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from the you've-never-seen-1000-tonnes-of-gold-instantly-evaporate dept.
User mistakenly takes control of hundreds of wallets containing cryptocurrency Ether, destroying them in a panic while trying to give them back
Unlike most cryptocurrency hacks, however, the money wasn't deliberately taken: it was effectively destroyed by accident. The lost money was in the form of Ether, the tradable currency that fuels the Ethereum distributed app platform, and was kept in digital multi-signature wallets built by a developer called Parity. These wallets require more than one user to enter their key before funds can be transferred.
Source: https://www.theguardian.com/technology/2017/nov/08/cryptocurrency-300m-dollars-stolen-bug-ether
This is less than 1% of the entirety of the total value of Ethereum (as perceived by speculators). One must remember that the national debts of issuers of some fiat currencies could effectively destroy 100% of those currencies, so is it appropriate for dollar users (which indirectly is all of us) to sneer at cryptocurrency users for this apparent weakness which will, presumably, be fixed and never happen again?
(Score: 2, Interesting) by khallow on Thursday November 09 2017, @04:09PM (4 children)
That's typical market bubble phenomena. For example, I watched The Big Short [wikipedia.org] last night where such things were a prominent plot point. The overall plot follows several groups of Wall Street investors in the time span of 2005-2008, leading up to the real estate crisis and parts of its aftermath. They all bet huge amounts on various securities that would pay out, if quality of real estate bonds (the fundamental unit was securitized bundles of mortgages mostly with a lot of speculative instruments layered on top) went down. This was all based on various observations that these real estate bonds had crazy out-of-whack estimates of the quality of the real estate mortgages that made up the bonds.
By January, 2007, every one of the groups was experiencing a great deal of doubt (and calls from bosses, investors, creditors, etc) because the markets were not declining in value as one would expect in the face of adverse news (here, it was a large increase in mortgage defaults). So they all asked themselves two questions. What are we missing? And should we bail out of our positions? The resulting search for answers in Las Vegas provides an entertaining climax to the movie (*spoiler* they weren't wrong).
Bottom line though was that the markets could remain delusional for a considerable length of time because a lot of relevant parties, including regulators and bond raters, choose not to look. I believe we will see that something similar has happened with cryptocurrencies. A lack of reaction to bad news is IMHO an indication that the market is ignoring adverse risk, a long tradition of bubble behavior.
To summarize, unfortunately, that is not weird, but expected behavior of a market in a bubble. If you're in that market for investment purposes, it's time to bail. The market may continue to go up, because there are a variety of ways and reasons for it to stay propped up and even bubble some more. But my take is that when Ethereum does collapse, it'll be to below present, perhaps orders of magnitude below present.
(Score: 2, Disagree) by Anonymous Coward on Thursday November 09 2017, @04:18PM (3 children)
The Big Short is government propaganda that places all the blame of the subprime mortgage crisis on Wall Street and completely glosses over the perverse incentives the US government created in mortgage lending via the Community Reinvestment Act.
(Score: 3, Interesting) by khallow on Thursday November 09 2017, @04:44PM (2 children)
You mean like the two Miami real estate dealers who sold mortgages to some of the very people that the Community Reinvestment Act targeted (here, immigrants and people with terrible or non-existent credit) and bragged about the shit borrowers they were able to cram into mortgage securities without affecting the bond rating? The Act wasn't mentioned by name, but it wasn't glossed over. Sure, the Act made things worse, but the real estate crisis would have happened anyway.
As to being government "propaganda", we have the amoral SEC agent who only shows up in the movie because they're job/husband hunting at the Las Vegas conference (with zero knowledge or care about the real estate market when questioned about it), repeated sarcastic mentions of former Fed chairman, Alan Greenspan (culminating in a scene where Alan Greenspan is about to speak while the audience is heading to the exits to trade on Bear Stearns [wikipedia.org] which stock has just collapsed), and mention of the TARP bailout at the end of the film. That indeed shows government in a fine light!
(Score: 2) by DeathMonkey on Thursday November 09 2017, @06:57PM (1 child)
You mean like the two Miami real estate dealers who sold mortgages to some of the very people that the Community Reinvestment Act targeted (here, immigrants and people with terrible or non-existent credit) and bragged about the shit borrowers they were able to cram into mortgage securities without affecting the bond rating?
Yeah, the perverse incentive is the bond ratings agencies being paid by the same people who sell the bonds.
(Score: 1) by khallow on Thursday November 09 2017, @09:23PM
FTFY. I wouldn't speak of it as unique. There was quite the rat's nest of perverse incentives at play in this crisis.