TerraUSD crash led to vanished savings, shattered dreams • Hacker News Board

Re: TerraUSD crash led to vanished savings, shattered dreams

#321

Post by sepiasaucer » Wed, Jun 22, 2022, 3:09 PM UTC

MadeThisToReply wrote: post #267

CTDOCodebases wrote: post #236

Earlier quoted context omitted.

How can Bitcoin be a ponzi scheme if it doesn't generate returns for the investors? I have bought and sold Bitcoin on an exchange and the anonymous person on the other end of the trade did not make any promises of returns. By your definition is Uber stock a ponzi scheme? It too does not provide a return and relies on buying pressure to increase it's price so people can reap the rewards of their so called "investment"…

"Ponzi scheme" has become completely divorced from its original meaning. It's supposed to refer to a specific type of scam where you pay "investors" using the money you received from previous investors, but nowadays it's basically just used now to mean "anything crypto-related in which people might lose or have lost their money."

A [crypto] Ponzi scheme is an investment fraud that pays existing [crypto] investors with funds collected from new [crypto] investors.

Re: TerraUSD crash led to vanished savings, shattered dreams

#322

Post by acdha » Wed, Jun 22, 2022, 3:12 PM UTC

dougSF70 wrote: post #174

WalterGR wrote: post #103

Earlier quoted context omitted.

> Based off that, you can probably live off investments starting at around the 90th percentile ($61k annual income with 5% withdraw rate), if you live modestly in a low CoL state. I don't understand how that math works. Could you break it down for me?

The theory goes that a 4.5% draw rate from your capital will ensure your capital is preserved (relative to inflation average of 2.5%) for ever provided it grows at 7% a year in the long run. This is an achievable long term capital growth rate. If you can live of $61k a year then you will need 61,000 / 0.045 = $1,355,555 of investments to deliver $61k a year without degrading the value of the capital relative to infla…

> I guess the 90th percentile refers to the fact that 10% of people in the US have this amount invested or more.

I think the 10% number is referring to something a bit different. The stats referenced are net worth, which in most cases is significantly composed of someone’s house & other property which doesn’t easily provide a passive income and 401ks which aren’t accessible. I’d be surprised if the number of people who have $1.3M in normal investments is greater than 1%.

Re: TerraUSD crash led to vanished savings, shattered dreams

#323

Post by Balgair » Wed, Jun 22, 2022, 3:14 PM UTC

alphabettsy wrote: post #160

dubswithus wrote: post #54

> Keith Baldwin, a 44-year-old surgeon who lives outside New Bedford, Mass., saved $177,000 during the past decade. Last year he took his savings and bought USD Coin, putting it in a crypto account that paid a 9% annual yield. A surgeon saved 177k over 10 years? Something else might be going on here.

Being a surgeon isn’t equivalent to wise with money. Many Ponzi schemes have preyed on high income individuals and doctors of all sorts seem to be popular targets.

I think that's a tactic that Madoff and others used explicitly. Targeting people that think they are smarter than the rest. So lawyers, surgeons, engineers, management types, SWEs, etc. The social shame and cognitive dissonance of the obvious fraud leads to them to continue investing to 'save face' and to continue to think themselves smarter than the rest of us.

"Is it an obvious fraud? No, I'm too smart to fall for that. Therefore, I'll double down, again"

You can see it all over crypto today.

The fun part is that until a higher authority like the government steps in, we're going to have a lot of these schemes online for a long time. Herbalife and the MLMs use the tactic, crypto is just another; the future is ripe for people that use Madoff's tactics.

(Also, there must be a specific name for this tactic, and I would love to know what that it. But google isn't really coming up with anything for me. If you know, please comment and let me know? Thanks!)

Re: TerraUSD crash led to vanished savings, shattered dreams

#324

Post by scotty79 » Wed, Jun 22, 2022, 3:38 PM UTC

jmyeet wrote: post #31

I occasionally get asked by relatives and friends of what to invest in. Now I'm no expert but I guess in the valley of the blind the one-eyed man is king. Thing is what I tell them seems to bore them because, well, it's boring. My advice is basically this: Put your money in a broad index fund and don't look at it for 10 years. In giving this advice you start to realize it's not what people want to hear. It's not that…

My current advice would be put, all money in bitcoin and don't look at it till the beginning on 2025. Then put a sale offer for 6x the price for what you bought for to get a conservative return on your investment.

Than wait few years for the next crypto crash and when you read heading "Bitcoin is dead" it's time to buy again.

https://mobile.twitter.com/cz_binance/status/153864715281303...

Unless you believe, that this time it'll be different.

Re: TerraUSD crash led to vanished savings, shattered dreams

#325

Post by randomran01234 » Wed, Jun 22, 2022, 3:45 PM UTC

acdha wrote: post #315

randomran01234 wrote: post #285

Earlier quoted context omitted.

Is it really a good way to evade taxes? Each transaction is recorded publicly on-chain forever. User would have to be very careful with their on-chain privacy and very determined to skirt the legal system. The average crypto user will begrudgingly pay their crypto taxes to avoid having to live the life of a criminal, and would happily welcome more frictionless ways of having taxes recorded and collected on-chain. > C…

> A user can purchase $1000 of DAI and send this to another person in the world within 30-60 seconds, without the beneficiary needing to set up a USD bank account or disclose private data to a third party. Your “refutation” is leaving out some key details: 1. You do in fact have to deal with legal requirements - it’s a requirement for converting into useful money and tax evasion has serious consequences in most of th…

20% returns as you see in Terra is probably ponzi-like, but ETH protocol is not promising free yield for doing nothing, or doubling or tripling your investments.

