Cryptocurrencies (Bitcoin, Ethereum, Litecoin, etc.)

[Dahobbs 17522]

2 minutes ago, Jesse Livermore said:

I expect people to value more bitcoin as an asset and its currency usage to increase over time. You expect Nvidia value to go up as well, they aren't paying substantial dividends so that's the reason to buy it.

ahhh, here's the crux of it. You fumbled the bag at securing generational wealth, based on your own misjudgment. It will be very hard for you to reverse course on that. I understand.

Nation states will buy bitcoin as they buy gold.

Proof of work is one of the most important facets of bitcoin. The fact that you think it's bullshit is a window into why you sold so long ago after being early miner.

Look what happened to Ethereum after switching from Proof of work to Proof of stake. womp womp

Again, how many decades does the feeding frenzy have to last until people admit they were wrong?

 

I look forward to your next username. Bye. 

[NYTransplant 145]

27 minutes ago, Dahobbs said:

Tell me you don't know what a ponzi-scheme is. If I invest in Nvidia, it is because I expect Nvidia to make more money selling GPUs and related services. I'm wanting to own a piece (however small) of that business. When one "invests" in bitcoin, you're not doing so because you expect people to actually start using bitcoin as a currency. And you're not doing so because you expect bitcoin fundamentally will do something useful (it never will). You're doing so because you're hoping other people are drawn in the by allure of quick money and then you can sell your bitcoins to them at a higher price. That's it. That's the business. And, by definition, that is a ponzi-scheme. 

Agree with you on this. Stocks are not Ponzi schemes, as the value is in the underlying company, and there is an actual asset there. To be critical, your claim that Bitcoin is a Ponzi scheme and my claim that the US dollar is a Ponzi scheme are not accurate, either. For Bitcoin, investors are not being paid with other people's money. They are paying more for an actual asset, albeit a digital asset. An asset with a finite supply. Celsius was a Ponzi scheme, unfortunately for me. Miners contribute energy to generate more bitcoin, and thus they have skin in the game. They aren't creating BTC out of thin air.

Conversely, the US does create money out of thin air. I'd argue that the US dollar is the biggest scam the world has seen. The US managed to establish the dollar as the world reserve currency in 1944, when it was backed by gold. The world committed to the currency and for ~25 years, all was well and good. But, then the US started printing more money than they had gold to cover and in 1971, you could no longer claim gold in exchange for currency. There is nothing behind the US dollar. Nothing other than a promise from our government that is adding debt at a ridiculous rate. It's appropriate that Trump is going into office, this could be his biggest bankruptcy ever.

 

[Jesse Livermore 44]

22 minutes ago, Dahobbs said:

I look forward to your next username. Bye. 

Well. I'm at -44. Given that the same 2 posters neg every one of my posts in this forum I’m good for another 25 or so after adjusting for posts they haven't hit yet. So I have a little while yet. I'd like for this one to make it to btc 100k. We’ll see 

[NYTransplant 145]

29 minutes ago, Captainant said:

Happy to return to past conversations if you don't prejudice my position or put words in my mouth.

Sounds good. First question - do you think that a 51% attack on Bitcoin is a legit concern? You mentioned it in the past few pages, was that some sort of brain fart, or can you provide an explanation for how this could happen without the price of Bitcoin going parabolic (I think $1 million/BTC would be a very conservative number if an attempt was made).

[Captainant 27625]

5 minutes ago, NYTransplant said:

Sounds good. First question - do you think that a 51% attack on Bitcoin is a legit concern? You mentioned it in the past few pages, was that some sort of brain fart, or can you provide an explanation for how this could happen without the price of Bitcoin going parabolic (I think $1 million/BTC would be a very conservative number if an attempt was made).

It's moreso the unknown unknown of the cryptography space. Quantum computing is an emerging field and designed to solve the very NP-hard problem at the core of proof of work. 

