
What Happened to the Guys Who Invested Their Life Savings in Cryptocurrency? - kaboro
https://melmagazine.com/en-us/story/what-happened-to-the-guys-who-invested-their-life-savings-in-cryptocurrency
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derekp7
What's worse than losing your life savings, is those that made a huge profit
on one coin, then traded that directly for another coin that then lost
everything. The IRS considers that trade to be a liquidity event, and you owe
taxes on the value difference (of the first coin) from when you bought to when
you sold (even if it wasn't sold for cash). Now you could claim a loss on the
second coin, but only if you sold it during the same year. If you sold it the
next year, you can still claim it as a loss against future profits, but you
still owe taxes on the original coin sale.

So now that you've lost everything, you still end up owing the IRS possibly
hundreds of thousands of dollars.

~~~
galangalalgol
I though the whol point of these currencies was anonymity? If you never cashed
out gains into a currency tied to you how would anyone know anything beyond
the purhase?

~~~
nullc
Many exchanges report user's activity to the IRS.

Moreover, even if your tax authority wouldn't currently have a way to know--
the penalties for cheating can be very serious so it's in your best interest
to comply with your obligations.

This is essentially how all income/gains tax works in the west: Governments
have very limited ability to catch people, but they scale the penalties so
that the risk from audits and whistle-blowing are enough so that most
voluntarily comply. After all, cash is quite anonymous especially for small
amounts.

If you're constrained to spend your money only in ways that could never be
found in an audit or revealed by a spurned lover, did you ever really have
that money in the first place?

~~~
galangalalgol
These people are dead broke with hundreds of thousands in back taxes. Jail
might look like room and board at that point. Given the only use they made of
the gains was to purchase something that no longer exists, the risk v reward
in their specific instance seems well tilted towards crime.

------
tempsy
Bitcoin is over $10k last I checked. Unless you only bought it the short time
Bitcoin peaked at $20k you probably haven't lost _that_ much, unless you sold
already.

It's the altcoins that continue to get crushed right now against bitcoin. Many
are still hitting all time lows against bitcoin as bitcoin's dominance has
increased (officially) to 70% of the total crypto marketcap but probably
higher in reality.

~~~
hollerith
What are your reasons for believing that the real ratio (bitcoin:total crypto)
is higher than the official or "nominal" ratio?

~~~
tempsy
A lot of crypto investors will say the same thing. I'm referencing the
dominance on CoinMarketCap's website but in reality there's a lot of dead
projects with basically no liquidity. CMC doesn't do anything special to
filter those projects from the denominator, but if you identified those
projects and removed them BTC would probably be at 75-80% or higher.

~~~
lawn
A slight counterpoint that a lot of crypto investors will point out is that
BTC's marketcap is artificially inflated by Tether. Tether has been printing a
lot of coins (highly likely without backing) which has gone directly to buying
BTC, pushing it higher than other coins trading against fiat.

Marketcap is generally a pretty poor metric to use, as it can be gamed in
various ways.

~~~
andirk
Can you explain how Tether can print coins at will but still pay out $1 USD
per 1 Tether? If one can cash out, doesn't that mean it's accurately pegged to
the buck?

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z92
Wonder what happened to those that invested in Bitcoin as soon as it made
front page here in Hacker news. At that time it was selling like 40 cents for
10,000 coins, if I remember correctly.

~~~
scandox
I turned down a 3,000 bitcoin payment for a website I made in September 2011.
I told the rather elderly man who suggested the exchange that I didn't accept
"magic beans".

~~~
api
I spent about 10 bitcoins on a coffee.

I've talked to loads of people with the same sort of story. Truth is that I
never believed BTC could be worth what it is and in a way I still don't. I
think its valuation is ludicrous given its economic design issues and scaling
problems.

My take away from the whole saga is that it's totally debunked any notion that
I had that markets or their participants are rational. I honestly find it a
bit depressing. Maybe I should give up trying to do useful work and invent the
next pet rock fad.

~~~
tom_mellior
I've spent several Bitcoins on pizza. I have no regrets; if nobody used the
magic beans, nobody would be interested in them. In other words, if early-ish
adopters hadn't "taken one for the team", we wouldn't be discussing Bitcoin
now because it wouldn't exist.

In a way the person who bought that famous pizza for 10,000 Bitcoin only lost
"wealth" that wouldn't have existed without the buzz generated by that
transaction.

~~~
api
The problem is that this illustrates what's wrong with highly deflationary
currencies. Who wants to spend a currency that could appreciate by over
10,000X if you just "hodl" it? That's why Bitcoin has actually been abandoned
for a lot of commerce. Why spend it _ever_?

~~~
tom_mellior
I would still spend it if it were easy. I bought my first Bitcoins when they
were around 10 USD, so anything I buy is at one 1000th of the dollar price.
Could it go to a 2000th? Yes, but apart from something huge like buying an
apartment it would be hard to care about the difference.

But yes, this is not an answer that applies to deflationary currencies in
general, nor to people who came later to Bitcoin than I did.

Edit: Although again, the only way Bitcoin can appreciate is if people _do_
spend it. Tragedy of the commons.

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Traster
One thing I find interesting about this was the description of the people
likely to borrow to invest.

>Borg told City Lab that they’re usually educated, with some assets in their
portfolio, but are worried about their retirement. “They earn more than
$60,000 a year, and have at least an adequate handle on technology,” reports
CNBC.

I think this is very understandable from my perspective. I'm relatively young,
smart and have a good job. I'm tech savvy, but I'm also numerate. Because I'm
numerate I can look at the house I'd like to buy - it's £3/4/5m, I earn
>£100k, but probably will never earn >£300k (numbers deliberately fuzzed for
privacy reasons). So I look at my situation and say "I can never get to that
house that I really want". It's not a mansion, it's just a nice detatched
house in a good part of town.

