[HN Gopher] S&P Dow Jones Indices to launch cryptocurrency index...
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S&P Dow Jones Indices to launch cryptocurrency indexes in 2021
Author : awb
Score : 369 points
Date : 2020-12-03 14:49 UTC (8 hours ago)
(HTM) web link (www.reuters.com)
(TXT) w3m dump (www.reuters.com)
| intotheabyss wrote:
| If you want to get a piece of DeFi, but don't know which projects
| to speculate on, you can buy DPI on Uniswap which is an ERC-20
| token that tracks the top 10 coins in the defipulse.com index.
| Paul-ish wrote:
| Is there any risk these indexes will prop up bad coins, or will
| provide incentive for people to try to pump their coin onto the
| index.
| finikytou wrote:
| this + the entry of tesla within S&P + the destruction of small
| businesses is the perfect recipe for chaos and years of reviving
| 2008 era
| elevenoh wrote:
| Could you elaborate?
|
| We're definitely in an accelerated-transition period w/ an
| uptick in inequality, if that's what you mean.
| raziel2701 wrote:
| Covid hits, Fed and US govt. unleash trillions of dollars of
| easy money for corporations and the stock market bubbles up
| to record all time highs in record time. This is
| unprecedented. The largest transfer of wealth program
| continues on and we continue to have a 9/11 worth of deaths
| at an alarmingly increasing frequency. Unemployment is high,
| food lines are staggeringly long, small businesses are
| cracking, and we don't support people to stay home: more
| stimulus money going directly to the lower socioeconomic
| classes is absolutely needed to help them stay home and stay
| safe.
|
| So the markets are totally decoupled from the economy.
| Reality is gonna hit that someday and then, only then, will
| we see the panic go through Congress once again as they pass
| all kinds of amazing bills that while they do in the name of
| helping the little guy, it mostly provides protection to all
| these zombie corporations that need another dose of easy
| money to stay alive. So we throw away all this capital and
| keep the transfer wealth program alive that sucks the future
| out of the younger generations to keep the shareholders
| happy.
|
| Socialize the losses, privatize the profits. It feels like
| we're about to reach a tipping point. The number of scammers,
| grifters, conmen is too damn high, even the president is one.
| What's happening?
| elevenoh wrote:
| Humans are less & less required for the unfolding, highly
| leveraged, highly automated, highly unequal economy.
|
| Don't see any way for avoiding this.
| finikytou wrote:
| cryptos just like tesla stock are roller coasters. the sp500
| is an indicator of stability used by most of investors to
| jauge the health of the markets. add tesla to the sp500 (day
| after day spiking up and down like no other stock) and you
| create instability. the crypto has always been instable so
| managing indices on it... and at the same time you see that
| many people lost their jobs, went into loans they re not able
| to refund. not even talking about the fall of the dollar.
|
| I think all added its gonna be bad.
| elevenoh wrote:
| There's points in here I could spend time refuting. e.g. I
| would disagree that 'add[ing] tesla to the sp500 =
| instability'
| cryptica wrote:
| The economy is a scam. All the newly printed money which has gone
| into tech over the past decade is a scam. The only thing that
| mattered at all was your social connections; doesn't matter what
| the project was.
|
| Is it a coincidence that the two fastest growing assets are owned
| by people who share a common history?
|
| Mark Zuckerberg is the biggest shareholder in Facebook and the
| Winklevoss twins are the biggest Bitcoin investors... That's no
| coincidence. It's all about social connections. Your social
| proximity to Mark Zuckerberg and Winklevoss twins determines your
| future success 100%. Everything else doesn't matter. If that
| sounds ridiculous, that's because it is. It's a giant financial
| pyramid scheme.
|
| In any pyramid scheme, those closest to the originator of the
| scheme make the most money... The difference in this case is that
| they can keep printing money forever so the scheme doesn't ever
| need to collapse.
|
| The sooner we realize this, the sooner we will be able to fix the
| monetary system and go back to normal.
| mrlala wrote:
| I mostly agree with this. As absurd as it sounds, I think you
| are basically correct.
|
| The people with money do what they can to keep propping things
| up because they are the ones that massively gain on it. They
| can afford to keep risking and risking, cashing out when it's
| convenient and if they take a hit? Oh well, I lost 50%.. or
| 500m. But you know what? I still have 500 million fucking
| dollars! As opposed to the normal people in which a 50% loss is
| devastating.
|
| It is such insanity how much money the people pulling the
| strings have. And they have convinced people "hey throw all
| your money into our gambling pot of doom!"
| levosmetalo wrote:
| Great news. Right now what is holding me from investing in
| Bitcoin are:
|
| - horrible fees - slow transaction - risk of total loss (by
| loosing wallet, or exchange getting hacked) - no regulation
|
| With the Bitcoin ETF I would be getting the following benefits
|
| - lower trading fees on stock market compared to stock exchange -
| fast transactions - no risk of total loss, since ETF shares are
| protected (at least in Europe by UCITT) - the state standards and
| controlling mechanisms apply to ETF providers
| misnamed wrote:
| The thing I don't get (and I have the same skepticism about
| gold ETFs) is that if one is trying to hedge extreme scenarios
| (e.g. high inflation or even monetary collapse) ETFs being
| 'protected' could easily fall through. I sort of understand
| holding one's own gold or Bitcoin, but through and ETF just
| seems like all the speculation with none of the crisis
| portability.
| tcoff91 wrote:
| For those who aren't very dilligent, the risk of losing one's
| coins due to loss or theft is likely much higher than the
| risk of hyperinflation or monetary collapse. Being your own
| bank is a huge pain in the ass it turns out. Also inheritance
| planning is much more simple with an ETF.
| misnamed wrote:
| I guess I just don't see the value from either side, then.
| The best supposed features of Bitcoin are lost in ETF form.
| itodd wrote:
| How can this be with Tether existing? Does anyone really honestly
| think that USDT is legit?
| earthtolazlo wrote:
| Just about everyone knows that Tether is a ticking time bomb
| waiting to blow up the cryptocurrency markets. But for now
| Tether makes number go up and currently that's the only thing
| that matters.
| cwkoss wrote:
| Tether would be silly to include in the index, but not sure how
| its existence affects crypto indices otherwise.
