
People are taking out mortgages to buy Bitcoin, says securities regulator - tadasv
https://www.cnbc.com/2017/12/11/people-are-taking-out-mortgages-to-buy-bitcoin-says-joseph-borg.html
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tptacek
This doesn't surprise me. My Facebook feed has three kinds of people on it:
family, people I went to grade school and high school with, and security
industry people I've met at conferences.

Over the last few months, it's gotten to the point where I can't snark about
Bitcoin (to my security industry friends) without getting aggressive pushback
from the people I went to grade school with, none of whom are in the
technology industry, many of whom are cheerleading their social circles into
investing in Bitcoin.

None of them are _transacting_ in Bitcoin (to a first approximation: nobody is
transacting in Bitcoin). They're buying for the same reason people bought into
Pets.com.

Here's an example:

 _November 29 at 11:03am:_ Bitcoin just topped 11k! That's a 77% gain in just
the last 30 days. Who wants in??? _[21 likes, 19 comments]_.

This is from a home mortgage loan officer I went to grade school with. The
comments are all variants of "Me, I want in."

I don't know what weird threshold we crossed in the middle of this year, but
cross it we did.

~~~
thesmallestcat
I normally wouldn't buy a foreclosure for ethical reasons that I'm sure fail
to hold water. But if there's a wave following the collapse of Bitcoin, count
me in. I have zero sympathy for somebody who loses their shirt speculating on
fucking Bitcoin.

~~~
tptacek
Why? It's a manifestly crazy investment, but why is a mortgage broker on the
south side of Chicago expected to have enough innate technical knowledge to
qualify Bitcoin as an investment, but not for an NYSE-listed stock? To the
overwhelming majority of investors, both are fundamentally opaque instruments;
you buy because other people are buying.

To me, this indicts Bitcoin's most aggressive promoters, not the investors.

~~~
thesmallestcat
I guess what I mean is that I can feel for people who got duped into taking
out a risky loan for a house they can't really afford. Shelter is something
anybody can appreciate. I can't explain going all in on Bitcoin except by a
combination of greed and stupidity.

------
PeterisP
Bubbly bubble.

Seriously, some time ago you could debate if you're an early adopter (winning
from a raise in the bubble even if it pops later) or a laggard who'll only
lose in it; but if you're investing _after_ a random taxi driver has taken a
mortgage to do so, then (hint-hint) you're not one of the early ones.

~~~
1001101
Someone that owns a substantial sum of coins recently put it to me this way:
there are ~16 million millionaires in the US. If each one of them wants 1
Bitcoin... I'm long again.

~~~
chickenfries
Wow that’s some amazing rationalization they’ve done there. What happens in
the incredibly more likely scenario that most of them want none?

~~~
1001101
Sure - think of it more as a thought experiment rather than a forecast and
this from a professional trader that's been long since 2013. Either way, I
thought I would share it, and we'll see which way it goes.

~~~
kornakiewicz
Those 16 millions of guys might want to buy a book that I will eventually
write.

~~~
chickenfries
If each one of them wants to buy one book... you've got 16 million in sales
right there! I don't see anything wrong with this line of thinking.

------
pmoriarty
Not that this is going to stop anyone, but those who are considering investing
a lot of their net worth in something so speculative should do themselves a
favor and read up on the so-called Tulip Craze (aka Tulip Mania) in the 17th
century.

[https://en.wikipedia.org/wiki/Tulip_craze](https://en.wikipedia.org/wiki/Tulip_craze)

~~~
21
For decades, economists have pointed to 17th-century tulipmania as a warning
about the perils of the free market. Writers and historians have reveled in
the absurdity of the event. The incident even provides the backdrop for the
new film Tulip Fever, based on a novel of the same name by Deborah Moggach.

The only problem: none of these stories are true.

[https://www.smithsonianmag.com/history/there-never-was-
real-...](https://www.smithsonianmag.com/history/there-never-was-real-tulip-
fever-180964915/)

~~~
eridius
That summary understates it.

> _That’s not to say that everything about the story is wrong; merchants
> really did engage in a frantic tulip trade, and they paid incredibly high
> prices for some bulbs. And when a number of buyers announced they couldn’t
> pay the high price previously agreed upon, the market did fall apart and
> cause a small crisis—but only because it undermined social expectations._

The tulip craze was real, it just didn't cause society to crumble.

