, publicly traded cryptocurrency platform in the United States founded in 2018 to bring choice, transparency, and cost efficiency to the marketplace. ”
Never heard of them before but they talked about direct deposits and a debit card on the page linked above so if they aren't a bank they are acting a lot like one.
> Bank local! If you want to speculatively invest, that's fine. But keep some money in a local bank so that you can pay your bills next month.
Hmm, shouldn't you also consider having accounts in multiple banks, even if they're relatively local ones? For example, in my country there's two banks that I guess are the most popular ones: SEB and Swedbank.
While they both have a history of being reliable, it's not unheard of that people's bank details might be compromised, breaches happen, or outages/cyber attacks that might disrupt/slow down service in whatever capacity.
While a part of these factors might not be applicable to people who practice good information security, it's not like you cannot write them off entirely. Furthermore, I do think that there was a bank that actually went bankrupt a number of years ago, people couldn't access all of their funds etc.
So treating banks like any other system - where avoiding a single point of failure might just be worth it in the face of significant consequences should anything bad happen, seems like the right thing to do.
Then again, one might also just buy gold and bury it in their back yard (provided that they own the land), depending on what their risk tolerance is towards certain events. Not even kidding about this. If you can diversify your investments, doing the same for where/how you store your money or other assets just seems smart, even if a bit cumbersome.
> I sometimes wonder if I'm the only one who just wants a bank to be a bank.
1) One big issue is that there's a case of bad incentives that are growing even worse. As I see it, the big problem emerges when you really start to understand what inflation does to your savings and how inflation operates like a stealth tax, particularly on the poor/middle class who have less avenues to shield their wealth through property or other assets that might retain or expand their value in the long term. The paltry ~0.05% (not 5%, but a fraction of a percent) interest rate you might get from your savings account feels like somebody is pissing on your face when inflation is reportedly in high single digits, but probably higher. You end up being robbed of more purchasing power the more responsible you try and be and the more of a saver you are in a high inflation environment. Fix this systemic problem with inflation first. This is why a lot of people are searching out higher and higher returns, even with some risk. You're being robbed no matter what happens unless you beat out inflation.
2) I'm taking a guess here, but as you state you're a bit of an older man, you might be speaking from an advantageous perspective of growing up in an era where buying a home and relative economic success was comparatively easier to achieve. It's a little easier to play it extremely low risk, even if you're losing some money, if you've already achieved a satisfactory outcome in life with home ownership. For many complex reasons, the younger generations here who are taking bigger risks have a far harder time achieving the same level of relative success as the older generations have achieved.
I don't think people put money in these crypto high-yield investments because they love risk. The majority of people I have talked to were unsophisticated investors who didn't know what they were doing, and were under the impression that the investment was safe.
This is a very American thing. As much as our Canadian banks gouge us, and lead to a lack of choice and almost monopolistic conditions... Our banking system is so ridiculously stable compared to the US it's not even funny. I look down south in confusion because I just don't understand how you manage in your system
Not sure what you mean. I’ve had the same account with Chase roughly since I became an adult (I’m 32 now). It seems to be perfectly stable and work fine.
I hate to break it to you but vast majority of small regional banks are scams. I learned this hard way trying to support local bank instead of big ones. It turns out these banks are run by bunch of private equity firms for the sole purpose of lone manipulation. After they serve their purpose, they “almost” go out of business until another equity firm picks it up for cheap for another rinse repeat cycle. My local bank changes hands about every 2-3 years. As a bonus you get crappiest website with giant security issues. Your money is safe there only below federal limit. As long as banks are concerned, always chose too big to fail ones.
If we get interest rates back up to better levels (IMHO 6 to 7 percent mortgages) they might even be able to pay interest on savings without selling loans!
Unfortunately lowering rates is used to "fix" the economy. This is a failed strategy.
You may feel like your accounts are stable and nothing is disappearing but by CPI inflation calculations (https://www.bls.gov/data/inflation_calculator.htm), any money you had in that account 30 years ago has lost half its buying power.
If you want to keep the money that you have worked for over the long term, your checking and savings account are not going to cut it.
Half in 30 years? That’s pretty good! Ethereum fell by that much in a couple weeks. On the way up in a bull market it’s all roses, but in a bear market, these things can crash hard.
Money losing value gradually — Demurrage — makes people actually spend money rather than hoard it. If you want the money to earn interest, you will have to take some risk. Invest in some assets. Usually, stocks or real estate or (finally thanks to the JOBS act) new startups.
