Crypto is 'rat poison', a third of mainstream investment firms tell JPM | Hacker News Reader

Crypto is 'rat poison', a third of mainstream investment firms tell JPM

reuters.com

44 pointsshivbhatt65 comments

I'm not even into crypto, but this sounds like: Oil is 'rat poison', says a third of coal barons.

I was thinking more along the lines of "Oil is Rat Poison" say a third of competing oil barons.

Oil would be a threat to a coal baron but how is cryptocurrency a threat to investment bankers? It's easy money for them if they thought it was worth anything.

The banking system relies on inflationary currency. Some crypto is not only not inflationary (in the long run) but provably so. A world where the money supply is fixed is a very different trading environment.

Defi, were it more common and regulated lightly, could take a lot of business away from banks and investment banks. I’m not saying that’s likely, but it is a plausible threat in that sense.

...Or it's the end of crypto -- hence "rat poison"

https://www.wsj.com/articles/defi-is-helping-to-fuel-the-cry...

More than one of them actually said 'rat poison'?

If it had been 'shit' or something generic like that I might believe it, and I can believe one said 'rat poison', but I find that headline very hard to believe.

Wasn't it Charles Munger who used the term rat poison to refer to bitcoin?

It always reminded me of the Banksy quote:

"If you win the rat race you are still a rat"

So perhaps it is rat poison and the rats are JPMorgan and all those investment firms.

Almost, it was Warren Buffet (the article says this). More: https://www.cnbc.com/2018/05/05/warren-buffett-says-bitcoin-...

Edit: apparently Buffet was referring to an earlier statement by Munger

So they're all just parroting something they heard.

Hardly surprising after a crypto market downturn.

Or, you know, they were asked if they agreed with the view. Which is what the article states near the end.

Coming to this realization would have required reading the article.

I read about 75% of the article but then an ad popped up and covered up the bottom.

Yes, Charlie Munger said that 8 years ago[1]. Buffet was quoting Munger in 2018, but added a 'probably'

[1] https://video.foxbusiness.com/v/2359385547001 (it's right at the beginning of this discussion with Buffet, Munger and Bill Gates)

edit: The price was about $100 when Munger called it Rat Poison, and about $10,000 when Buffet called it Rat Poison Squared, so Buffet was amazingly accurate

Apparently Lehman Brothers people called certain assets "goat poo."

https://www.reuters.com/article/jpmorgan-idUSN18295440201102...

Well the answer to your question is in the article:

> Billionaire investor Warren Buffett has in the past characterised bitcoin as "rat poison squared". One third in the JPM survey agreed with that view. Another 16% thought it was a temporary fad.

The question was not "what are your thoughts on cryptocurrencies? Please write at least 100 words", it was more along the lines "do you agree with Warren Buffet's view that Bitcoin is 'like rat poison squared': [ ] Yes [ ] No"

> asked about their personal investments, 40% of the investors said they were active in cryptocurrencies.

Seems there's quite a big disconnect with what investors do with their own vs institutional money

If you want to gamble with your own money, that's your business. Don't gamble with the firm's money.

As there should be! I have no problem with you taking 10% of your net worth and betting it on moonshots. Hell if you really want to drop 100% in (I have some extended network folks that did) then go for it, as long as you know what you are doing. But my 401K? Bitch please. Thats not a moonshot. I'm not trying to get rich and sip pina coladas on the beach. I'm trying to make sure I'm not homeless from 60 to dead when I can't produce. I want slow, steady, measured returns. I don't care that I missed out on the 1 in 10 moonshots as long as I also missed out on the 9 in 10 rug pulls.

> I don't care that I missed out on the 1 in 10 moonshots as long as I also missed out on the 9 in 10 rug pulls.

Man that was well put. Saving that.

Active doesn't mean long term long.

What I hate about crypto: These extreme positions on the subject. It has become like politics, bipartisan. How is this useful? Where is the middle ground?

The middle ground is "I have no use for cryptocurrency."

The extremes are "Cryptocurrency is the future of all money" and "Cryptocurrency is a fractal set of scams all the way down."