| 35fbe7d3d5b9 wrote:
| Because it is almost certainly being used to artificially
| pump the price of BTC up.
|
| The only question is: "has the market priced this in, so the
| current price is a floor and we're waiting for USDT to fall
| away", or "has the market _not_ priced this in and a major
| shock will happen when that shoe drops? "
| hddherman wrote:
| There have been theories and allegations that Tether is being
| used to prop up the price of various cryptocurrencies. When I
| last kept an eye on the wild world of cryptocurrencies,
| Tether was at around 4 billion USD in total, and now it has
| grown to 19 billion, while at the same time Bitcoin is at an
| all time high.
|
| As long as Tether continues to exist, any cryptocurrency USD
| prices should be taken with a spoonful of salt.
| dylkil wrote:
| There are currently projects on ethereum which implement indices
| in a decentralised fashion. Take a look at PieDAO [1] if you are
| interested. Included assets, their weights and all indices are
| governed by the DAO [2].
|
| [1]https://www.piedao.org/
| [2]https://www.investopedia.com/news/daos-and-potential-
| ownerle...
| Cd00d wrote:
| Tangent question: why do financial services pluralize index as
| 'indexes' rather than 'indices'? Throws me off every time, and
| seems to be an industry thing.
| crusso wrote:
| The real puzzler is how they used both spellings in one
| headline.
| chrisa wrote:
| Looks like a super common question - nasdaq has an article
| about it: https://www.nasdaq.com/articles/indexes-or-indices-
| whats-the...
| pmiller2 wrote:
| I think I agree with that article. I'm used to seeing
| "indices" in a mathematical context, referring to an object
| that labels a particular subobject of another object.
|
| It seems a lot like the difference between "vertices" and
| "nodes" in a graph. Go to the math department, and you'll
| hear people talking about vertices. Walk down the hall to the
| CS department, and it's all nodes, all the time.
|
| I have no idea why this is, but I suspect some kind of
| cultural thing. Maybe the CS term and the math term
| originated independently? Kind of like how you talk about
| machine learning in CS, but a good portion of ML would
| actually be classified as statistics by the math and stats
| departments.
| ajay-d wrote:
| Thanks! This read was more interesting than the crypto
| article
| ninly wrote:
| 'indexes' has been a just-fine variant of the plural for a very
| long time -- actually it's the first one listed in Merriam-
| Webster, so probably the more common variant, though I haven't
| dug into other references. That said, you're correct that the
| more common or preferred variant will depend somewhat on the
| culture/community/industry. The house style guides in finance
| probably tend toward 'indexes' -- in part because an index is a
| branded product they produce, so consistency is important --
| while software/tech companies (or at least people in them) may
| tend prefer 'indices'.
| johnwheeler wrote:
| I dunno why, but I typically use "indexes" when I talk about
| a set of lookup tables (database indexes) and "indices" when
| talking about positions within indexes (indices of arrays)
| Spivak wrote:
| I will say that, at least for me, indices and indexes aren't
| the same word and mean two different things. This has made me
| realize that I've just naturally made this distinction
| without really knowing it.
|
| * In a loop i,j,k are the indices. Matrices have indices too.
|
| * Databases have indexes. The things at the back of books are
| indexes.
|
| Indices are things that represent a position in something.
| Indexes are the things -- the literal "objects" or mappings
| or trackers.
| SilasX wrote:
| Why do they need a justification? English is under no
| obligation to imitate Latin plurals, and it adds no functional
| benefit.
|
| Edit: interestingly, the title of the article uses the English,
| while the body uses the Latin (although in one case that's
| because it's from a name).
|
| Edit2: Relatedly, I had a "shower thought" that even the most
| pedantic Latinophiles say "albums" instead of "alba". Although
| I also know a Latinophile who reluctantly used "alba" for a
| folder on his music app -- but that was only because "albums"
| was a reserved word.
| bluedevil2k wrote:
| I agree, it's time we stop pushing words like "cacti" and
| just accept the inevitable English-ication of words and say
| "cactuses".
|
| This is a tangent to the article, but along these lines
| people love correcting "octopuses" as "octopi", but "octopus"
| isn't a Latin word, it's Greek, so the "-i" ending isn't
| correct.
| cgriswald wrote:
| I think it's fine to say or write -es or -I in general
| usage. I think it's also fine to prefer one or the other in
| contextual usage. And I think it's fair to roll ones eyes
| at people making a big deal of it.
|
| But it's incorrect to say octopus is not a Latin word.
| That's like saying _utensil_ isn't a French word. It is,
| and it came to English from Latin through French. Octopus
| came to English through Latin from Greek. It's a Latin word
| and it's a Greek word.
|
| So, I don't think it's a consistent position to be okay
| with the Englishification of Latin words, but not be okay
| at the Latinization of Greek ones!
| pmiller2 wrote:
| "Virus" is also a word that frequently gets pluralized
| incorrectly, if you're thinking of it as a Latin word used
| in an English context. The only plural form that makes
| sense in English is "viruses," mostly because the Latin
| form actually _has_ no plural. [0]
|
| That doesn't stop people from writing "virii," however.
| Both "octopi [1]" and "virii" are examples of linguistic
| hypercorrection [2], in which a speaker misapplies a known
| linguistic rule that seems to fit, but does not. Neither of
| these examples are attested in the source language the word
| derives from; people literally use them just to sound
| smart, most of the time.
|
| Other examples are using "whom" in places where the correct
| word would be "who," not using a preposition to end a
| sentence or clause with [3], and to not split infinitives
| [4].
|
| ---
|
| [0]: https://en.wiktionary.org/wiki/virus#Etymology
|
| [1]: https://en.wikipedia.org/wiki/Hypercorrection
|
| [2]: I kinda like "octopodes" myself, but that may just be
| me.
|
| [3]: Winston Churchill is frequently quoted saying
| something like "this is the kind of nonsense up with which
| I will not put." This is most likely apocryphal. See
| https://quoteinvestigator.com/2012/07/04/churchill-
| prepositi...
|
| [4]: My favorite origin theory for this one is basically
| "you couldn't do it in Latin, so don't do it in English."