I don’t know why people have “fat bank accounts”. Money isn’t meant to be stored. That’s a racket by the banks, along with the idea that you have to buy a home instead of renting. If you can rent and buy other assets that you understand better than real estate, then do that.
This is not magic .. money has to come from somewhere. It usually comes from banks themselves — who lend it to people and businesses who believe that they can pay back MORE money ! The only way everyone can pay back more money than is in existence is if the money supply is increased in the meantime. So inflation happens. The only alternative is having lots of people default and restructure their loans to owe less. This is what Ray Dalio says can be “a beautiful deleveraging”. I don’t buy it…
> he only way everyone can pay back more money than is in existence is if the money supply is increased in the meantime. So inflation happens.
or the lent money is used to produce more goods and services, which the increased money supply would represent (otherwise, you'd get deflation, which discourages spending, and spiral downwards towards depression).
Most of that sounds right, but the money to pay it back is not a zero-sum game. It can also comes from increased velocity, quantitative easing, the net present value utility function, or by temporarily exchanging it for other asset classes (eg building real estate is a form of increase to the money supply), and probably other sources too
i am not even 40 and got my money robbed from the bank by the government twice. depends where you live, a bank is not that good of a place to keep your savings.
Not the OP but there are plenty of examples of countries where the government stole everyone’s deposits — usually by forcibly converting accounts denominated in a hard foreign currency to the local currency at a farcical “official” rate.
I’ve specifically heard of this happening in Argentina and Yugoslavia, but if you google “forced currency conversion” you can find many other examples.
Nah the IRS has frozen bank accounts multiple times merely because people owned cash businesses where they made sub-10k deposits on the regular without any intention to structure it. It's frighteningly easy to lose access to your bank account in the US.
>But that's not at all what happened in the thread we're replying to..
Don't think you have the information to say that.
OP didn't say what happened. I don't think we can say anything in particular is exactly what did happen without more information. Unless you don't consider the US a place with "a stable financial system and/or government" -- which may be accurate -- then this very well could have taken place in the US. I'm not sure you can infer where this took place.
This is a pretty common scenario in South America, e.g. Argentina, Colombia, Venezuela and then you can look over at some African reasons and even Asia nowadays too - e.g. Sri Lanka.
You can also go as far as even the USA does this on money it deems "did a crime" or was related, or just in the proximity because the law enforcement officer said so. civil forfeiture.
I think you're conflating these defi platforms as banks, they are not - they are risk ladden investment platforms as listed on the website itself...
"2022 Voyager Digital, LLC. VOYAGER is a trademark of Voyager IP, LLC, a wholly owned subsidiary of Voyager Digital Ltd. All services provided by Voyager Digital, LLC, a FinCEN registered company. Investments are subject to market risk. NMLS ID: 1730854"
I also don't see them saying they are a bank, anywhere on their about me investor page:
"About Voyager
Voyager Digital Ltd. is a fast-growing, publicly traded cryptocurrency platform in the United States founded in 2018 to bring choice, transparency, and cost efficiency to the marketplace. Voyager offers a secure way to trade over 100 different crypto assets using its easy-to-use mobile application, and earn rewards up to 12 percent annually on more than 40 cryptocurrencies. Through its subsidiary Coinify ApS, Voyager provides crypto payment solutions for both consumers and merchants around the globe."
As /u/thr0wawayf00 mentions, they issued debit cards and allowed people to do direct deposits into their accounts. So people were using it like a bank for their ordinary day-to-day financial transactions.
I, personally, would never have considered it a bank (or had any trust for anything crypto-related in general), but other people seemed to treat it like a bank.
Banks have never been that safe for large sums of money. Not only do banks occasionally get robbed, but also safe deposit boxes get accidentally cleaned, and creditors and the govt. can have your accounts levied.
There's a myth that Voyager is FDIC insured. It's pure marketing.
Voyager has an omnibus account with the Metropolitan Commercial Bank where Voyager's customers deposit their money. Voyager acts as the money manager of the omnibus account and has absolute control over the money.
Metropolitan is a member of FDIC and is FDIC insured. In the case of the Metropolitan bank failing, the FDIC insurance kicks in to cover any loss of the omnibus account upto 250K. However, Voyager is NOT a member of FDIC and is not FDIC insured. In the case of Voyager failing, the money is gone. FDIC won't be involved as Metropolitan is still fine.
Voyager customers hoping FDIC coming in to cover their loss are going to have a rude awakening.