From that perspective I completely understand this compulsion to start
betting. The step from working middle class to comfortably well off is just an
unimaginable step.

~~~
nostrebored
Unrealistic desires are not an excuse for betting, they're the exact reason
not to bet. The road to the mansion is paved with the crippling debt of the
less fortunate. Assuming you'll be the winner of a speculative bubble is not
the numerate decision.

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anm89
Surely a lot of people got burned ingesting in crypto but I know quite a few
who made out like bandits as well. 7 and 8 figure payouts in their 20s and 30s

~~~
tootahe45
The key being they 'got out'. Most of the idiots on Reddit have convinced each
other to bag-hold to the grave, if they stepped outside their echo chamber
they'd see crypto is clearly dead for some time now.

~~~
carbocation
But if you made 7 or 8 figures, then BTC being at 50% of it's all-time high
still keeps you at approximately 7 or 8 figures.

Just saying that even if they didn't get out, they still did marvelously.

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51stpage
All I can see is uneducated investors taking highly leveraged positions and
feeling the inevitable pain when they didn't cover the possible downside.

A lesson to us all, absolutely. Know damn well what you're doing (and prepare
accordingly) before you start trading with someone else's money.

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zed88
I think we should hold our judgements for a bit longer. It is yet to be seen
how the looming recession affects the cryptocurrency demand.

~~~
nickgrosvenor
Most will probably liquidate their position.

~~~
OrgNet
probably the opposite will happen... if a lot of people lose confidence in the
dollar

------
viach
Probably investing all your life savings into something you don't fully
understand is not the best idea in any case - cryptocurrency or something
else.

------
jonwinstanley
In the same way as not many people bought Bitcoin at the beginning and sold
for $20k, the stories of buying at $20k and losing 95% are equally unlikely.
The crash took the whole of 2018 to happen. Did the guys with all their
savings in Crypto not take any of it out while it was dropping? Seems unlikely
to me

~~~
AstralStorm
They went for bad crypto coins and ICOs...

------
Ambele
The S&P500 Market Cap is 24.30T. Bitcoin's market cap is $184 Billion.
Therefore for proper hedging, you should put 0.75% of your assets into
Bitcoin. For every $100k, that's $750.

Put it another way, you should put 132x more money into stocks than you should
Bitcoin. If Bitcoin were to steal market cap from the investment markets,
you'd be well positioned for transition. If Bitcoin were to become worthless,
you'd still be well positioned.

Bitcoin will one day become worthless but it may be a while before that
happens. The speculation is whether the new universal currency will kindly be
available to prior bitcoin holders as an airdrop or fork, or whether it will
be a brand new cryptocurrency without any ties to Bitcoin. So far, no
cryptocurrency has overtaken bitcoin and the next 10 by market cap don't look
like they will overtake it soon.

Planning for the additional (and painful) tax complexity in advance is
advised. If you don't how to do taxes yourself, it won't be fun to pay an
bitcoin-specializing accountant $300-$800 each year because you bought Bitcoin
once.

------
4seen
In 2012 I learned about Bitcoin and I was denied a MtGox account in 2013, I
wanted to buy a few thousand BTC. I don't feel bad about his anymore. I could
not buy Bitcoin for a long time out of spite. Saw it coming by, every time it
was worth more and more.

Finally in August 2017 I finally jumped in and made well over 500k Euro in
profit, but I kept it too long so I lost 75% of that, I am really glad I took
my initial investment out, even though it would have been worth more today.

I did not know anything about trading or reading charts when I started, it
would have made a huge difference for me. Since the beginning of 2018 I have
invested most of my free time into understanding trading / markets and
programming indicators and market analysis tools. I feel much more confident
in trading now and for me it is a good way to make more money.

I like the proverb 'Give a man a fish and he will eat for a day. Teach a man
how to fish and you feed him for a lifetime.'

------
shrutipathak
Never invest in something you don't understand.

Words to live by.

~~~
alexandercrohde
Not really. Understanding comes in degrees, and most things that the average
person doesn't truly understand (the market, index ETFs, your startup equity
agreement) give better ROI than those you do.

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new_here
Does this BTC valuation graph not look like a massive pump and dump or am I
missing something?

[https://www.dropbox.com/s/3lcuf7df5km8rmn/Screenshot%202019-...](https://www.dropbox.com/s/3lcuf7df5km8rmn/Screenshot%202019-09-08%20at%2021.22.04.png?dl=0)

~~~
hervature
Does this Nikkei valuation graph not look like a massive pump and dump or am I
missing something?

[https://www.marketwatch.com/investing/index/nik?countrycode=...](https://www.marketwatch.com/investing/index/nik?countrycode=jp)

~~~
sroussey
Yeah, up until 1990. Then, not since.

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RickJWagner
Remember the posts from people who mocked Warren Buffett for warning people
away from BitCoin?

I surely do. I'm a Boglehead, I like to read that stuff.

If you are unsure of what happened (and why you should have been on the
sidelines), please visit Bogleheads.org. You will learn that _anyone_ can
become relatively wealthy given a little discipline and a lengthy working
life. It really works.

------
tom_mellior
Can anyone explain why this is flagged? It's a very one-sided article, talking
only about people who did dumb things and lost out. But is that a reason to
censor it?

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deevolution
My guess is they're doing fine as long as they invested in Bitcoin and avoided
90% of the other vaporware imitation crap floating around.

------
th3099120495788
Max: The two cardinal rules of producing are one: Never put your own money in
the show.

Leo: And two?

Max: [yelling] Never put your own money in the show!

[The Producers]