| Early grammarians frequently took inspiration from Latin,
| because its grammar was already well-codified, mostly due
| to it being a dead-ish language. See https://en.wikipedia.o
| rg/wiki/Split_infinitive#The_argument_...
| iamspoilt wrote:
| Someone please explain this to me:
|
| How is any cryptocurrency even considered an investment vehicle?
| I would classify myself as Boglehead and I believe in the
| fundamentals of investing in stocks because in all it's
| technicality (and given the buy-and-hold strategy), you are
| investing in a business by owning a part of it which naturally
| means that you will and do get the returns on it, both in terms
| of profits (dividends) and and value growth (appreciation of the
| stock value). And conventional wisdom of lending also applies to
| bonds.
|
| That being said, again, why would cryptocurrency ever be
| considered as a good investment vehicle? Isn't it analogous to me
| investing my money in buying USD or the British Pound (or a well
| diversified currency ETF), something I don't see a lot of value
| in as well.
| brighton36 wrote:
| Sign value.
| hart_russell wrote:
| It's forex trading. Currencies gain and lose value relative to
| each other. Not that hard to understand.
| bgitarts wrote:
| 1) Low correlation to other markets. Any 60/40 portfolio that
| moved just 1% of it's allocation to Bitcoin would have produced
| a higher sharpe ratio (higher return, less volatility) over
| past 5 years.
|
| 2) Many crypto protocols are already capital assets that
| generate income streams. These income streams can be discounted
| to the present just like the income streams of companies.
| Examples: - Ethereum (ETH): It has multiple use cases such as
| collateral and gas for execution (think oil) both of which
| contribute to it's value as usage grows, but it's also a
| capital asset that can be staked and used to validate
| transactions to generate an income stream. This is not much
| different than real estate or farm land being used as a
| productive asset to generate returns. - MakerDAO: Protocol that
| generates a stablecoin (DAI) backed by debt based collateral
| (think mortgages against homes). The interest from minting DAI
| is repaid to unlock the collateral and burns (think stock
| buybacks) MKR. - Yearn.finance: Protocol that takes stablecoin
| (crypto pegged to USD) assets and generates returns across
| decentralized money markets. Returns have been averaging
| between 10%-35% APR depending on the pool and strategy.
|
| Finally consider the current macro environment. Stocks generate
| a stream of future income based in USD and fiat currencies. In
| 2020, the central banks of the major currencies have not only
| increased currency supply by over 50% (FED balance sheet in
| march was 4.3T, today 7.2T) but worked with top level
| governments to hand out the new printed money directly to
| consumers which is now money that will be hard to pull back out
| of the economy and they did it while GDP and economic activity
| has been stifled.
|
| So a larger amount of currency backed by a smaller amount of
| economic activity is a depreciating asset. If the return on
| equity of your profitable companies is smaller rate than the
| depreciation of the currency you have a negative real return.
|
| In order to prevent this companies may start to transact in a
| currency that has a deterministic monetary policy and can not
| be changed by the whims of a select few bureaucrats. As the
| most stable and longest running crypto network, Bitcoin stands
| to be such an asset. See Micro strategy (MSTR) and Square (SQ)
| moving treasury reserves into Bitcoin.
|
| The way you value Bitcoin is you estimate the amount of global
| GDP (140 Trillion) that will shift to transacting in it and
| then divide that by the velocity of money or how often it
| changes hands. This will tell you how large a marketcap it will
| have in order to support that level of economic activity.
|
| So for example if 1% of global GDP is transacted in Bitcoin and
| it's velocity becomes something like USD (1.5x) or the Euro,
| let call it a velocity of 2 then: 140 * 1% / 2 = $700 Billion
| marketcap.
| CapriciousCptl wrote:
| I want to believe it's an investment myself, but haven't been
| able to-- and by sitting it out we've of course lost a lot of
| money in forgone gains.
|
| Where I get stuck, and maybe someone could help me here--
| generally, you don't have to try to hard to imagine a future
| with cryptocurrency being more useful then it is today. That
| is, it is more _valuable._ BUT, why should that mean that its
| _price_ should be higher? It 's like looking at the pithy
| saying, "price is not value" in reverse.
| asdffdsa wrote:
| Are you disagreeing with the fundamental economics argument
| of supply and demand? More demand assuming a constant
| (forecasted) supply means the price will be higher.
| joosters wrote:
| There's no constant supply of cryptocurrency, there are new
| types of coins created every day.
| tcoff91 wrote:
| Different cryptocurrencies are not fungible. New altcoins
| don't increase the supply of Bitcoin. It's not like they
| siphon much demand from Bitcoin either. Someone
| discovering a huge new source of Platinum doesn't
| fundamentally effect supply/demand of gold.
| clarky07 wrote:
| the value of something like bitcoin is generally going to be
| related to the value of the network. if you can envision it
| being more useful in the future, consider what the function
| is, and what it means for the value of the network as a
| whole.
|
| some examples to explain what i'm saying, not necessarily
| what i think will happen per se
|
| bitcoin replaces, or at least augments, gold as a "store of
| value inflation hedge" - in theory it should be a great
| inflation hedge. there are a limited number of bitcoin, 21
| million max, but we keep printing trillions and trillions of
| new dollars. gold also doesn't do anything productive, it
| just sits there and acts as a hedge on inflation.
|
| in this scenario, the market cap of gold is something like 8
| trillion. if bitcoin takes some of this job, it's market cap
| must get a lot bigger. functionally, we have 8 trillion
| "dollars" of wealth that are currently stored in gold. if we
| wanted to "store" 8 trillion "dollars" of wealth in bitcoin,
| we can't currently. the entire market cap of bitcoin is only
| a few hundred billion. For it to be an inflation hedge on the
| scale of gold, the price has to rise tremendously.
|
| this same calculation can be done for whatever potential
| usefulness you come up with. Like if you think it can replace
| the USD as a reserve currency for setting international oil
| trades, the market cap of bitcoin has to get exponentially
| bigger just to handle the scale of those markets.