Edit: A simple analogy is that your parents and you open a shared account with a bank. Your parents lose all the money from the account. FDIC is not going to cover any of the loss since the bank is fine.
Hm.. interesting. In their medium article linked below they say the funds are safe even in case of the failure of the company not just their bank partner, but on their website in the same text the "company failure" is not there. (and even just saying "company" in the article is a little vague because they don't say which company):
"Through our strategic relationships with our banking partners, all customers’ USD held with Voyager is now FDIC insured. That means that in the rare event your USD funds are compromised due to the _company_ or our banking partner’s failure, you are guaranteed a full reimbursement (up to $250,000)."
They were misrepresenting their FDIC status if they were claiming FDIC covering their company's failure. They might be cleaning their language to avoid legal problems.
Just two weeks ago they had the following in a blog post:
> This is also a good time to remind everyone that USD is held by our banking partner, Metropolitan Commercial Bank, which is FDIC insured. The cash you hold with Voyager is protected up to $250,000–which means it’s as safe with us as at a bank.
They also said:
> Through our strategic relationships with our banking partners, all customers’ USD held with Voyager is now FDIC insured. That means that in the rare event your USD funds are compromised due to the company or our banking partner’s failure, you are guaranteed a full reimbursement (up to $250,000).
The "That means that in the rare event your USD funds are compromised due to the company" is what is confusing people.
What the hell? Is there no penalty for advertising as being FDIC insured when client deposits are not? Plain as day I checked their tweets and they made a statement about FDIC insurance and the next sentence was telling you to start your crypto investment.
I'd be interested if someone can comment with more information. Here are the details from Voyager's legal docs:
> Customer understands and acknowledges that Customer may arrange to deposit United States Dollars (“USD” or “Cash”) into the Account. Cash deposited into the Customer’s Account is maintained in an omnibus account at Metropolitan Commercial Bank (the “Bank”), which is a member of the Federal Deposit Insurance Corporation (“FDIC”). Voyager maintains an agreement with the Bank whereby the Bank provides all services associated with the movement of and holding of USD in connection with the provision of each Account. Therefore, each Customer is a customer of the Bank. All U.S. regulatory obligations associated with the movement of, and holding of, USD in connection with each Account are the responsibility of the Bank. For purposes of clarity, any services pertaining to the movement of, and holding of, USD are not provided by Voyager or its Affiliates. Cash in the Account is insured up to $250,000 per depositor by the FDIC in the event the Bank fails if specific insurance deposit requirements are met. FDIC insurance does not protect against the failure of Voyager or any Custodian (as defined below) or malfeasance by any Voyager or Custodian employee.
My reading of that, then, is that if you have USD cash in that account, then Voyager can NOT restrict your withdrawal of that cash, due to this line "All U.S. regulatory obligations associated with the movement of, and holding of, USD in connection with each Account are the responsibility of the Bank." They are clearly saying here that, basically "For purposes of your cash, you are an individual customer of the Bank (which is FDIC insured), and the Bank is responsible for following Banking regulations". AFAIK banks are not allowed to just restrict withdrawals as Voyager has done.
So it seems like your crypto could all be tits up, but your cash should be FDIC insured.
Your cash is FDIC insured in regarding to Metropolitan failure. Your cash is not FDIC insured in regarding to Voyager failure.
Omnibus account is a shared account which Voyager has absolute control. See their language below where Metropolitan grants them the right on "movement of and holding of USD," i.e. they can move the money as they see fit.
"Voyager maintains an agreement with the Bank whereby the Bank provides all services associated with the movement of and holding of USD in connection with the provision of each Account."
As for Voyager customers withdrawing the money from Metropolitan, they can try. Curious to see how far they get.
IANAL, but I think what they are trying to say here is "We are not a bank. Dear SEC, please don't treat us like one - go ask Metropolitan for all your regulatory cravings".
"Therefore, each Customer is a customer of the Bank", ehm, does the bank know about it? Each bank account must have a legal owner (or multiple ones for a joint account) and I somehow doubt Voyager would put their entire customer base as the joint owners of their bank account.
The "Cash in the Account is insured up to $250,000 per depositor" part is deliberately misleading. As far as the bank is concerned, there is only one depositor - Voyager.
In general, you need to look at specific scenarios:
1. Voyager goes belly up and you still had $1000 on your account. You could:
1.1. Sue Voyager. The court will likely rule you as a creditor granting you a claim against some fraction of their residual assets. You will get anywhere between $0 and $1000 depending on other creditors, their claims and the amount of remaining assets. Quite likely, not much.