At this point, it not likely to see a successful 51% attack. But it's not impossible or something that you can rule out, because code is law. Nobody writes perfect code, there will always be a flaw found and exploited. Or technology will sufficiently advance to work around the difficulty built into the code. 

It's been a loooooong time, but even the BTC blockchain has had a couple forks to undo unintended bugs. The larger that monied interest gets, the more impossible those sorts of after the fact adjustments are to coordinate. 

 

It's not one of the greatest risks to Bitcoin, so I'm sorry for bringing it up now that you've reduced my entire position to that

[NYTransplant 145]

9 minutes ago, Captainant said:

It's moreso the unknown unknown of the cryptography space. Quantum computing is an emerging field and designed to solve the very NP-hard problem at the core of proof of work. 

At this point, it not likely to see a successful 51% attack. But it's not impossible or something that you can rule out, because code is law. Nobody writes perfect code, there will always be a flaw found and exploited. Or technology will sufficiently advance to work around the difficulty built into the code. 

It's been a loooooong time, but even the BTC blockchain has had a couple forks to undo unintended bugs. The larger that monied interest gets, the more impossible those sorts of after the fact adjustments are to coordinate. 

 

It's not one of the greatest risks to Bitcoin, so I'm sorry for bringing it up now that you've reduced my entire position to that

So, it's safe to say that your primary argument is less about a 51% attack, and more about the code being hacked. If that's the case, is it safe to say that I should have the same level of concern for a BTC hack as I have for my Fidelity account being hacked? 

If that's your point, then sure, I'll accept it, but in that situation, we're going to have much bigger problems, as I think it's safe to say, unless BTC flips the banking industry, hackers will be going after the bigger fish first.

[Captainant 27625]

49 minutes ago, Jesse Livermore said:

Well. I'm at -44. Given that the same 2 posters neg every one of my posts in this forum I’m good for another 25 or so after adjusting for posts they haven't hit yet. So I have a little while yet. I'd like for this one to make it to btc 100k. We’ll see 

Well that and Blacklab banned you from the site for continually repeating anti-Ukraine propaganda and derailing in the Ukraine war thread. And you keep making accounts despite that

[NYTransplant 145]

21 minutes ago, Captainant said:

It's moreso the unknown unknown of the cryptography space. Quantum computing is an emerging field and designed to solve the very NP-hard problem at the core of proof of work. 

At this point, it not likely to see a successful 51% attack. But it's not impossible or something that you can rule out, because code is law. Nobody writes perfect code, there will always be a flaw found and exploited. Or technology will sufficiently advance to work around the difficulty built into the code. 

It's been a loooooong time, but even the BTC blockchain has had a couple forks to undo unintended bugs. The larger that monied interest gets, the more impossible those sorts of after the fact adjustments are to coordinate. 

 

It's not one of the greatest risks to Bitcoin, so I'm sorry for bringing it up now that you've reduced my entire position to that

Second question, can you explain how BTC is leveraged? Specifically, more leveraged than any other "real asset" that people can invest in? 

I'm fully aware of the fact that people are buying BTC on margin, and companies like MSTR have used debt to acquire BTC, but how is this any different than the stock market or mortgages? The introduction of options trading against IBIT does add more leverage, but I'd argue that we haven't gotten to the point where you can leverage leverage on BTC the way you can with many investments.

So, is the leverage just worse because it's Bitcoin, or is there some way in which people are getting significantly more leverage on their BTC investments than other "real investments?" 

[Jesse Livermore 44]

6 minutes ago, Captainant said:

Well that and Blacklab banned you from the site for continually repeating anti-Ukraine propaganda and derailing in the Ukraine war thread. And you keep making accounts despite that

I'm a realist. I think it's a good way to look at things because you're looking at things how they are, not how you want them to be.

That doesn't jibe with certain threads here and that's fine. Being a realist on this thread is a good thing.