|
| now, i don't think it's likely to become the world's reserve
| currency, certainly not anytime soon, but if it were you can
| see where it would have to have more value to be able to do
| so. I do think it is a great inflation hedge, and I think
| lots of money managers are going to start recommending to
| client to put 1-3-5% of their portfolios into bitcoin as a
| hedge. That's happening right now. IF that goes mainstream,
| the market cap of bitcoin HAS to go up significantly to
| handle all that new demand, given that the supply is capped.
| obligatorydev wrote:
| Is Bitcoin not infinitely divisible though? So it would
| just be inflated by dividing infinitely. It's the same as
| having infinite amount the other way.
| clarky07 wrote:
| how is that the same? having more spots after the decimal
| is not the same as having more in front. cut an apple in
| half you don't have 2 apples, you have 2 halves. 21
| million total bitcoin and breaking them apart is not the
| same as printing 5 trillion more dollars.
| SilasX wrote:
| Someone please explain this to me:
|
| How is any negative-yielding bond even considered an investment
| vehicle? I would classify myself as a Boglehead and I believe
| in the fundamentals of investing in bonds because it all its
| technicality (and given the buy-and-hold strategy), you are
| indirectly lending to a government by buying its bonds, which
| naturally means that you will and do get returns on it, both in
| terms of the interest (coupon payments) and value growth
| (further decline in those bond yields).
|
| That being said, again, why would negative yield bonds ever be
| considered a good investment vehicle? Isn't it analogous to me
| investing in my money in a depreciating car, which will only
| lose value unless the car happens to have a random spurt of
| high demand that lets me unload it at a profit?
| JoshTko wrote:
| Bitcoin has only two core benefits, store of value, and
| unconditional point to point transactions. The key investment
| question is will people value these features more or less in
| the future.
| misnamed wrote:
| Even if you accepted it as a diversifier, all cryptos combined
| still have a relatively small market cap, so I don't really see
| the point in adding them to a stock/fixed-income portfolio.
| It's a bit like frontier markets: sure, they're possible to
| invest in, but expensive, small and won't make a big difference
| at market weights.
| vmception wrote:
| This is easy. You made an analogy to stocks and ignored the
| entire universe of investments and other asset classes.
|
| Doesn't that tell you all you need to know?
|
| There is a decade old meme of getting stock market gurus to
| comment about crypto and their sycophants repeating their
| predictably abysmal view of something outside of their
| wheelhouse.
|
| Commodities traders never had an issue and volatility is also
| not an issue in that market. There are no "permabulls" in
| commodities outside of a few rare metals, and trading in those
| markets primarily factors in seasonal and cyclical supply and
| demand.
|
| Buy and hold works ok in some crypto assets. But the permabulls
| that never traded anything else, and the stock market investors
| that keep a stock certificate their grandma gave them 20 years
| ago should just not be in this market.
|
| You are conflating "good" investment vehicle with "valid"
| investment vehicle, where its a mixture of whether being a
| permabull works alongside whether enough institutions that you
| respect have said positive things. make your own choices about
| what you want to trade.
| x87678r wrote:
| I dont understand it either. To me yes BTC supply is limited,
| but there are lots of cryptos so BTC is nothing special. The
| secret could be if lots of important and smart people are
| invested in BTC you have to trust that it will keep being
| special, and better than other cryptos. It sounds sketchy to
| me, but the network effect is real so there might be something
| in it.
|
| It seems lots of well known financial people are getting on
| board right now. It seems like a ponzi to me but those people
| aren't dumb.
| JxLS-cpgbe0 wrote:
| > It seems like a ponzi to me
|
| A Ponzi Scheme relies on a central authority, BTC by
| definition has none.
|
| Maybe you were trying to say "market manipulation" or
| "securities fraud?"
| x87678r wrote:
| No definitely ponzi. Maybe a central authority is in the
| definition for ponzi, but I think this is exactly Ponzi
| without a CA. The whole thing isn't fraud or manipulation
| because again there is no one single owner, though looking
| at all the junk on social media there is definitely lots of
| both.
| JxLS-cpgbe0 wrote:
| > this is exactly Ponzi without a CA
|
| Which would be...not a Ponzi Scheme. What makes you say
| that besides "junk on social media?"
| nofunphil wrote:
| Buying Bitcoin is becoming similar to buying gold. It's a Store
| of Value. Why is gold an investment? Because it's scarce and we
| have, as a society, decided it's an investment. There may be
| nuances here, but that's the basic idea. Bitcoin is digital
| gold. Most other tokens are similar buying fiat currencies
| which can help if you local fiat currency is hyper-inflating.
| But then some tokens give access to de-fi which a whole other
| rabbit hole.
| postingpals wrote:
| A store of value is just one aspect to what makes money,
| money. It also has to be a medium of exchange and a standard
| of value. Bitcoin's value changes so wildly that it cannot be
| a standard (right now) and no one uses it to buy things.
|
| Everyone is investing in bitcoin on the promise that its
| going to be so much more useful than dollars, in the hopes
| that they will make a lot of... dollars? Do you see the
| contradiction? If they think it's going to be so much better
| than dollars what are they going to do with their long term
| investment dollars if, in the long run, bitcoin surpasses
| them?
|
| Don't use economics terms to explain the usefulness of
| bitcoin when economics itself disagrees.
| Erlich_Bachman wrote:
| Your logic stumbles when you consider gold. "no one uses
| it" either to "buy things", and yet it is valueable and has
| been so for eons. Store of value is a very important
| function in itself.
| [deleted]
| postingpals wrote:
| The gold standard was abandoned precisely because it was
| inferior. It was pretty useful up until early 20th
| century as a medium of exchange too. People used to use
| gold coins to buy things, didn't they?
| Erlich_Bachman wrote:
| Now it's not, and yet it's still valueable.
| notreallytrue wrote:
| Honest question: in 20 years would you prefer to own a 21
| milionth of bitcoin (1 bitcoin) or 21 milionth of gold
| (~8kgs of gold)?
|
| Not thinking about the value of it, but of its future
| usefulness as value store and as mean of payment
| themodelplumber wrote:
| > Everyone is investing in bitcoin on the promise that its
| going to be so much more useful than dollars
|
| I doubt this is true in every case, maybe even most cases.