1.2. Sue the bank. The bank will show that the omnibus account still holds some USD (that might be less than the end users' deposits) and will tell you to go sue Voyager as a creditor.
1.3. File a claim with FDIC. They will tell you to bite dust because they cover the business between the bank and Voyager. You are neither of those and have no business with them.
2. The bank goes belly up. Voyager will file a claim with FDIC and get $250K for ALL users. This will make them default on the users' claims, hence go to 1.1.
> We are in discussions with various parties regarding additional liquidity and the go-forward strategy for the company. While we don’t have anything else to share today, we are working diligently and hope to have more information to share soon.
Translation: we are insolvent. The action we have taken prevents a run that will wipe out our working capital. We have been running a fractional reserve all along.
This is getting tedious.
Also: Voyager's alleged debtor, 3AC, just filed for Chapter 15 Bankruptcy:
>Build your wealth. Earn up to 12% annual rewards. Beat your bank by earning top rewards each month on 39 digital assets with no lockups.
Doing 12% APY when the fed funds rate was 0.5% meant they were loaning those deposits out at more than 13%. That's a pretty bad rate for a commercial loan. The only companies taking out those loans are doing so because they were rejected from regular banks. Why? Well now we know: it was all crypto hedge funds who were levered up and instantly imploded the minute crypto started to go down.
If loans were a component of Voyager's reserves, then by definition, Voyager was employing fractional reserve banking.
It's even more amusing that you think this crisis being caused by failed loan payments doesn't mean that fractional reserves are in play, because backing deposits with loans in lieu of cash is literally the textbook example used to illustrate fractional reserve banking.
You are a bank. Sally gives you $100, so now you have $100 in cash as assets. Bob comes up to and asks for $80. You agree to give him $80, on the condition that he gives you $90 next week. Now you have $20 in cash and a $90 loan backing your $100 liability to Sally. Because that $20 in cash is less than $100, you have fractional reserves.
Now, the real world is more complicated, because there's different definitions of cash and of liabilities, and even questions like "how much is this thing worth" can be very hard to pin down. But the basic idea of fractional reserves is that banks do not hold all of their reserves in cash.
And yes, the cryptocurrency industry does cater heavily to people who find the existing banking system abhorrent because it practices fractional reserve banking while practicing fractional reserve banking themselves, just far more quietly. (Indeed, a lot of the cryptocurrency industry is basically preying on people who are financially illiterate.)
Tether is looking stressed. In the last three months, a lot of Tether has been cashed out. Look at the chart for Market Cap -> Last 3 months.[1] From US$82 billion to US$66 billion. Today, US$200 million was cashed out. Every few days, their market cap drops suddenly.
At this rate, in a few months we'll find out how much backing Tether really has, because it is being paid out.
Tether's market cap dropping without a price drop is indication that they are liquid and able to handle (to date) almost $20 billion in withdrawal over a 1 month period. That is impressive and a sign of their robustness. They are passing a stress test so far.
It seems like it would be pretty binary. That is, withdrawals would be orderly... until they are suddenly not. It's not very good evidence for the state of their backing now. Maybe they've chewed through all their liquid assets and will explode tomorrow, maybe not.
That is, withdrawals wouldn't shake the Tether price at all until someone is told "no you can't withdraw today" and decides to sell their Tethers on the market at a discount instead of withdrawing at par.
Yes, it’s possible that Tether is suddenly unable to be exchanged for dollars, but it’s pretty impressive they’ve been able to handle a sudden outflow of 20B. They’ve certainly proven their most harsh critics wrong, but there is still risk of course.
I dunno, if I put $80 of cash into a black box and pull out $20, that doesn't tell you that much about the remaining $60, just that the box wasn't secretly a paper shredder the whole time. Which is great news for the lucky early redeemer. Not much use to later redeemers though, if it turns out that the remainder was eaten by hungry rodents.
Depends on how you see it, I am impressed there was even $20 in the box given how poorly and non transparently they are governed.
The current global market climate makes it tough to keep the $80Billion in investments both liquid and on par even if they invested in traditional portfolio baskets, a traditional bank would likely struggle if quarter of their deposits liquidated in a month and may not be able to easily meet cash reserve ration requirements to support future withdrawals.
You could have a situation where Tether is 80% capitalized, in which case one USDT is worth $0.80.