------
age_bronze
What is curious is that it seems like there's a growing consensus with
everyone with a real clue about it that this is a bubble, while the price
keeps rising anyway.

We're already past the point where bitcoin could have any value as a currency,
as the higher and higher transaction fees ensure the only remaining users are
traders. I mean I can hardly see anyone using bitcoin today as anything but a
store of value for speculative reasons. Any real users (which treat it as a
currency) should have already left for cheaper currencies. It's going to fall,
and fall hard, and it will be painful. When it will crash, it's going to take
similar protocols (who can use the same setups / hardware / asics) down with
it as miners try to reuse their hardware on more effective currency.

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freedomben
Oh people COME ON!

I love Bitcoin and other crypto currencies but driving yourself into debt to
buy in is _grossly_ irresponsible. Worst of all these will be the same people
clamoring for regulation when they lose all their things.

------
symlinkk
Interesting that everyone seems to be in consensus that this is a bubble. If
you're so sure, why not short it? That's free money you're leaving on the
table.

~~~
slyfocks
I’m fairly certain it’s a bubble but it’d be foolish to short. Altcoins are in
a bubble as well—Potcoin being valued at $64mil is just one of many examples
of coins with zero or close to zero utility valued at absurd levels merely due
to their visibility as a cryptocurrency (much like dot coms in 1999).

Ultimately, the mania present in a bubble can persist longer than one can stay
liquid, i.e. Bitcoin could double or triple before the bubble bursts, which
would trigger a margin call on a short position.

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darkstar999
How do you take out a mortgage and spend it on something other than a
property? That has to be fraud regardless of what you purchase, right? This
worthless article didn't explain much.

~~~
ceejayoz
A home equity loan is a form of second mortgage. You can take money out of it
for whatever purpose you like.

~~~
stephengillie
It sounds insane to me, but some banks offer _home equity credit cards_ , to
leverage your home to buy clothing or other items.

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frgtpsswrdlame
So how does a bubble in Bitcoin pop? Since there's no real underlying value
does it just take the spread of the idea that Bitcoin is a bubble?

~~~
pmoriarty
Why not just the same way as any other bubble? People start selling in vast
quantities, other people see the selling and panic, the currency devalues, and
the selling snowballs until it's a small fraction of its former value.

The big questions are if that's ever going to happen, and if so, when?

Unless you've got a time machine or have cornered the market, though, I'm not
sure how you could ever know.

~~~
frgtpsswrdlame
Well here, let me explain: if gold is a bubble someone comes up and says, gold
is overvalued, here's x, y, z that explain why it's overvalued. That idea
spreads, people stop buying and start selling, boom bubble popped.

With bitcoin though, I don't see a good way to say bitcoin "is overvalued,
here's x, y, z that explain why it's overvalued." There's really no
explanation for it's value at all, that's the aspect of bitcoin that resembles
a currency.

~~~
nostrademons
There hasn't actually been a reason for gold's value since 1933, when FDR took
the U.S. off the gold standard. And gold has exhibited similar bubble behavior
as Bitcoin since, eg. the 1980 bubble when it went up 5x in a year and then
crashed 50% the next year, or the 2005-2011 bubble where it went up 4x and
crashed by 40% over the next couple years.

It really is as simple as other posters are saying: when there are more buyers
than sellers, the price goes up, and when there are more sellers than buyers,
the price goes down. The reason for there being more sellers than buyers could
be as simple as people losing interest and moving onto the next shiny thing.
You can't eat either gold or bitcoin, so in the absence of continued
attention, there's natural selling pressure.

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justifier
Do these people know cryptocurrencies are reliant on unsolved mathematics?

This information needs to be the first thing people learn about
cryptocurrency.. long before putting any money in

------
DougN7
Isn’t this exactly what made the stock market crash of 1929 so devastating to
the US? And which lead to the Great Depression our grandparents tell us about?

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misotaur
Maybe some take a mortgage to short it?

~~~
maltalex
Are there sane ways of shorting Bitcoin?

~~~
21
To invoke a higher authority:

Bitcoin: my answer to the repeated questions. No, there is NO way to properly
short the bitcoin "bubble". Any strategy that doesn't entail options is
nonergodic (subjected to blowup). Just as one couldn't rule out 5K, then 10K,
one can't rule out 100K. Gabish?

[https://twitter.com/nntaleb/status/939526347730407424](https://twitter.com/nntaleb/status/939526347730407424)