| Though this sentiment does seem to become more rigid toward
| the core of the crypto community, a huge swath of other
| investors are playing price action. There are tons of
| technical traders in crypto, and they tend to care much
| more about MA deviations, gaps, pennants, and candlestick
| forms than what's going to replace USD.
|
| You can also think of it as a play by (people who don't
| have as many concerns about the dollar) off the fears of
| (people who are afraid about the future of the dollar).
|
| IMO there is a lot of room in a speculative ecosystem for
| non-value, non-traditional-economics, and even hugely
| irrational viewpoints. They can all meet with success by
| using their own sets of strategies.
| root_axis wrote:
| Cryptocurrency isn't actually scarce though, it may be
| "scarce-like" but the scarcity is an artificial property that
| can be arbitrarily changed, unlike gold's scarcity which is
| an unalterable property of reality.
| tiwprueowut47 wrote:
| Gold's scarcity is certainly not unalterable. Gold can be
| destroyed, increasing its scarcity. Plus we already have
| the technology to create gold out of other elements in a
| particle accelerator, decreasing its scarcity. That process
| happens to be prohibitively expensive, but there is no
| guarantee it remains so. The scarcity of cryptocurrencies
| and gold both depend on the actions of other people.
| root_axis wrote:
| Yes, it's possible to destroy or transmute gold, but as
| you already stated, it's prohibitively expensive thus
| with respect to scarcity it might as well be impossible.
| Yes, that might change in the future but there is no
| reason to believe that it will.
| Sargos wrote:
| You just explained to yourself why Bitcoins supply is
| fixed and can't feasibly be changed. It was a well made
| argument, good job.
| root_axis wrote:
| No. Your belief that the bitcoin community will never
| choose to alter the supply of bitcoins is not the same
| thing as the properties of physics which constrain the
| practical transmutation of gold.
| modeless wrote:
| Bitcoin _is_ scarce; the consensus mechanism makes it
| prohibitively difficult to change the supply. It 's barely
| even possible to do widely desired protocol upgrades;
| anything more is simply out of the question. The scarcity
| is _far_ more secure than any fiat currency.
|
| I think it would actually be easier to increase the supply
| of gold via asteroid mining than to increase the Bitcoin
| supply. That doesn't require consensus and will probably
| happen someday.
| root_axis wrote:
| > _the consensus mechanism makes it prohibitively
| difficult to change_
|
| This is a cultural property of the community, not an
| intrinsic property of bitcoin. If Satoshi signed a PGP
| message with a compelling call to alter the scarcity it
| would likely happen; maybe you disagree, but the point is
| that it's very possible to change the scarcity because
| it's a distributed computer program.
| modeless wrote:
| The fact that it's a "cultural property of the community"
| doesn't make it easy to change.
|
| Bitcoin is not just "a computer program", it is a program
| _and_ a blockchain. The same program with a different
| blockchain is not Bitcoin (there are plenty of those out
| there). Adding more supply to the Bitcoin blockchain
| would require large numbers of people to work against
| their own interests, decimating the value of their own
| infrastructure investments and bitcoin holdings.
|
| It would be much, much more difficult to change Bitcoin
| than e.g. the supply of dollars or euros which are
| considered scarce enough for most purposes by most of the
| world. And, I contend, even more difficult than changing
| the supply of gold via asteroid mining. I doubt that even
| the second coming of Satoshi would be enough to do it
| (and I also very much doubt that Satoshi is still alive,
| or that he would want to if he was, considering his known
| political/economic stances).
| root_axis wrote:
| The point is that the scarcity can be trivially changed
| if certain people decide that it should, which isn't true
| for things that exist in the real world like gold. Norms
| shift over time and your suggestion that it's unlikely to
| change is your opinion based on cultural analysis, not
| something that can be proven to be true even in
| principle.
|
| > _It would be much, much more difficult to change than
| e.g. the supply of dollars or euros which are considered
| scarce enough by most of the world_
|
| This thread is about gold not fiat money, obviously the
| scarcity of fiat money can change, that's the whole point
| of fiat money.
| nmlnn wrote:
| > can be trivially changed if certain people decide that
| it should
|
| This is simply not the case - see 2017 bitcoin cash fork
| or Segwit2X push. At the end of the day money is a human
| invention, meant to facilitate value exchange between
| humans. So it requires consensus between the users of the
| money, if some fraction want to change the rules they are
| free to.
|
| We went for something we found in nature with properties
| that were pretty good for that, but with some downsides
| (not absolutely scarce, difficult to transport, easy to
| steal) to something created specifically for the purpose.
| root_axis wrote:
| It can be trivially changed in the sense that it's a
| computer program that simulates money. No amount of
| consensus can increase the gold supply.
| nmlnn wrote:
| Technological advances can increase the gold supply.
| Asteroid mining, extracting it from sea water, mining
| lower quality deposits, etc.
|
| There still has to be consensus on using gold as money,
| if there isn't it will lose its monetary premium to
| something that has better monetary properties.
| modeless wrote:
| > There still has to be consensus on using gold as money
|
| This is a great point. The choice to value gold as
| currency over other rare metals is 'a cultural property
| of the community' and yet not 'trivial' to change, just
| as Bitcoin's consensus isn't.
| modeless wrote:
| You can't "prove" that Earth's gold supply won't increase
| with asteroid mining either. We can disagree on the
| relative difficulty of asteroid mining vs. changing
| Bitcoin's consensus rules, but you must at least concede
| that they are both possible.
| root_axis wrote:
| Right... No matter how many people wish it to be so, the
| amount of gold on the planet cannot be arbitrarily
| increased, instead, you'd have to go to extremes likes
| mining astroids in space, a feat of engineering that is
| only possible in theory.
| modeless wrote:
| Mining asteroids is quite possible in practice. In fact
| we've already taken material from asteroids and returned
| it to Earth. The only question is how long it will take
| for the technology to advance enough for profitability;
| there are no fundamental issues preventing it. It really
| seems inevitable assuming no civilization-ending
| disasters. And it can increase Earth's gold supply
| arbitrarily up to many times the current supply. And it
| only takes one company to do it. Anyway, if our only
| disagreement is on the relative feasibility of changing
| Bitcoin consensus vs. asteroid mining, I'm happy to
| continue to disagree with you on that.