Or a situation where they have money locked in Treasury bonds for 1 year. In that case, the value of USDT depends on your discount rate and is around $0.95.
"The valuation of the assets of the Group have been based upon normal trading conditions and do not reflect an unexpected large-scale sale of assets, or the case of any key custodians or counterparties defaulting or experiencing substantial illiquidity, which may result in materially different or delayed realisable values. No provision for expected credit losses was identified by management at the financial reporting date."
Whats the limit on withdraws before they have liquidity issues? Easiest way to make investors confident is due a full audit with a top 4 auditing firm.
You mean like Earnst & Young who was just fined $100 million for overlooking cheating by their employees on the ETHICS portion of the CPA exam? I agree something is severely broken about Tether, but it’s also clear that auditing firms can be crooked, too. I would not trust an audit to expose Tethers shortcomings. After all, the auditors can only report on the documentation provided to them … they specifically do not determine the legitimacy or validity of the documents provided (iow, false documents are not vetted in any way).
Nonsense. All they'd have to do is have $20 billion in cash to satisfy $20 billion withdrawals. It doesn't mean anything about the rest of the money. The next $1 withdrawn could bankrupt them for all we know.
The have had to unwind a double-digit percentage of their portfolio, in a down market, in a very short amount of time. The total net effect of doing so has been to collect something like 0.00001% net profit. That is simply not credible.
> At this rate, in a few months we'll find out how much backing Tether really has, because it is being paid out.
As someone who's been watching Tether since it's inception, I say don't count on it. They've managed to continuously escape the consequences of running a dangerous fractional reserve system.
The main beneficiaries of this system are now companies with incredibly deep pockets who aren't afraid of deploying that capital to keep the system afloat.
I used to think Tether would fall apart with a long enough bear market. Now I think it will stay afloat until it's captured by the US government. Or until it's acquired by a U.S. company that's willing to turn over customer trade data to a "5 eyes" nation in exchange for their help and leniency in restructuring it so it can continue to operate with the government's blessing.
Based on what evidence besides their word? There's been innumerable investigations and analyses which, while not 100% conclusive, raise mountains of evidence to the contrary. And they've already been caught lying with Bitfinex.
This isn't "launching coins in a desperate attempt", it's providing stablecoins in the FIAT currency that the market would want - in this case one of the world's most popular currencies.
Seems like a marketing spin to lure customers into a false sense of security. From the fine print in the user agreement:
"Cash in the Account is insured up to $250,000 per depositor by the FDIC in the event the Bank fails if specific insurance deposit requirements are met. FDIC insurance does not protect against the failure of Voyager or any Custodian (as defined below) or malfeasance by any Voyager or Custodian employee."
If FDIC insurance is applicable, though, that should mean your cash is being held in your name with the underlying bank. It is unlikely that Voyager would have any right to those assets upon bankruptcy or insolvency -- if they do (I am no expert), that would destroy the neobank model to some extent.
> Voyager maintains an agreement with the Bank whereby the Bank provides all services associated with the movement of and holding of USD in connection with the provision of each Account. Therefore, each Customer is a customer of the Bank.
The "omnibus account" phrasing is a little vague though, but if FDIC insurance is applicable, funds have to be separated to some extent.
"Metropolitan Commercial Bank maintains an omnibus account specifically designated for the benefit of Voyager customers. [...] Voyager is responsible for maintaining records to determine the ownership and amount of each of its customer’s funds on deposit in the omnibus account."
Some people there say they have called the FDIC, but the response they have gotten is that the insurance only kicks in if the Metropolitan Commercial Bank fails.
I have no idea what happens to the customer accounts at the bank in case of a Voyager bankruptcy. E.g. if they can be used to cover voyagers debt or have to be handed over to the customers.
> I have no idea what happens to the customer accounts at the bank in case of a Voyager bankruptcy. E.g. if they can be used to cover voyagers debt or have to be handed over to the customers.
Most likely, the customers are unsecured creditors to Voyager, which means they're at the back of line for getting claims on those assets.
That's wild. That seems like something someone should go to jail for ignoring everything else. At a glance that wouldn't be my interpretation of the statement on their site.
> does that mean anyone with less than $250k is guaranteed their money?
I’ve noticed a lot of crypto companies being sneaky with this. What that means is if Metropolitan Commercial Bank goes under, Voyager’s cash is protected. It does nothing to protect cash you’ve entrusted to Voyager if Voyager goes under.