[gyroprotagonist 2592]

Lulz. I see this thread has not changed one bit

[StassneyHorn 6573]

I am breathing life into those who are negged unfairly. I will be your shield

[CoTex 1160]

4 hours ago, Dahobbs said:

Tell me you don't know what a ponzi-scheme is. If I invest in Nvidia, it is because I expect Nvidia to make more money selling GPUs and related services. I'm wanting to own a piece (however small) of that business. When one "invests" in bitcoin, you're not doing so because you expect people to actually start using bitcoin as a currency. And you're not doing so because you expect bitcoin fundamentally will do something useful (it never will). You're doing so because you're hoping other people are drawn in the by allure of quick money and then you can sell your bitcoins to them at a higher price. That's it. That's the business. And, by definition, that is a ponzi-scheme. 

I had bitcoins before you did. I was mining them for fun early on. I just recognize bitcoin for what it is. Digital currency as a broader concept is different. Nation states will in fact adopt digital currency. And it will actually be useful. And it will not require proof of work bullshit. And eventually bitcoin will die or fade into irrelevance like many other crypto-currencies. But, until then, I absolutely agree the frenzy will continue. Gamble away. A lot of people will make a lot of money doing it. And then suddenly a lot of people will lose a lot of money. Just don't be the one caught holding the bag.  

When I log in to my bank account, it shows money balances that look like this $350.  I'm using this number as an example, it is not the actual number.

I can use that online portal to send money to other places, including Amazon, who will then send me stuff.

Is that not digital currency?  I never see the paper dollars or the gold in fort knox or have to go to the federal reserve to make a demand, I just use digital means to move numbers around and people give me things for it.

I am going to call that digital currency, even if you don't.  It aint paper and it aint wampum.

I think people that don't like the dollar, don't like rules around the dollar, or want to hedge the dollar, want an alternative.  Bitcoin seems to be the frontrunner from where I'm sitting.

I will say that, as of today, I don't need a digital wallet and I don't need to mine anything - I have access to and regularly use digital currency.

[Dahobbs 17522]

36 minutes ago, CoTex said:

When I log in to my bank account, it shows money balances that look like this $350.  I'm using this number as an example, it is not the actual number.

I can use that online portal to send money to other places, including Amazon, who will then send me stuff.

Is that not digital currency?  I never see the paper dollars or the gold in fort knox or have to go to the federal reserve to make a demand, I just use digital means to move numbers around and people give me things for it.

I am going to call that digital currency, even if you don't.  It aint paper and it aint wampum.

I think people that don't like the dollar, don't like rules around the dollar, or want to hedge the dollar, want an alternative.  Bitcoin seems to be the frontrunner from where I'm sitting.

I will say that, as of today, I don't need a digital wallet and I don't need to mine anything - I have access to and regularly use digital currency.

I didn't say Bitcoin couldn't be used as currency. I said it is poor currency. And it is. Its value changes too frequently and by too much. Transaction speeds are slow. Transactions are expensive. It would sort of be like trying to use a vanguard fund as a currency. You could technically do it. But very few people would accept it (without being first converted to an actual currency like dollars). The friction costs are too high to make small transactions worthwhile. And bigger transactions suffer because you can't plan large future contracts/transaction in a very volatile "currency."  

Real digital currencies will be useful. 

Edited Tuesday at 09:36 PM by Dahobbs

[CoTex 1160]

16 minutes ago, Dahobbs said:

I didn't say Bitcoin couldn't be used as currency. I said it is poor currency. And it is. Its value changes too frequently and by too much. Transaction speeds are slow. Transactions are expensive. It would sort of be like trying to use a vanguard fund as a currency. You could technically do it. But very few people would accept it (without being first converted to an actual currency like dollars). The friction costs are too high to make small transactions worthwhile. And bigger transactions suffer because you can't plan large future contracts/transaction in a very volatile "currency."  

Real digital currencies will be useful. 

Is the $$ not a "real digital currency?"  Why/why not?