For a long time I was happily sitting in the “I have no use for cryptocurrency” zone, occasionally checking in to see if things changed or reading a blog post here and there to see if there was something I was missing. But as the energy usage has ramped up to nation-state levels without an accompanying increase in usefulness, I’ve slid much more in the “cryptocurrency is dangerous to humanity” direction.

Idk if I’d call it a “fractal set of scams”, but I think “more bad than good” is a fair characterization.

> The middle ground is "I have no use for cryptocurrency."

I'd argue that the middle ground is "We'll see."

https://www.youtube.com/watch?v=e2cjVhUrmII

> re: wait and see

I’d argue that the web had Facebook, EBay, Google, and Amazon 13 years after launching, what are the crypto folks waiting for if it’s so revolutionary? Where are the killer apps, and how much longer do we have to wait?

"Cryptocurrency is a fractal set of scams all the way down."

I really like that description. Did you come up with that?

I am sure that the description of something bad as being fractally (self-similar on repeating scales) bad is not original to me.

To be fair, Internet in the 90s was the same: https://www.newstatesman.com/science-tech/internet/2016/08/2...

Unfortunately it’s only black or white, no grey area. Agree with one position, be branded by the opposition.

I like the idea of crypto currencies, if done well, but what we see are not actual currencies, imho. They are volatile assets at best, but usually just scams generally.

And if they aren’t designed to be scams, they will definitely be abused as one, looking at DOGE.

The middle ground is “proof-of-stake cryptocurrency is going to be useful”:

https://news.ycombinator.com/item?id=27604772

The middle ground is when people stop actually using cryptocurrencies to speculate and crypto actually back the security they're selling with real assets.

Kind of like Tether, but you know, not Tether.

The middle ground is that it's fine to invest in stuff which is characterized by volatility as long as the consequences are on your own account and you can justify the reasons to do so. Apart from the fact that most media outlets thrive by feeding a bi-partisan story, there's in essence only yourself to blame. The crypto market as of now has a lot of similarities to the pre-2000 Internet bubble. Lots of shitcoins and creation of a large bubble. The fact that incumbent investment firms and companies are looking into it doesn't mean they have it right. Time will tell how this all plays out.

There is clearly non-zero utility in BTC for certain individuals. But it's also clear that a large portion of BTC is held as speculation. Have there been any formal attempts to identify fair market value out of BTC or other crypto assets based on their current use cases?

It’s almost an impossible question given that the “use cases” that are NOT speculating boil down to “transfer of funds” and there’s not really a difference between “transferred $1m USD as 10 bitcoins” and “transferred $1m USD as 10b dogecoins”.

I guess you’d have to figure out the “total active use case market” (I.e; factor out speculation) and then work out how many coins you have available to support that.

So if there’s a $100m market for transfers per month and a million coins, they may be valued at $1.

So if you can't back a security with anything tangible then the true underlying value is 0. This means no one will buy it back if the currency falls to a value near 0. See the recent brouhaha about Titan (e.g.). Gold and silver at least have real use outside of "being pretty". That fixes the lowest possible value for gold to be above 0 somewhere.

It does have some utile value, and that value is somewhere between 0 to infinity.

The speculators are hoping for a "greater fool" who will buy their assets because you know, numbers go up.

The criminals like it for the money laundering aspects. It's not a perfect money laundering tool, but it's certainly good enough for ransom ware (until recently when the US reclaimed some money from ransomware writers).

There is some payment transfer capability, but here the utility comes at a price for some fee paid to transfer the money.

The volatility keeps it from having very much utility as a store of value. Price was once over $60k but now dropped under $30k then back up to $34k. But volatility is not what you want as a store of value. You want stability and assets backed by something tangible.

Largely it seems like the utility value is that "people think there's actual utility" when in fact, the utility is provided by speculators.

And they are the rats.

If crypto is rat poison then the likes of JPM are the rats.

I had a similar reaction to this news as I did to when the Federal Reserve President of Minneapolis called Bitcoin a Ponzi scheme:

"Ponzi scheme operator calls Bitcoin a Ponzi scheme."

It takes one to know one?