| Erlich_Bachman wrote:
| In all practical senses it is scarce. It is the protocol
| and consensus of the people using it that makes it scarce.
| If you disagree, go ahead just make your own BTC and see
| how "easy" it is to convince other people to use it instead
| of BTC or some other mainstream coin. (Some people even
| tried exactly that...)
| root_axis wrote:
| You can't really know how easy it might be for me. For
| example, if my name was Vitalik Buterin or Elon Musk or
| even Donald Trump, I could trivially create my own
| cryptocurrency and a lot of people would use it.
| [deleted]
| [deleted]
| ric2b wrote:
| But it still wouldn't change the scarcity of Bitcoin.
| doggosphere wrote:
| Creating a new cryptocurrency doesn't make Bitcoin less
| scarce.
|
| At worst your coin takes time and attention away from
| Bitcoin, and thus takes value. At best it outgrows
| Bitcoin, and grows the entire space.
|
| But that's like saying you could build your own
| alternative to Facebook by whipping up some corporate
| partnerships and venture capital. Go ahead, we'll see
| which one wins in the long run.
| ball_of_lint wrote:
| Sure - you can make another cryptocurrency if you want.
| That currency will not be bitcoin.
|
| Some people tried this before by branching off the
| bitcoin blockchain. That was called bitcoin cash, and it
| failed.
|
| Bitcoins, meaning not any cryptocurrency but just actual
| bitcoins, are scarce and will almost certainly remain so.
| kinakomochidayo wrote:
| It's easier for those with the funds, and connections to
| manipulate, and censor discussions about other forks -
| and some pro-Segwit people did exactly that with the 2017
| hard fork, like on /r/bitcoin, bitcointalk, etc.
| Erlich_Bachman wrote:
| Yep, store of value is actually a useful function for many
| indivudals and companies, and we are betting on that storing
| of value will become more and more valueable as we progress.
|
| Storing of value is not just "hoarding", useless activity. It
| is an important ingredient in making many of the business
| processes and just things work in general. It is a very
| impotant function. And thus if we have tools that make that
| function work well, - they will be valueable.
|
| And as it turns out, there aren't that many things that work
| well as a store of value. It's not like you can take any
| thing or instrument or contract or whatever else, and make it
| work as a store of value. In some sense, the ability to act
| as a store of value is scarce in itself. We already have some
| instruments, like gold, properties, land, etc. Stocks and
| ETFs and such are also kinda a store of value, but have a lot
| problems (but also other functions besides just storing the
| value). So yes, we welcome another way to store value, this
| market is by no means saturated as it turns out. Gold has
| it's own problems.
| allendoerfer wrote:
| If I am investing and seeking returns I will tolerate a
| certain level of risk and volatility, if they are justified
| by the returns I am getting.
|
| If I want to store value, what I am looking to avoid at all
| costs is volatility and risk. That's why instituations are
| even accepting to lose a little bit of value in return for
| security by buying bonds from Northern European countries.
|
| It's kind of in the definition of the word "storing": If
| you want to store water you won't put your bucket of water
| on to a race car, even though it might drive through a
| heavy rain.
| mrlala wrote:
| Honestly that is just bs.
|
| Gold is a physical thing that is scarce and has real uses
| other than being treated as 'money'. We have only mined a
| cube with 28 meter sides of gold from the dawn of time! It's
| useful- that's why it has value.
|
| If it wasn't useful (pretty for jewelry and an essential
| industry product) then it would be fairly worthless.
|
| You say crypto is scarce? The scarcity is artificial, and you
| can create an infinite number of crypto currencies...
| Erlich_Bachman wrote:
| They already have created an infinite number of them.
| Nobody is buying them. BTC and a couple of others have the
| property of being valueable (which is decided in consensus
| by the users in the real world), while also being scarce.
| Nobody cares if some shitcoin on the bottom of
| coinmarketcap is not scarce. It is irrelevant.
|
| So yes, useful cryptocurrencies are scarce.
| the_gastropod wrote:
| > BTC and a couple of others have the property of being
| valueable
|
| I'm not sure this is a rock-solid argument. Ponzi schemes
| also have value (until they don't). MLM's are often
| massively valuable, too. But most people would
| acknowledge they're little more than scams to the huge
| majority of people "invested" in them.
| bitxbitxbitcoin wrote:
| It's more analagous to buying some gold for your investment
| portfolio than buying a fiat currency that has its inflation
| under control by a central government.
| shuntress wrote:
| I basically agree with this but I just want to add that if
| everyone decides to increase the total amount of bitcoins or
| change the inflation controls in some way, that can be done.
|
| The cool thing about bitcoin is that this is a _shared_
| decision made by everyone.
|
| Ok, technically, it is made by the groups contributing the
| majority of compute power to the network. And technically,
| central governments can be representative of everyone and
| therefor enable that same shared decision making but that's
| kind of a bigger discussion.
|
| The point is, changing the network to "add more" BTC is
| probably much more likely than breakthrough replicator
| technology that can turn hydrogen atoms into gold atoms.
| iamspoilt wrote:
| From the school of thought that I would adhere to (Jack
| Bogle, Warren Buffet), Gold on its own is not an investment.
| TigeriusKirk wrote:
| But do you understand why other people consider it to be an
| investment?
| fractionalhare wrote:
| Not on its own, no, but the person you're responding to
| said buying it for an investment portfolio. That's a very
| compelling use for gold.
| stopyellingatme wrote:
| This is what i came here to say.
|
| BTC isn't very good as a currency but acts as a deflationary
| asset over time (i.e. there is a fixed amount that can
| exist).
|
| I, personally, hold BTC as part of my portfolio simply
| because of it's ensured existence and massive upside
| potential.
|
| I wouldn't put a terrible amount of my net worth into it, but
| a small fraction may serve you well in the future.
|
| Short story. Had the chance to invest 300k in 2012 (~$10 per
| coin). Didn't pull the trigger. Too much net worth. However,
| I should have used ~10k (maybe a little more). Wouldn't be
| nearly as worried about $ as I am today if I was just a
| little more conservative on investing up front.
| cocoa19 wrote:
| It shouldn't be considered an investment vehicle if we follow
| Benjamin Graham's philosophy (father of value investment,
| Warren Buffet's mentor).