[Dahobbs 17522]

7 minutes ago, CoTex said:

Is the $$ not a "real digital currency?"  Why/why not?

No. There is a complicated layer of systems behind the scenes that enables those digital transactions. It isn't inherent in the dollar. 

[Snake Diggity 4619]

3 hours ago, StassneyHorn said:

I am breathing life into those who are negged unfairly. I will be your shield

Negged unfairly?  The motherfucker continually circumvents the ignore feature and posting rules by creating countless usernames.  Fuck him and fuck you.

[StassneyHorn 6573]

You are not engaging in good faith and negging discriminatorily, while he makes money hand over fist.

[Dahobbs 17522]

2 hours ago, StassneyHorn said:

You are not engaging in good faith and negging discriminatorily, while he makes money hand over fist.

No, he doesn't. He isn't a real person. 

Edited yesterday at 01:43 AM by Dahobbs

[StassneyHorn 6573]

A neg for that? Pfft

He’s real, you neg him cause you disagree, and that’s not what negs are for.

He “circumvents” your ignore, because you and others are into gang-negging. You guys roll up on him and put his username 6ft under and he’s just another soul lost on Surly. Don’t be a gang-negger.

[Nice Guy Eddie 13508]

Looking forward to throwing a $100 at btc at $100k. Just to shake my heads at btc hitting that level.

[Dahobbs 17522]

9 hours ago, StassneyHorn said:

A neg for that? Pfft

He’s real, you neg him cause you disagree, and that’s not what negs are for.

He “circumvents” your ignore, because you and others are into gang-negging. You guys roll up on him and put his username 6ft under and he’s just another soul lost on Surly. Don’t be a gang-negger.

He is multi banned from Surly by the admin. He is paid to spread bullshit. That is why is here. You're just enabling it because you don't know the history and just read this thread. 

[Tailgate 3021]

This run looks like it’s going to sustain.

Hard to believe at some point we will hear people say “I wish I would have got in when it was only $100k per coin.”

[StassneyHorn 6573]

1 hour ago, Dahobbs said:

He is multi banned from Surly by the admin. He is paid to spread bullshit. That is why is here. You're just enabling it because you don't know the history and just read this thread. 

Is he paid in btc? Cause that seems like a good trade

[Come Sayl Away 2]

1 hour ago, Dahobbs said:

He is paid to spread bullshit. That is why he is here.

You are delusional. Why would anyone be paid to post on surly?

I'm here because it's a place to put my thoughts down on a ledger as it were and discuss with hodlers and haters. It has helped me hold my conviction in the bear markets and build it in bull markets. That has made me a bunch of money. I hope it has done the same for some other posters here. I know the last bull run it did when some people followed me on miner trades. As for MSTR,

 

On 4/3/2023 at 3:03 PM, Mullet Free said:

As an aside, started buying back into MSTR and Riot calls in 401k. Worked great last cycle. I was skeptical that I could go back to the well again, but they have tracked BTC well. In fact outperforming the spot price. I think the lack of low cost, spot etf still helps these act as trading vehicles for BTC in traditional financial accounts. 

 

On 3/13/2024 at 2:51 PM, Cum Rocket said:

Been thinking a bit about MSTR. It's by far my largest holding in 401k. Trying to assess how long this lasts.  Actually looked at numbers and it’s still one of the most shorted stocks in market. 18% of float is short. Fuel for even more pumping above Btc. Decided today to sell some other holdings and rotate more into MSTR. I don't see how this thing isn't substantially higher in 12-18 months. 

 

On 3/19/2024 at 2:04 PM, Cum Rocket said:

True story. Before ETF passed I decided to rollover my 401k from old employer to self directed IRA. It's at Vanguard, so no ETFs allowed. Instead I bought MSTR. It's been unbelievable, the last couple days notwithstanding.