What this means for anyone who is a customer is that Voyager is having an uproarious laughing session in their private conference rooms at how gullible their customers are.
The FDIC insurance means that Voyager is guaranteed at minimum $250k of its bank account should Metropolitan Commercial Bank. That's $250k for the entire company, not per customer of Voyager [1]--if Voyager held $25m in cash in that account, that's only 1% of its cash accounts that are insured. Of course, how much of an impact that has depends on how much of its assets Voyager actually holds in cash which is likely very little.
But as a customer? You have no protection whatsoever. This reassurance is basically saying "we're protected in case of emergency; you're not."
[1] It's possible that Voyager is actually the custodian of an account in your name at Metropolitan Commercial Bank, but I think that would require your explicit signature to set up, so I doubt that it's actually in play here.
>So does that mean anyone with less than $250k is guaranteed their money? Is there any legal backing?
No, it means that up to $250K of Voyager's USD is protected by FDIC in case their bank flops. That is the combined limit shared between ALL of Voyager's customers.
It doesn't protect from Voyager telling you that they sold your 1 BTC for $20K USD as you requested, while actually still sitting on 1 BTC, hoping to sell it tomorrow for $30K and pocket the $10K difference.
Similar to "not your keys - not your bitcoins", no written agreement with a regulated bank - not your dollars.
If a user has $250k or less in USD assets on the platform I believe it does.
For most of these sites, users convert deposits into stablecoins (USDC, etc) since they can typically earn interest on this, and this is not covered under FDIC.
USDC is supposedly USD backed, so a reasonable person would presume someone who advertises FDIC insurance of cash would assume the USDC underlying USD is backed by FDIC. Seems like pretty clear fraud to me if the USDC isn't actually FDIC insured. If they meant only some of the cash (non USDC backed) was insured they should have said that.
> USDC is supposedly USD backed, so a reasonable person would presume someone who advertises FDIC insurance of cash would assume the USDC underlying USD is backed by FDIC.
That is not how FDIC insurance works. If you don't hold USD, you don't enjoy any FDIC insurance, period. Not your USD, not your insurance.
> If they meant only some of the cash (non USDC backed) was insured they should have said that.
Judging from the text at the top of this thread, this is precisely what they said, so it's not fradulent. At no point are they saying that they offer accounts protected by FDIC insurance--instead, they're saying that their USD reserves are in FDIC-insured accounts. So no misrepresentation going on.
Agreed but I'd say this was misrepresented as they say USD is backed by FDIC. See below.
>If you don't hold USD, you don't enjoy any FDIC insurance, period. Not your USD, not your insurance.
USDC is USD backed, so one would conclude you actually do "hold" USD through the USDC security. Thus you are tricked into believing you have FDIC insurance on the USD secured by the USDC. "period."
>Judging from the text at the top of this thread, this is precisely what they said, so it's not fradulent.
What was said on the thread is that USD is FDIC backed. USDC is secured by USD, so one would reasonably conclude their USD underlying the USDC is FDIC insured (in fact it is not).
>At no point are they saying that they offer accounts protected by FDIC insurance--instead, they're saying that their USD reserves are in FDIC-insured accounts. So no misrepresentation going on.
But the USD reserves of the USDC __aren't_ completely FDIC insured so there is misrepresentation going on.
It's pretty evident to me here there was a slight of hand here that was intentional. The wording was intentional chosen to weasel out of the FDIC backing while leading the customer on to believe it is FDIC backed. A pretty common reasonable interpretation of the customer I think is to say "I own USDC which has underlying USD, and Voyager says USD itself is FDIC backed thus the full value of the USDC is insured." If that wasn't the case it seems pretty pointless to couple their twitter advertisements that advertise FDIC insurance and then goad you on to deposit USDC. The coupling was definitely intentional.
> USDC is USD backed, so one would conclude you actually do "hold" USD through the USDC security.
I mean, I can see the thought pattern behind this, but it's wrong. No court will uphold this interpretation. You don't hold the USD, you hold USDC, so absent the USDC financial instrument itself having contractual obligations (which it doesn't), the underlying assets matters not one whit.
> It's pretty evident to me here there was a slight of hand here that was intentional. The wording was intentional chosen to weasel out of the FDIC backing while leading the customer on to believe it is FDIC backed.
Oh, I'm certain the misleading was intentional. But that doesn't mean it was fradulent. At no point did they make a false statement--instead, you made an incorrect inference. You might have a cognizable false advertising claim, but nothing I've seen would lead me to conclude that a fraud claim could be upheld.