All those people would have sold their left you know what for an entry in btc around 500, not even back to when it was worth less than a dollar.

Maybe in their minds those who bought early and realized their gains managed to get the cheese and avoid the rat poison?

In any event, I never understood the absolute need that people on Wall Street have to talk about stuff...like you work on Wall Street because you choose to predict things and participate in the zero sum game...you get the pro and cons of that.

https://archive.is/vrV13

> Only 10% of institutional investment firms surveyed by JPMorgan trade cryptocurrencies

I agree that crypto is worthless - especially compared to effort in that space - but "temporary fad"? That's extreme underestimation of human stupidity.

I tend to think the opposite, that large cryptocurrencies are likely to always be worth more than $0, even if some black swan like a 51% attack were to happen. After all, "worth" is subjective, and the behavioral guarantees cryptocurrencies make (notwithstanding black swans) are attractive in assets.

At least rat poison serves a useful purpose, if you need to get rid of rats.

What is bitcoin good for?

Reducing the money supply.

Charitably, giving gamblers something to play with.

Less charitably, Ponzi Scheme As A Service.

The only thing 'rat poison' is Buffett's favorite stock, Coke.

It seems this expression touched the nerve of many here.

Happens any time the topic of cryptocurrency is brought up. Very strong opinions on both sides.

When I see "crypto" I don't immediately think of cryptocurrency. I though this was going to be an article about privacy, about how companies committed to strong crypto in their products will face challenges and so are bad investments. But no, "cypto" is now shorthand for coins as they continue to eat the world. Soon I'll be that old man telling kids about the days when a coin was a bit of metal that we could put into a machine to buy things. Of course by then the kids will be fascinated at the concept of exchanging money for goods without waiting for the blockchain to update.

Yeah, unfortunately cryptocurrency has hijacked this term in the general media.

Good. The next time some CIA man-in-black speaks up about the need to ban strong crypto we can rest assured that nobody will understand what he is talking about.

You mean someone will create a bill to ban TLS and everyone will cheer because they think it's to ban BTC.

We both exaggerate, but I think miscommunication is almost always bad for the side that is right.

Same with "wiki" and "wikipedia". Wikipedia is an instance of a wiki, damnit!

And the Internet is only one particular internet, and the World Wide Web is a specific web

I already feel that way everytime I see that floppy disk "save" icon.

I agree with you. But to be fair, cryptography and cypherpunks are/were closely related, and a topic often discussed was what we now call cryptocurrencies as an umbrella term. Not a big deal it gets shorted to "crypto".

Ok, so lets imagine that Btc/Eth fall back to pre-COVID levels.

This means that a huge amount of people will have lost money, and electricity and hardware will have been burnt up for minimal or negative gains.

What is the point of maintaining the legal status of crypto at that point?

Specifically, by maintaining its legality, we still have to deal with the huge problem of ransomware, and some residual mining activity (and fraudulent/wasteful use of electricity, right at the same time we are trying to save the climate).

Why not just ban the formal legal exchange of crypto for fiat now?

Cryptocurrency was literally created by cypherpunks for the explicit purpose of evading governments and centralized power. Before it became popular its primary usage was in darknet drug markets. Legality is largely meaningless for crypto.

The value may drop after a ban, but crypto will remain a mainstay for any transactions that require freedom, privacy, or both.

You attack where it can be converted to fiat which greatly restricts its use.

Converting between crypto and fiat wasn't exactly straightforward when Darknet drug markets were the primary use case, but it was still done frequently. It will always be possible to use something like LocalMonero/LocalBitcoin or a decentralized exchange like Bisq or Haveno to convert as you wish.

And as long as crypto is accepted in a single country you're good. Centralized exchanges will just move to countries that haven't banned exchanges.

I agree - but if Bitcoin and other crypto is reduced to the role of buying drugs and other contraband, it would suggest a price $200-$500 (as it was back in 2014 when that was its primary use), not $33,000.

Definitely, there is an insane amount of speculation priced in. The current prices are not even remotely justified, but crypto was never meant to be a speculative trading platform, it was meant to be used. The price cratering wouldn't really bother me.

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