I just think this bull cycle is such a clear bet I couldn't look at the employer retirement in SPY etf and leave it. I plan on having some hard decisions in about 18 months about withdrawal of large sums vs waiting 15 years to pull it out, but that's another discussion.

 

On 3/25/2024 at 1:32 PM, Daddy Fat Sax said:

I'm not sure what to make of Microstrategy. It's trading at more than twice the value of its bitcoin. During the last cycle that "premium" jumped to 6x. I don't see how it can make it that high this cycle when there's ETFs. People looking for proxies are what boosted it that high last time. That's why I don't understand the current 2x. I will continue to hold though. Still some interesting catalysts like S&P inclusion and of course animal spirits during bull run.

 

On 9/18/2024 at 8:00 PM, Conqueeftador said:

For those who are interested in exposure in their 401k, Microstrategy is very interesting. There are of course the etfs, but microstrategy is commanding a premium to the NAV of its BTC holdings. Why? In part because through their access of capital markets they are able to actually increase the amount of BTC per share over time. Pretty fascinating. 
 

 

Report for banning or listen and make money. Your choice, anon.

People get upset with other opinions I've had, but I'm not sure why that matters when I'm staying on this forum.

[Come Sayl Away 2]

13 hours ago, Dahobbs said:

No, he doesn't. He isn't a real person. 

I'm real

 

 

 

[Come Sayl Away 2]

The demand is insatiable for these bonds and Bitcoin. 

 

 

[StassneyHorn 6573]

Thank you for the news, the proven history, and the holdings snapshot. Wow, how can you guys continue to neg after being pantsed like this?

[bernorange 8359]

I mean, it's not like he posted a resume quality picture of himself posing with a tree.

[StassneyHorn 6573]

 

[NYTransplant 145]

5 hours ago, Tailgate said:

This run looks like it’s going to sustain.

Hard to believe at some point we will hear people say “I wish I would have got in when it was only $100k per coin.”

I think we'll see a slight pullback (mid-$80k) before the run to $100k, but I'm not selling what I hold.

[Dahobbs 17522]

1 hour ago, StassneyHorn said:

Thank you for the news, the proven history, and the holdings snapshot. Wow, how can you guys continue to neg after being pantsed like this?

That's stupid. But whatever, continue worshipping him. 

[StassneyHorn 6573]

[Nice Guy Eddie 13508]

2 hours ago, NYTransplant said:

I think we'll see a slight pullback (mid-$80k) before the run to $100k, but I'm not selling what I hold.

Maybe. When orgs like MicroStrategy are buying billions of dollars worth of btc, prices can quickly jump when supply dries up. Disclaimer, I don’t think they are buying on the retail apps but I have to think there is a relatively quick impact to retail prices.

im more of the opinion that we run up to $100k before there is a correction. Perhaps even exactly at 100k because that could trigger large auto sales.

[Captainant 27625]

The exuberance around the accounting rule change to count Bitcoin spot price increases as profit is weird, since that's explicitly counting unrealized profits as earnings. Seems like the sort of thing that got Enron in trouble and making bigger and bigger bets that left them ever more exposed to the downside

[Snake Diggity 4619]

Crypto douchebags are just the descendants of Dutch Tulip investors, pets.com hodlers, and MBS speculators.  Talk shit incessantly on the way up, then disappear when the bubble bursts.

[NYTransplant 145]

5 hours ago, Nice Guy Eddie said:

Maybe. When orgs like MicroStrategy are buying billions of dollars worth of btc, prices can quickly jump when supply dries up. Disclaimer, I don’t think they are buying on the retail apps but I have to think there is a relatively quick impact to retail prices.

im more of the opinion that we run up to $100k before there is a correction. Perhaps even exactly at 100k because that could trigger large auto sales.

Looks like your opinion could be correct. See you at $100k?

[Hornbeliever 712]

I set an eject button for BTC on Jan 1 2025.  I’m now debating canceling my own strategy.  

No one ever went broke cashing in a gain but how boring is that.