|
| I'd say it should be called a speculative vehicle. The word
| speculative carries a negative connotation, so financial
| companies won't make money off of bitcoin trades, so hence the
| name investment vehicle. It's as manipulative as the name
| almond milk, which is not really milk.
| baron_harkonnen wrote:
| I recommend you read some of Stephen Deihl's thoughts on the
| subject[0].
|
| You're not alone if you feel that cryptocurrency doesn't make
| sense as an investment vehicle, but the HN community will make
| you feel crazy for not seeing what a great thinking this is an
| incredible new opportunity and "things are different this
| time!"
|
| There is no better indication of a bubble then people telling
| you that you're the crazy one for questioning it. I remember
| people telling me I was crazy for not buying a house in 2007,
| and crazy for not trading tech stocks in 1999.
|
| [0] https://www.stephendiehl.com/posts/crypto.html
| ozorOzora wrote:
| "The Politics of Bitcoin: Software as Right-Wing
| Extremism"... just wow. Is it crazy to consider that crypto
| companies might simply provide better tools than a lot of
| banks, therefore driving worldwide adoption?
| baron_harkonnen wrote:
| Your argument here makes it sound like people are using
| crypto for practical applications on a scale approaching
| banks. If that was the case I would be far less skeptical,
| but, aside form a few enthusiasts that make crypto
| transactions to make a point that "people use these" I
| don't know of anyone that uses crypto for practical,
| everyday financial transactions.
|
| Can you provide me some evidence that people are _using_
| crypto at a large scale, and that that scales in increasing
| in a way that it is anywhere near competing with banking
| services? It seems that even after a decade of enthusiasm
| people are still mostly "investing" in it.
| anythingdude321 wrote:
| yes but that is a use. bitcoin is useful as a savings
| technology. that is how monetary technology should work,
| especially at first
| ur-whale wrote:
| Apologies for posting something borderline meme-ish on HN,
| but I think this video actually answers your question (watch
| the whole thing):
|
| https://www.youtube.com/watch?v=XbZ8zDpX2Mg
| seibelj wrote:
| > _but the HN community will make you feel crazy for not
| seeing what a great thinking this is an incredible new
| opportunity and "things are different this time!"_
|
| The HN community is strongly hostile to crypto. Few people
| here like the downvotes when they speak positively about
| crypto, although I keep taking them!
| Alex3917 wrote:
| As a store of value it's better than gold in some ways,
| because you don't need to physically store it. But unlike
| gold, which can appreciate in value indefinitely, Bitcoin is
| mathematically capped in how much it can appreciate in value
| because the expected value of mining and purchasing need to
| go to par.
| gruez wrote:
| >But unlike gold, which can appreciate in value
| indefinitely, Bitcoin is mathematically capped in how much
| it can appreciate in value because the expected value of
| mining and purchasing need to go to par.
|
| I don't think you're using the term "appreciate in value"
| correctly. I think what you meant to say is that gold can
| be _mined_ infinitely (on earth, in space) and therefore
| has potentially infinite supply, whereas the total supply
| of bitcoins is capped at 21 million.
| Der_Einzige wrote:
| You _are_ crazy for not buying a house in 2007. I can 't
| think of a better investment to have right now than a house
| purchased in 2007...
| lotsofpulp wrote:
| The price of the house structure itself decreases with
| time. The price of the land the house sits on might
| increase, depending on where it is.
|
| Land prices in very, very few areas have increased
| sufficiently to match a risk adjusted return (or even the
| nominal return) of a broad market index fund, such as VOO
| or VTI. Especially considering the liabilities and ongoing
| maintenance costs with owning housing structures.
|
| The labor adjusted return is far better too, you spend
| minutes and a few clicks investing in an index fund, versus
| hours and days on real estate.
| pashamur wrote:
| *with the caveat that those very few areas also hold a
| large percentage of the population, since land prices are
| correlated with population density and zoning regulations
| (i.e. see Hong Kong for ex.)
|
| One thing to not forget is the amount of leverage
| provided for you in the housing market is
| disproportionate compared to the leverage you would get
| in stocks (20% down is 5x leverage, and there are some
| options to get in on a house with even less than that).
|
| If you look at the real rate of return on everything
| (paper from 2017, analyzing the period between 1870 and
| 2015 in several developed countries), they claim the
| return on property is around 8% per year, which is
| comparable to stocks but with a lower variance.
|
| A caveat though is that housing outperformed equity
| slightly 1870-1950, and equity has outperformed
| 1950-today. Housing is also a very locale-specific thing,
| since there is no global private 'housing' market you can
| invest in.
|
| https://www.frbsf.org/economic-
| research/files/wp2017-25.pdf
| lotsofpulp wrote:
| Absolutely right about the advantages of leverage. And
| with real estate, you can do a 1031 tax exchange and
| continue growing your wealth tax free indefinitely as
| long as you can pay the property taxes. Although,
| residential real estate offers a pittance in returns
| compared to commercial.
|
| But I think almost everyone who doesn't have an interest
| in doing the grunt work of real estate investing would be
| better served sticking their money in an index fund ETF
| rather than real estate. It's drastically less work, less
| worry. Extremely low cost broad market index funds and
| ETFs are relatively new too, I'd be interested in seeing
| an analysis of performance after they went mainstream.
| Infinitesimus wrote:
| > There is no better indication of a bubble then people
| telling you that you're the crazy one for questioning it. I
| remember people telling me I was crazy for not buying a house
| in 2007, and crazy for not trading tech stocks in 1999.
|
| I'm not sure that's a good indicator with so many counter
| examples: the internet, large touch screen phones, Cloud in
| the earlier days, etc.
|
| We truly have no idea what the future if Cryptocurrencies
| are.
| the_gastropod wrote:
| Bitcoin has been around for about a decade now. It didn't
| take anywhere near that long for the internet, large touch
| screen phones, the cloud, etc. to really catch on.