Voyager Wallet
You can transfer assets from an external wallet to your Voyager account/wallet. Like Coinbase, the account wallet is not yours (i.e., not your keys, not your coin). If Voyager wants to freeze your account, along with any assets in it, they can. And there isn’t much you can do about it.
No, you're fucked. It used to take up to 2 days to transfer it out of Voyager, before everyone (not a whale) was completely fucked.
It’s almost as if unregulated financial institutions don’t operate on the same standards as regulated ones. That would be crazy, though, so it must not be true.
If you’ve never read about what markets were like 100+ years ago (at least in the United States), it’s enlightening. Turns out that people lost money left and right due to fraud and mismanagement. Why would we expect anything different now?
How can a bank get off the ground without using fractional reserves or relying on the founders putting their own money at risk to start the business? No giving out loans until you've created enough of a buffer? But how to build that buffer in the first place, high fees? But how to successfully enter a competitive market as an unknown newcomer charging high fees?
The people getting wiped out by the collapse of Voyager, Celsius, etc. were not putting their money on bitcoin. They were giving it to a custodian who thought they could beat bitcoin by investing in altcoins (or lending to those who do so).
This is definitely not "everyone's strategy"; plenty of us bitcoiners have been warning against this sort of irresponsible activity for a long time.
> withdrawn your deposits from these platforms when UST and then Celsius collapsed
Which ironically, is why more of them keep (and will keep) falling. It'll be a cascade of withdrawals across the ecosystem, and all these weak platforms will rightly go under. Looking forward to it.
Once someone sends their bitcoin or "crypto" to a lending platform, they no longer own this asset. What they now have is an IOU for that asset that the platform may be unwilling or unable to fulfill in the future, as appears to be the case with Voyager and numerous others before it.
Yes, but setting aside direct ownership which is not a prerequisite for investing in any coin, how is bitcoin a better choice? It seems to me that is like saying, well you really should have invested in Exxon and you would be ok now.
My guess: from a speculative standpoint Bitcoin is finite and the only real competitor to fiat. There's also a large amount of sustained hype. It's unlikely to flatline unless something really major happens.
Blockchains like Ethereum are not (and aren't meant to be) alternatives to fiat. In fact, the best thing for ETH would be low price, since it's mostly used as gas. Altcoins are almost entirely vaporware until ETH tech matures and consumer services become feasible. Until then, any high valuation of either ETH or Altcoin is 100% Tulip Mania. I have no idea about any blockchains outside of Bitcoin or Ethereum.
Bitcoin has no concept of ownership. "Not your keys, not your coins" means exactly that. If you lose your car keys, you still own your car. This is not true of bitcoin.
No concept of ownership is a stretch. If you have the keys to a Bitcoin wallet, you own that Bitcoin wallet. If you lost physical cash or gold, it would be like losing your keys to a Bitcoin wallet. No one would replace your physical cash, gold, or Bitcoin, if you lost it. However, that doesn't mean that you don't own that physical cash, gold, or Bitcoin, at least while you have it in your possession.
Well, when it comes to bitcoins, you only own them as long as you have them in your possession—which means you don't own them, you only possess them. This is what I mean by no concept of ownership. The bitcoin network doesn't care who is the rightful owner of the bitcoins, it only cares about who has access to them.
Crypto is one of the biggest active victim-blaming communities.
"Not your wallet not your coin", or whatever they like saying, is just is just deflection from valid criticism that crypto is very easy to exploit without recourse.
I disagree. To me it's like saying passwords are broken because most people choose "password123". Or like saying dollar bills are bad because they can rip. Safety rails should be made of course, but if you aren't even maintaining basic hygiene within a system then I'm sorry but that's on you.
People are learning to use better passwords, and people learned long ago to keep their paper money in a wallet. The same will happen with crypto.
I have no idea. Certainly more than the cost of a pizza. There are 21 million, and if split evenly among the world population each person would get ~0.002625.
It depends on a lot of factors; like how important it might become for people to avoid using fiat or government controlled digital currencies, or how deeply integrated it could become in daily life.
BTC isn’t a security. “Crypto” securities are much riskier than sticking with the one cryptocurrency worthy of being called a commodity- according to Gary Gensler (SEC chair, former CFTC chair). Securities are dividend or interest bearing assets. Commodities do not give interest or dividends, it’s like holding gold or some other rock. BTC is volatile enough! “Stable” coins and other “guaranteed return but not regulated” instruments have a long history of collapsing, even before “crypto” was sprinkled on top.