[NYTransplant 145]

30 minutes ago, Hornbeliever said:

I set an eject button for BTC on Jan 1 2025.  I’m now debating canceling my own strategy.  

No one ever went broke cashing in a gain but how boring is that.

Tell me you're on the stonks thread, without telling me you're on the stonks thread.

Edited 12 hours ago by NYTransplant

[52-80 19147]

On 11/19/2024 at 5:48 PM, Dahobbs said:

Tell me you don't know what a ponzi-scheme is. If I invest in Nvidia, it is because I expect Nvidia to make more money selling GPUs and related services. I'm wanting to own a piece (however small) of that business. When one "invests" in bitcoin, you're not doing so because you expect people to actually start using bitcoin as a currency. And you're not doing so because you expect bitcoin fundamentally will do something useful (it never will). You're doing so because you're hoping other people are drawn in the by allure of quick money and then you can sell your bitcoins to them at a higher price. That's it. That's the business. And, by definition, that is a ponzi-scheme.

Tell me you don't know what Nvidia's financials are or their investor's motivation for buying the stock. 

NVDA made money to the tune of 64B profit in the last 12 months. It would take 5 decades of that profitability to pay back the equity ownership.

If you assume recent rate of growth (incremental ~3B/q) continues forever, it would take 10 years of that insane growth -- think to when the Seahawks last won a Superbowl -- for the business to break even to its valuation.

So while there is a business that underpins the equity, it explains a tiny sliver of the equity price. Someone buying a stock at this levels needs to assume: (a) business grows even higher, faster or (b) someone else will buy the stock at a higher value.  In other words: "they can [re]sell NVDA to them at a higher price". 

The same motivation is behind buying both things.

[52-80 19147]

On 11/19/2024 at 7:43 PM, NYTransplant said:

Second question, can you explain how BTC is leveraged? Specifically, more leveraged than any other "real asset" that people can invest in?

He can't because he's a fucking retard. It was a direct response to GBTC and IBIT. Neither securities are leveraged. Not even notionally but like very objectively, factually, neither items lever as they buy the underlying with assets at 1:1 , and investors trade them at 1:1. 

Here's another example, in response to MicroStrategy:

9 hours ago, Captainant said:

The exuberance around the accounting rule change to count Bitcoin spot price increases as profit is weird, since that's explicitly counting unrealized profits as earnings. Seems like the sort of thing that got Enron in trouble and making bigger and bigger bets that left them ever more exposed to the downside

MSTR do not claim or recognize Bitcoin as earnings or profits. Their PNL comes from their software business. Bitcoin sits on the corporate treasury, which gets marked to market as would a bond or commercial paper, which is how accounting is always supposed to be done.

LMAO

[52-80 19147]

21 hours ago, Come Sayl Away said:

I'm real

 

That's helluva discipline to be holding from $27.  Wow.  Congrats

[bernorange 8359]

24 minutes ago, 52-80 said:

Tell me you don't know what Nvidia's financials are or their investor's motivation for buying the stock. 

...

SMCI and M$ accounting fuckery is in the process of being unraveled.  NVDA is likely going to be exposed as an accounting fraud monster on the order of Enron.  Caveat Emptor.

 

Edit: This guy is all over NVDA/SMCI's nuts on this issue and frequently posts about it on Xitter:

https://justdario.com/

https://x.com/DarioCpx

 

Edited 4 hours ago by bernorange

[Dahobbs 17522]

26 minutes ago, 52-80 said:

Tell me you don't know what Nvidia's financials are or their investor's motivation for buying the stock. 

NVDA made money to the tune of 64B profit in the last 12 months. It would take 5 decades of that profitability to pay back the equity ownership.

If you assume recent rate of growth (incremental ~3B/q) continues forever, it would take 10 years of that insane growth -- think to when the Seahawks last won a Superbowl -- for the business to break even to its valuation.

