What Happens When an 'Infinite-Money Machine' Unravels
- Reference: 0180345121
- News link: https://news.slashdot.org/story/25/12/09/173219/what-happens-when-an-infinite-money-machine-unravels
- Source link:
At one point last week, the company's market value dipped below the value of its bitcoins after accounting for debt. Strategy announced it had built a $1.4 billion dollar reserve by selling more stock to cover required dividend payments to preferred shareholders over the next twelve months. The company also disclosed it might sell some of its coins if its value continues to fall, a reversal from Saylor's February tweet declaring "Never sell your Bitcoin." Professional short seller Jim Chanos, who had questioned the strategy's sustainability, told Sherwood he made money by shorting the stock and buying bitcoins.
[1] https://www.newyorker.com/news/the-financial-page/what-happens-when-an-infinite-money-machine-unravels
Infinite money machine is impossible (Score:5, Informative)
And infinite money machine clearly violates the laws of thermodynamics.
But an infinite pain machine is allowed under known physical laws.
Re: (Score:2)
Infinite money machines are trivially easy. There's nothing stopping an issuing agency from printing even more money. Zimbabwe's 100 Trillion dollar note is but one such example. Of course that bill wasn't worth the paper used to print it shortly after it was printed due to the well over billion-percent monthly inflation, but infinite money machines do exist. Incidentally they seem to themselves be infinite pain machines judging by the historical effects of running the printing press or infinite money machi
Re: (Score:2)
> Infinite money machines are trivially easy.
No, they are literally impossible.
What you describe is a seemingly-infinite-money-machine.
What hap[pens? Investors that get caught! (Score:2)
Lose their investment!
Re: What hap[pens? Investors that get caught! (Score:3)
Most retail investors into Strategy are likely in it for the dividends and long term holding. That's how their products are sold. The price of Bitcoin this month doesn't matter. What matters to them is how much they originally paid and how much they are getting paid in dividends.
Typically when you invest in a stock with high dividends, it's because you expect to pay for that in lower gains or losses. Oil fields are the archetypal dividend investment. You buy a share in an oil field that's running out. As th
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"dividends and long term holding" True, but it all comes down to where you bought in. And where you "do" get out.
LOL (Score:2)
This guy: "#Bitcoin is a swarm of cyber hornets serving the goddess of wisdom, feeding on the fire of truth, exponentially growing ever smarter, faster, and stronger behind a wall of encrypted energy."
What a friggin' useless tool.
Re: (Score:2)
> More shitposts of that kind from that tool Saylor:
> [...]
>
> [1]https://twitter.com/saylor/sta... [twitter.com]
> There's probably dozens more.
Most notably, Warren Buffett said he never saw Bitcoin as a proper investment vehicle.
[1] https://twitter.com/saylor/status/1433037702073565186
This was better covered (Score:4, Insightful)
by the [1]greatest rap channel in YouTube history [youtube.com]
These are canaries in the coal mine for the collapsing economy. There's a ton of money in Wall Street chasing meme stocks and trying to extract value without offering it. But they can only survive while the economy at large does and can absorb their losses.
When the broader economy collapses various ponzi schemes go with it. Usually we prosecute the crooks and clean things up a bit, but I don't think anyone is expecting that this cycle.
[1] https://www.youtube.com/watch?v=fhsrkvEY55s
Re: (Score:3, Informative)
Patrick Boyle's channel is home to one of the most wonderfully snarky analysts of economic nonsense I've ever seen. Soundbites from this one include:
"Why have a company that does something, when you could just have a company that buys something and pumps its price up".
"Elon Musk - who spent billions of dollars on AI so he could have a cartoon girlfriend - says that..."
"He explained at a US-Saudi investment forum that this can all happen as long as we build an AI that cares about truth and beauty - and y
Re: (Score:2)
This time round Trump will pardon them, appoint them to cabinet, invest $1M in their new scheme, promote the s*** out of it so MAGA morons buy into it for $100B, extract $100B in profit, and then throw them under the bus claiming he's never met them, they were a horrible person, and definitely not his type anyway.
Quantiative easing, though.. (Score:2)
was totally legitimate and not some legerdemain allowed purely by the dollar's reserve currency status..
Anything to do with... (Score:2)
...Don Lancaster's [1]Incredible Secret Money Machine [archive.org] ?!?