These folks bought GBTC, traded GBTC and staked it with others, exchanged it for USDC staked that and then used the money to buy more BTC.
No one offers 3% to 20% APY just holding BTC. They are trading that coin to everyone else in a shadow banking / speculation scheme and hoping for the best.
Even better strategy imo is considering market caps alone. Dump money into the top x coins by market cap and the intertia will carry you. Whenever crypto dumps people say its the end, but get real. This is more speculative than the lottery for a lot of people. It will always have its lemmings and grifters pumping it back up after a dump. Just ride the tide. Buy low, wait, sell high, wait, buy low. Don't put all your eggs in one basket but throwing an egg or two around at these things isn't going to hurt you any if you are an otherwise responsible investor. I certainly wish I threw one of my eggs at bitcoin when I first learned of it when it was <$1, I wish I didn't cash out my measly holdings when it was ~$4k; but I won't be making these mistakes again. Now I throw a couple bucks a month into these things that legitimately have a nonzero chance of exploding. Why not? Entrees are $15 these days; whats $10 a week burned on essentially lottery tickets with better odds? I hate everything about crypto and don't see a point to it, but at this point in my life I realize sometimes you have to play the game that is given even if you don't agree with the rules because you don't have any actual sway in this world.
> It will always have its lemmings and grifters pumping it back up after a dump. Just ride the tide.
I think the shoeshine boy moment might be here with bitcoin and crypto, thanks to things like the Super Bowl ads, so that strategy you stated is much riskier than it was in the past, and potential returns lower. Pumping doesn't work well when the flow of new investors ebbs.
Eventually a lot of the "investors" may need to take out money out of bitcoin into fiat to pay for necessities, especially if a recession hits.
The issue is that people don't need or want to buy crypto except for speculation(other than some temporary crypto purchases for ransomware, drugs, money laundering etc.) to flip it.
If anything the fact that you have things like the crypto.com arena taking over the staples center ossifies it. People are now making automatic contributions to both a 401k and a crypto portfolio. There is an entire fintech side of this too. That last line in your post made more sense when bitcoin popped at 17k years ago. Its a fundamentally different animal now that you have goldman sachs boys buying crypto with their models, and I don't think the global world of finance is going to let go of this new plaything anytime soon after they have spent so much effort on regulatory process.
I'm not putting much skin in this game, but I'd be a fool not to hedge my bets and stake some versus blind myself on principle and sit on the sidelines. Betting what you don't mind losing is always a winning strategy; things can only go up with that outlook.
Its easy if you only bet amounts that you won't miss. I'm not saying move your entire portfolio for crypto, I'm saying its probably wise to hedge your bets and ignore your principles sometimes.
It's like they all thought that because they had magic money they could avoid not only the trappings of traditional financial markets, but all the laws of economics.
I don't understand what's the scam in this. You buy BTC because you either seek to profit from it, or you believe in the core philosophy behind it. Both of these are your own decisions.
A scam would be you buying a phone from Amazon and getting a brick. BTC is exactly what it describes, nothing more, nothing less.
If you got greedy enough to dump your BTC onto a centralized service for 3% yield, that's on you. As is the decision to buy BTC.
That’s for you to decide. Its properties aren’t hidden. You get the rules handed to you upfront and the rules are always adhered to - BTC inflation will always be what the whitepaper describes.
Think of it like poker. People lose money playing poker too. Is poker a scam? Nope. You might call it unethical or gambling, but unless a player is cheating, its not a scam. And any participant willingly agreed to the rules before playing.
Same with BTC. If you bought BTC, you willingly agreed to the rules. If you didn’t “win”, that’s on you, not the “game” itself.
I've been with the same relatively small regional bank for 30 years. I have a checking account, savings account and that's it. They've been stable this entire time, and I've never worried my money was going to disappear.
As another sign of being an old man, I'm old enough to remember the phrase "as safe as money in the bank". You see, when I was a kid, the banks had been operating under decades of strong regulation by the FDIC and other agencies, and were widely considered to be a safe place to put your money.
Not that the banking sector hasn't seen its share of problems in that time. From the S&L crisis, to the home mortgage lending fraud that lead to the big crash. But in all that time, with just a little effort, you could put at least some of your money in a regular local bank, and expect it to be there tomorrow.
Bank local! If you want to speculatively invest, that's fine. But keep some money in a local bank so that you can pay your bills next month.