So while there is a business that underpins the equity, it explains a tiny sliver of the equity price. Someone buying a stock at this levels needs to assume: (a) business grows even higher, faster or (b) someone else will buy the stock at a higher value.  In other words: "they can [re]sell NVDA to them at a higher price". 

The same motivation is behind buying both things.

I never said you can't get similar market bubbles in a stock. You absolutely can and do see that. And savvy investors recognize what is happening even if they also try to profit from it. With Bitcoin a lot of time and money has been invested in convincing folks that something different is going on. That's where the ponzi element comes in. Bitcoin attracts fraudsters and will continue to do so. I wish y'all well in your gambles. I have no issue with someone making money off of trading Bitcoin anymore than someone making money at the craps table. But, I do think people should see it for what it is and not as having connection to Bitcoin's fundamental utility (which is zero, or even negative if you account for energy costs). 

Edited 4 hours ago by Dahobbs

[Captainant 27625]

28 minutes ago, 52-80 said:

MSTR do not claim or recognize Bitcoin as earnings or profits. Their PNL comes from their software business. Bitcoin sits on the corporate treasury, which gets marked to market as would a bond or commercial paper, which is how accounting is always supposed to be done.

LMAO

 

If a firms entire growth is attributed to Mark to Market fuckery, youuuu might just be an enron. Microstrategy also recently lost its accounting firm, who said “We are resigning due to information that has recently come to our attention which has led us to no longer be able to rely on management’s and the Audit Committee’s representations,”

Mea culpa for that incorrect info, however I still feel strongly that if a companies growth is mainly from Mark to market, you should tread carefully

Edited 4 hours ago by Captainant
Edit: lmao I just realized I cross remembered MicroStrategy and SuperMicro.

[bernorange 8359]

If you are interested in some critical opinions on BTC (and various crypto for that matter), Justin Bons is worth a follow on Xitter.  His posts are thought provoking and usually generate a good bit of high level discussion.

https://x.com/Justin_Bons

 

 

[bernorange 8359]

Quote

...
Klement draws on a research paper written earlier this year, with the very blunt title, “Ponzi Funds.” In that piece, authors Philippe van der Beck, Jean-Philippe Bouchaud and Dario Villamaina find a feedback loop, from ETFs to stocks, and then back to ETFs. “Investors are unable to identify whether realized returns are self-inflated or fundamental. Because investors chase self-inflated fund returns at a high frequency, even short-lived impact meaningfully affects fund flows at longer time scales,” they say.

The researchers are quick to emphasize that the ETF providers themselves are not operating literal Ponzi schemes as defined by the U.S. Securities and Exchange Commission. But they note that Archegos Capital Management — where Bill Hwang was just sentenced to 18 years in prison — was an example where returns from an investment fund trading concentrated positions can be driven by the fund’s own activity. And they say that, like Ponzi schemes, “the wealth reallocation from self-inflated returns unravels once the price impact in the underlying securities reverts and investors stop misinterpreting self-inflated returns as managerial skill.”

The researchers point to one “large thematic ETF” with a chart that is strikingly similar to the Ark Innovation ETF where its raw daily returns and flow-induced trades were over 40% correlated. Its positions were 20 times larger than the daily dollar volume in those securities, they said. That resulted in situations where the fund was buying 20% of the daily volume of the underlying stocks and stirring that feedback loop.

The issue is not limited to Cathie Wood alone. The researchers looked at 1,868 exchange-traded funds. “When the funds hold a liquid portfolio, there is virtually no relationship between daily flows and returns. However, for the most illiquid funds, the realized return increases monotonically with the flow,” they say.

These funds do typically devour themselves, but not right away. “On average, bubble ETFs do not crash within the first year of the run-up,” they say.
...

https://www.msn.com/en-us/money/markets/beware-of-the-ponzi-funds-that-are-hiding-in-plain-sight-says-strategist/ar-AA1uuZKB

Caveat emptor