David McWilliams: "Bitcoin Betrayal"?

Brendan Burgess

Brendan Burgess

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I presume that McWilliams did not choose this headline:

www.irishtimes.com

David McWilliams: Between rent, house prices and Bitcoin betrayal, how much more can the younger generation take?

Some of the promises of bitcoin in particular and crypto in general may still come to pass, but right now it looks like an old-fashioned boom-bust cycle
www.irishtimes.com www.irishtimes.com

I can't figure out from quick scan of the yarn he is telling, who did the betraying?

But he has made a good point. If people speculated the house deposit on Bitcoin, most of the recent speculators, are in a very bad position indeed.

The conversation ebbed and flowed, more rapid-fire than laconic, becoming heated on the issue of crypto. As if paying high rents was not enough, the recent collapse of crypto, particularly bitcoin, has hit Ireland’s millennials and Gen Z’ers hard. Crypto is a generational issue. For those under 35 it was the asset of choice, a way of accumulating wealth for a generation locked out of the housing market. For Generation X (my crowd) and boomers, crypto was largely seen as an end-of-cycle scam, the ultimate pyramid scheme. As bitcoin has fallen from a high of €58,000 before Christmas to about €19,000, some younger people have suffered a huge fall in their ‘paper’ wealth.

Coming on top of house price and rent rises, this loss will be particularly difficult, not least because buying bitcoin was seen as an “alternative” to buying a house. Regular readers of this column will know that I’ve been a bitcoin sceptic for a long time, mainly due to my professional training as a monetary economist – but it hardly matters: globally, two trillion dollars of paper wealth has been wiped off the crypto markets, the biggest of these being bitcoin. For young Irish holders of crypto, the slump in prices has been a double negative whammy because bitcoin has been falling while houses prices have been rising, making them much poorer on a ‘relative’ wealth basis. We are talking about a lot of people.

The thing I find a bit odd is that although lots of young Irish people seem to own Bitcoin, I haven't heard many stories of people having lost all their money? Or maybe they don't recognise the loss as they expect it to back up?
 
NoRegretsCoyote said:
I usually hate the term "speculators" as it is mainly used by socialists now to describe the normal process of business investment, but it is completely correct here - people putting money into cryptos really are speculating!
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I suppose there's always a level of speculation when investing in anything and we've all done it a some stage, Xtravision, Eircom Atlantic Resources, Bula, remember those ?

But the younger generation live by what is told online, not all I would imagine, many have access to online " investment platforms " or ponzi platforms as I describe it. Many will have ordered multiple " investment bibles " free online from financial guru who is so good at investing he/she are selling books and seminars, of course the shipping of these " bibles " isn't exactly cheap either.

The younger generation also probably think that they need to " score big" when it comes to investing as they feel owning a home might never happen so they speculate.

My two 22&21 are more interested in starting pensions once it becomes easier via the new proposals, but my 2 remember the last crash when I was very sick and making every month took sacrifices for all of us, including Santa.

Speculation will always be in the world of investment and some will win and some will lose.

But its nobody's fault except the investor
 
Brendan Burgess said:
The thing I find a bit odd is that although lots of young Irish people seem to own Bitcoin, I haven't heard many stories of people having lost all their money?
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I think that's to do with human nature. You only ever hear of the few big wins a gambler will have in their lifetime, they never shout about the plethora of losses that fall either side of the those big wins.
 
I really can't believe there are any that thought bitcoin an alternative to buying a house.
I think my Millennial nephew is typical - he is a clever guy, now studying actuarial. He asked me about 18 months ago should he put the few thousand dollars he had earned in a US holiday job into bitcoin. I referred him to the wise words of Professor Roubini and he certainly backed off. It was about $40k at the time and I had to endure a bit of ribbing last November but he's back talking to me ;)
He wasn't seeing it as a life choice, but he was prepared to take a punt with far more exciting possibilities than earning a mere 5% p.a. in an investment fund.
To be sure, I don't think anybody with a tit or a wit over the age of 35 sees any sense in bitcoin so McWilliams is right, it is a bit of a fad for young rebels, a bit like punk rock, but I think he hugely overstates that phenomenon.
 
Lots of sweeping anecdotal generalisations here about "young people". So I'll add my own anecdotes. I know people older than myself who swear by crypto and have put their money where their mouths are. Meanwhile my 16 year old is, thankfully, convinced that it's a speculative bubble.
 
Duke of Marmalade said:
I really can't believe there are any that thought bitcoin an alternative to buying a house.
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Hi Duke

A lot of people feel that they can't get the deposit together to buy a house.

But if they doubled or tripled their money on crypto, then they would have the deposit.

They are vulnerable to the crypto story. It's very easy for them to be suckered in by the argument "Something was $70k a while ago, and now it's a bargain at $20k."

Brendan


Brendan
 
Brendan Burgess said:
But if they doubled or tripled their money on crypto, then they would have the deposit.
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I'm very curious as to how banks would assess this both from an AML perspective and also the creditworthiness of the borrower.