[1] https://archive.org/details/Incredible_Secret_Money_Machine_Don_Lancaster/mode/2up
Line go up (Score:3)
Astute investors will note that Dude Bro's strategy was based on the notion that bitcoin would keep appreciating.
So if everything kept getting better forever, he would be right.
But so would everyone in an index fund. With far better performance when line go down.
Re: Line go up (Score:2)
There's zero evidence to suggest Bitcoin is not going to continue upward. Anyone who knows the first thing about Bitcoin already knows about the bear market. It's not a surprise. Bitcoin investors tend to have outlooks that see farther out than the next quarter.
If you're not looking at a 4-year graph, you're not trying to understand Bitcoin price dynamics.
Why would you give a loan...? (Score:2)
....to a company who is simply going to buy Bitcoin with it? Their ability to repay the loan will be based on the price growth of Bitcoin during that same period. So your loan to this company (via a bond or a stock purchase) is essentially just a long position on Bitcoin...in which case, why not just buy Bitcoin yourself instead of working through this middleman who will take a huge cut?
Most finance and investing stuff makes no sense to me, but this seems outlandish even in that context!
Re: Why would you give a loan...? (Score:2)
They provide various financial instruments that pay dividends. It's a way of staying invested in Bitcoin for the long haul while generating cash to live on, without having to go through the stress of timing the market yourself and insuring your investments.
You buy a share in something that pays you 10% dividends, but ultimately stays invested in the Bitcoin economy. Strategy gets finding for more leveraged investments and acquired more Bitcoin. Bitcoin continues to rise on a 4-year timeline. Everyone gets p
Re: (Score:2)
Everyone gets paid (if all goes well).
And (just out of curiosity) what if it doesn't?
I mean, not that it would ever happen of course (because crypto is incredibly super stable), but what if the Magical Money Fairy has a little boo-boo and falls down? Does everyone still get paid?
What happens next? (Score:2)
> What Happens When an 'Infinite-Money Machine' Unravels ...
> Michael Saylor's software company Strategy, formerly known as MicroStrategy
(a) Declare bankruptcy.
(b) Use money to buy - I mean, lobby for - I mean get pardon. (Will work for 3 more years)
(c) Successively rename company: "MacroStrategy", "MegaStrategy", ... "MAGAStrategy".
(d) Goto "a".
Re: What happens next? (Score:2)
Strategy and MicroStrategy are identical. There was no bankruptcy. They simply pivoted from a digital services company to a Bitcoin treasury and decided to rebrand. "Micro" is very 90s.
Not real. (Score:1)
MSTR has been getting massively shorted by large banks, led by JP Morgan, in an effort to drive the price of bitcoin down. Once achieved, they buy in massively so as to set up their own competing treasuries.
MSTR only dies if crypto itself dies, probably taking the global financial system with it. Start writing your apology letters to the 'nothing ever happens' soyjak.
-Z
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Communism is not a workable system for more than Dunbar's number of people, and no country on earth uses it.
I really don't think it would work as an economic system, either, for the same reasons.
For groups smaller than Dunbar's number, that also have a charismatic leader, it can work quite well. But when that leader fails or retires, they tend to adopt a different system...or just fall apart.
Nothing to see here (Score:2)
This is expected. Strategy is essentially a Bitcoin derivatives market. They use leveraged investment to multiply their earnings. So, if Bitcoin is going up, it's likely Strategy will go up faster. But the opposite is true as well. When Bitcoin has been dropping, Strategy should be expected to drop even faster.
This is basic stuff. It's a non-story. Bitcoin continues to cycle. Derivatives continue to over perform in both directions.
What will be more interesting is to see how Strategy looks after a full Bitco
It's about value (Score:2)
and the value of bitcoin is hype. If you can't keep hyping it then the value falls. The last peak was fueled by the election and the hopes that it would go to the moon. But the problem is after the optics fall away from BTC the value drops and when it drops the more the hype fades. So if you want it to go up, keep hyping it, but I suspect that after a while people will get tired of the whole thing after a while you burn through people who lose money and won't touch an investment again.
Re: (Score:2)
Bitcoin does have some small intrinsic value. But it would be around the value of a ticket to the 1933 world's fair. Or an old newspaper with the headline "Dewey Wins".