> You do in fact have to deal with legal requirements - it’s a requirement for converting into useful money and tax evasion has serious consequences in most of the world.

I never said otherwise. Buyer can purchase the DAI on a KYC exchange that is regulated by their government. The beneficiary can report taxes on income and capital gains as they do with other assets.

> Replacing Western Union has some appeals but it’s not enough to justify the returns which blockchain salespeople have been claiming, especially when the established player can cut margins easily and blockchain users need a fairly large just to compensate for currency conversion and increased risk.

This is now a subjective argument about what you feel is better or more valuable. To some people, reducing commission for global transfers to 0%, with 30-60s finality and better privacy features is all desirable and valuable.

> My dividend income suggests you might be leaving something out here too.

Not very compelling when you compare dividend income over the last 5 or 10 year period between crypto and stocks. The point is that just having an asset that generates yield based on speculative investments is not that useful, and it’s the sort of zero-sum game that everybody is mocking Terra and crypto for.

Re: TerraUSD crash led to vanished savings, shattered dreams

#326

Post by UkrainianJew » Wed, Jun 22, 2022, 3:57 PM UTC

jliptzin wrote: post #146

UkrainianJew wrote: post #143

Earlier quoted context omitted.

>Put your money in a broad index fund and don't look at it for 10 years. That might be a dead strategy in 2022. After the 2008 crisis the fed discovered a miraculous economic cure: slowly print money and throw it into the economy, so people keep transacting with each other, and the GDP (and stocks) keep growing. Turns out, most of this growth was on paper - fads, speculative investments, overvalued stocks. Now that t…

There have been a ton of real technological advances since 2008 that is not just on paper. You could have also said the exact same thing in 2000.

Kinda, but a lot of them are about manufacturing more cheap stuff in China. Most technological advances not involving that are about skirting the regulations/antitrust laws (AirBnB, Uber, Google Ads) or using dark patterns to manipulate attention (Meta).

Re: TerraUSD crash led to vanished savings, shattered dreams

#327

Post by UkrainianJew » Wed, Jun 22, 2022, 4:01 PM UTC

stocknoob wrote: post #193

UkrainianJew wrote: post #149

Earlier quoted context omitted.

Bonds might become a thing again with the interest rates above 3%.

Bonds will take a hit if interest rates keep rising. (Look at how they’ve done year to date.) If you want to actually hedge your investments, use a collar. https://www.investopedia.com/articles/active-trading/011515/...

Existing long-term bonds take a hit. Because if today you can get a 6% bond maturing in 2030, nobody will buy your 3% bond unless you price it down accordingly.

But if you keep getting them in 1-year increments as long as you expect the rates to rise, you just keep cashing out at maturity and reinvesting at the yield rate of the day.

Re: TerraUSD crash led to vanished savings, shattered dreams

#328

Post by dehrmann » Wed, Jun 22, 2022, 4:07 PM UTC

strikelaserclaw wrote: post #313

dehrmann wrote: post #180

Earlier quoted context omitted.

It also feels like a surgeon should have known better. Not because this is something he studied, but he's obviously halfway intelligent, so he has less of an excuse for not knowing better.

it seems primal desires in humans such as greed, lust, envy seem to shut off the rational brain centers in many people.

Good point, and I bet that's what happened, but it's interesting that he didn't really own his greed, he's just fishing for sympathy.

Re: TerraUSD crash led to vanished savings, shattered dreams

#329

Post by HWR_14 » Wed, Jun 22, 2022, 4:27 PM UTC

SilasX wrote: post #300

HWR_14 wrote: post #263

Earlier quoted context omitted.

Why can't I rely on "avoid crypto, it's a scam"? I have to identify every new coin and it's mechanism of failure?

For the reason I just gave: it would mean that others could say “I told you so” about Dai/Compound etc not crashing. If it’s still not clear, imagine I was always saying the stock market is a scam and would collapse. Do I get credit for predicting Netflix’s recent tumble? Even if it happened for completely unrelated reasons to the mechanisms of collapse I was warning about? It’s fine to be risk-averse and avoid crypt…

> it would mean that others could say “I told you so” about Dai/Compound etc not crashing.

No, they really cant. Like, I have no idea what DAI/Compound are, and trivial googling didn't answer. A random counterexample doesn't disprove every famous and/or high market cap coin crashing.

To use your market example, if you kept saying tech stocks are overpriced we would judge it based on the performance of the NASDAQ. You wouldn't be able to say "well, Apple still convinces people to give them all their money and they're still doing well so you were wrong."

Besides, it's not enough for the greater fools to continue to exist. There needs to be a credible mechanism for wealth to actually be created.

> It’s fine to be risk-averse and avoid crypto as a rule

Being risk-averse and avoiding crypto are different things. I don't touch crypto because I think it's a scam

Re: TerraUSD crash led to vanished savings, shattered dreams

#330

Post by reducesuffering » Wed, Jun 22, 2022, 4:31 PM UTC

bowsamic wrote: post #227

jmyeet wrote: post #31

I occasionally get asked by relatives and friends of what to invest in. Now I'm no expert but I guess in the valley of the blind the one-eyed man is king. Thing is what I tell them seems to bore them because, well, it's boring. My advice is basically this: Put your money in a broad index fund and don't look at it for 10 years. In giving this advice you start to realize it's not what people want to hear. It's not that…

It's ego and over-confidence. People think they can outperform the S&P500. They can't.

By definition, 50% of capital outperforms the SP500, which is an average.

What the Buffett bet was all about is that you don’t know WHO will outperform, and with fees being a net-drag, a basket of hedge funds will on average underperform due to the average of them being, average, and then negative due to fees.