Who is less likely to default? Someone who turned €10k into €50k through some well-time crypto trades? Or someone to saved up €50k via putting €10k a year into a deposit account?
 
Rasputin said:
I think that's to do with human nature. You only ever hear of the few big wins a gambler will have in their lifetime, they never shout about the plethora of losses that fall either side of the those big wins.
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It was the same with the housing crash it was a long time before people were prepared to admit their losses , there was plenty of denial around in 2008 and 2009 ,it was only around 2010 that you really started to hear the stories
 
As a Millennial, here's my 2c based on my social circle of educated mid- to high-earning tech workers.

No one talks about investments in general, nevermind bitcoin. The most that people manage to set up is their pension, and even at that it's usually just up to the company match and into the default fund.

The only times investments come up are 1) when to cash in RSUs, and 2) recently with inflation there's been talk of protecting the value of money (which usually ends quickly when they see that losing 8% purchasing power per annum may be better than losing 20% in the last 6 months on the stock market).

I've had more taxidrivers talk to me about bitcoin than peers.

Maybe since my circle earn more than the average Millennial, many of them can afford a deposit anyway so don't feel they need to risk it on crypto. The plural of anecdote isn't evidence and all that. But I do think that there is an element of McWilliams enjoying saying "I told you so".
 
There is a lot of speculation in that article! Although it is news to me that you can live in a Bitcoin!

There has been $7trillion wiped of the S&P500 in 2022 as well, so a smart pension investment in global equities is not doing too well either. I didn't see any facts in that article, probably based on conversations of 'did you hear about the guy down the pub who invested his house deposit in bitcoin and lost it all'.
 
I've been interested in crypto since 2014, I've seen this all before. it goes up, it goes down, it goes back up again and down again.

I'm not sure if this is the bottom at 20k but this is where I'll begin putting my own money in again
 
Brendan Burgess said:
Crypto is a generational issue. For those under 35 it was the asset of choice, a way of accumulating wealth for a generation locked out of the housing market.
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Asset of choice for under 35s?
Brendan Burgess said:
For Generation X (my crowd) and boomers, crypto was largely seen as an end-of-cycle scam,
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End-of-cycle?
Brendan Burgess said:
Coming on top of house price and rent rises, this loss will be particularly difficult, not least because buying bitcoin was seen as an “alternative” to buying a house.
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As @Dublinbay12 remarked does anybody really see bitcoin as the alternative to a house?

I don't care if the author is a professionally trained monetary economist, AAM should not we wasting time on such drivel. :mad:
 
The postulated logic behind bitcoin is that there is a limited supply of it and therefore it will retain its value. The flaw in this logic is that being in limited supply is a necessary but insufficient condition for something to have an exchange value. Lots of things are rare yet worthless.
 
tomdublin said:
Lots of things are rare yet worthless.
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Hi tom

You have put this much more eloquently than I have done in the past:

Key Post - Why Bitcoin has value

And what earthly incentive do they have to distort the figures? What does it bring for them? I honestly don't know, but my guess is that they are not attempting to report on global figures and are simply focusing on their own market. Their editorial focus in almost exclusively US centric. I...
www.askaboutmoney.com
 
The youth are not the only people being betrayed by Bitcoin. Pity the poor criminals.

www.thetimes.co.uk

Kinahan cartel left reeling by crash in crypto

The Kinahan cartel has suffered significant financial losses as a result of the collapse in the value of cryptocurrency investments which it has been unable to convert into hard currency because of sanctions introduced by US authorities.Intelligence available to officials suggests that the cartel ha
www.thetimes.co.uk www.thetimes.co.uk

But they must have made out like bandits on the way up.

Brendan
 
Duke of Marmalade said:
As @Dublinbay12 remarked does anybody really see bitcoin as the alternative to a house?
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I think his point is that previous generations have had the opportunity to buy assets (property) at low prices which have subsequently grown significantly in value at the expense of the next generation.

Many Millennial and Gen X-ers have now been priced out of having the opportunity to get a slice of this pie, so some hoped that they could make a whole new pie instead.

Today, young people talk about their parents generation who bought a 3-bed semi for 20k that's now worth 500k. They're hoping that in 50 years young people will complain about how our generation were able to buy bitcoin for "only" 20k and amass great wealth as it went over 500k per coin.
 
interested21 said:
Today, young people talk about their parents generation who bought a 3-bed semi for 20k that's now worth 500k. They're hoping that in 50 years young people will complain about how our generation were able to buy bitcoin for "only" 20k and amass great wealth as it went over 500k per coin.
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I think the house has a tad bit more utility than a bitcoin though, and the rationale for buying was far different. Their parents generation bought a house to live in and raise a family, and its value went up over time. The people buying bitcoin are just blindly buying into a get quick rich scheme for fear of missing out.
In 50 years time, the only place you'll find Bitcoin is in a behavioural economics text book as a 'that really happened' cautionary tale.
 
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