Leveraged Speculative Bet (Score:2)
It was just a leveraged bet on a speculative asset. Works great as long as the values go up, but nothing goes up forever.
Who could possibly? (Score:3)
Who could possibly have predicted that something like this could happen?!
Re: (Score:2)
> Who could possibly have predicted that something like this could happen?!
All the /. bitcoin nay-sayers in the last 15+ years.
It was never good (Score:1)
This was never a good long term investment strategy. Crypto was never a good long term investment strategy. I have no sympathy for anyone that gambles their money away on crypto or anyone who even speculates on any kind of currency. Or anyone who day trades. Stupid stupid stupid.
It's designed to fail (Score:4, Insightful)
Folks on X discovered what appears to be a pattern of toxic lending.
Toxic lending is when you lend money in exchange for a right to get shares at ridiculously low prices in the event of a default.
The deal here is pretty straight forward:
1. Microstrategy gets to build up a vault of real (enough) assets worth far more than its products and services in the market.
2. Lenders get an insane amount of shares in reserve waiting for a default.
3. Microstrategy defaults. They quietly massively short the company at high values. Think like 50%-100% its float.
4. Lenders get their cheap shares from Microstrategy and give them to the brokerages that lent them shares.
Saylor and his allies are left diluted in their stock holding, but the company has real assets behind it. Company goes to trash, but it has enough assets that it can liquidate and ensure they're set for life.
At one point this was a respectable BI vendor. (Score:4, Informative)
They had a very good reporting engine when OLAP was a new thing back in the early 2000s. A business model licensing software that actually delivered value to their customers. What a concept!
Now they are a Ponzi scheme dressed up as a company. Another indication how far the US has fallen that the SEC tolerates this kind of BS.
In Electronic equipment, these conditions... (Score:2)
... generally result in smoke, and actual fire if the power isn't cut off soon enough.
It then becomes... (Score:2)
It then becomes like the infinite monkeys trying to write a masterpiece...
[1]https://www.youtube.com/watch?... [youtube.com]
Or infinite monkeys with platinum corporate credit cards imitating a robot vacuum at the docking station during a blackout... "Charging..." ad infinitum.
Or infinite monkeys with a revolver...a very messy mess-terpiece, the blust of times.
JoshK.
[1] https://www.youtube.com/watch?v=XGP45WwQxl8
I can't believe it (Score:2)
Wow, I can't believe that some highly speculative, crypto-coin-adjacent business scheme with the word "Infinite" in the name has crashed.
Oh goody (Score:2)
A 56 billion dollar Ponzi scheme is about to explode.
Black swan event. Buckle up folks.
Re: (Score:2)
first of all, a 56 billion dollar collapse is not a back swan event. its a nothingburger with no contagion risk. second of all, it's not going to collapse so long as corporate debt markets are available.
im not an MSTR investor, but i have been paying attention to what they're doing. their stock never deserved the premium, and MSTR is leveraged, but i wouldn't call them over leveraged to the point of liquidation.
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> it's not going to collapse so long as
Over and over and over... Same words. Same fools.
Things will be different this time (Score:2)
Famous last words.
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I too laughed at that when I read it.
"All I need to do is double my net worth every day for a month..."
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People who can't do simple arithmetic are so fun.
If you haven't worked it out, doubling your net worth every day for a month means you end the month with one billion times what you started with.
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Worse. This is a nerd forum. You should know your powers of 2 to at least 4294967296.
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Which means I'd have a million dollars and therefore I would in fact be a 'millionaire'. Duh.
Re:Oh goody (Score:5, Insightful)
> .... selling more stock to cover required dividend payments to shareholders
The exact definition of a pyramid scheme.
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The entire stock market must be a ponzi scheme then, because this is SOP now.
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I thought black swans were the things nobody saw coming?
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At this point in time it's more like White Swan event.
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If the crypto pop coincides with the AI pop, 1930's 2.0.
Re: Oh goody (Score:1)
Has the Fed learned that it should have printed money in 1929?
Re: Oh goody (Score:2)
So, you don't know what a black swan event is or you have no idea what you just read in that summary.
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And soooooo unexpected!
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What is 56 billion dollars?
BTC market cap is $1.8 Trillion....