|
| And for every technological advance met with skepticism
| that eventually succeeded, there are orders of magnitude
| more that crashed and burned (e.g., the segway, 3D
| televisions, HD DVD, and countless others)
| feanaro wrote:
| > Bitcoin has been around for about a decade now. It
| didn't take anywhere near that long for the _internet_
|
| That's not true, as is obvious with only basic fact
| checking. Apart from it not being obvious what you mean
| by "internet" (does ARPANET count?), the internet proper
| saw its first commercial access providers appear in
| 1989[1] and it certainly was nowhere near popular in 1999
| as it is now. In fact, I would say the change from that
| period is almost fundamental. Remember, 56k modems were
| popular back then and a very small part of the world's
| population had internet access.
|
| My point is, this certainly fits into the larger picture
| of where Bitcoin is right now. It's vastly more popular
| then 10 years ago, because now my plumber and barber ask
| me about it, it is regularly talked about in the news and
| there are almost no countries without laws enacted as a
| response to it.
|
| [1]: https://www.rogerclarke.com/II/OzI04.html#CIAP
| the_gastropod wrote:
| > the internet proper saw its first commercial access
| providers appear in 1989[1] and it certainly was nowhere
| near popular in 1999 as it is now
|
| The internet had 248 Million users in 1999 [1] Bitcoin
| has, estimating very liberally ~28M users worldwide [2].
|
| > It's vastly more popular then 10 years ago, because now
| my plumber and barber ask me about it, it is regularly
| talked about in the news and there are almost no
| countries without laws enacted as a response to it.
|
| Nobody's disputing that. As in my previous examples,
| we've all heard of 3D televisions, segways, HD DVD's,
| 8-track, beta max, Theranos, Juicero, and tons of other
| laughably bad ideas. That doesn't indicate success.
|
| [1] https://www.internetworldstats.com/emarketing.htm
|
| [2] https://www.buybitcoinworldwide.com/how-many-bitcoin-
| users/
| feanaro wrote:
| > That doesn't indicate success.
|
| Of course it does not, but it certainly is not a good
| argument for failure either.
| mrlala wrote:
| >We truly have no idea what the future if Cryptocurrencies
| are.
|
| Yes we do...
|
| Why in the utter hell would I ever use crypto that has
| ABSOLUTLY ZERO GUARANTEE after I pay someone?
| vntok wrote:
| Curious, which country are you living in that doesn't
| have laws against fraud or theft?
| mrlala wrote:
| Curious, why are you being intentionally obtuse?
| lcc wrote:
| Have you ever paid for anything in cash? That has exactly
| the same guarantees.
| vesinisa wrote:
| > We truly have no idea what the future of X is
|
| What an excellent reason not to invest in X!
| cortesoft wrote:
| That is what risk is.... not knowing. If you want high
| reward from an investment, you need to take high risks,
| which means you will invest without knowing something.
|
| Now, some risks are smarter than others...
| fractionalhare wrote:
| That's not necessarily a good idea. You don't _need_ to
| take on higher risk for a higher return. It 's usually
| better to leverage risk-adjusted returns rather than
| chase high total returns with commensurate risk.
|
| You _can_ take on more risk that if you have the
| appetite, but if that 's the case you could also just use
| levered beta (e.g. 3x levered S&P 500). This would
| significantly improve your portfolio while still being
| fundamentally much easier to understand than a novel
| asset.
|
| If your portfolio has a decent risk adjusted return and
| very low volatility and beta exposure, it's safer to just
| leverage it up to the same risk as the S&P 500. This
| reduces the chance of you blowing up your capital in the
| long run.
|
| I would argue there are very few investment goals for
| which extreme risk is sound (especially if it's
| unhedged!).
| acituan wrote:
| > You don't need to take on higher risk for a higher
| return
|
| The lower the risk of an instrument, the more it will be
| saturated with investors, the more thinly per-investor
| share of profit will be spread. Therefore there is no
| such thing as "low risk, high returns", unless it is a
| scam. There is no unexploited profit opportunity that is
| risk free, if one thinks they have found one, they must
| have just missed accounting for the hidden risks.
| fractionalhare wrote:
| I didn't say "low risk, high returns." It is a spectrum.
| What you've said in your first two sentences sounds fine
| as a textbook principle. But the real world is messier
| and opportunities don't just vanish: if you do the math
| on a basic risk parity strategy with the S&P and some
| uncorrelated ETF, you can see it will beat the market on
| a risk adjusted basis. Very often you can then leverage
| this up to a higher absolute return than SPY while
| keeping lower volatility and beta overall.
|
| _> There is no unexploited profit opportunity that is
| risk free_
|
| This is essentially encapsulated by a Sharpe ratio (among
| other things). On the contrary, it is not especially
| difficult to produce a relatively high Sharpe ratio,
| accounting for transaction and margin costs, if you don't
| have a large amount of money to invest (large means
| single digit billions or more). This is especially, but
| not exclusively, the case if you don't care to compound
| your returns.
| pashamur wrote:
| That's also ignoring the cost of capital, as leveraging
| risk adjusted returns has to take that into account. You
| don't get the same rate of return if you use margin, say,
| in order to leverage.
|
| If you use a 3x or other leveraged fund, then you run
| into tracking issues (look at
| https://www.etf.com/etfanalytics/etf-comparison/SPXL-vs-
| SPY) where you see tracking break down), you can lose
| everything (remember XIV?), and you have other potential
| issues.
|
| So it's not as simple as leveraging up a low-risk
| portfolio to assume a given risk/return ratio. There's
| also diversification to keep in mind.
| fractionalhare wrote:
| That is a good point, but that all applies to riskier
| investments as well. Whether or not that specific example
| will beat out something like cryptocurrencies does depend
| on margin and transaction costs, this is true.
| anythingdude321 wrote:
| if you leverage your risk for a higher return you _also_
| increase your risk
| fractionalhare wrote:
| Yes, but you can _choose_ how much risk to take on using
| your leverage weight. You don 't have to accept the
| baseline risk of the inherently riskier asset. It's
| easier to start with a less risky portfolio and weight it
| accordingly than it is to derisk a portfolio which is
| intrinsically riskier.
| acituan wrote:
| > I believe in the fundamentals of investing in stocks because
| in all it's technicality (and given the buy-and-hold strategy),
| you are investing in a business by owning a part of it which
| naturally means that you will and do get the returns on it,
| both in terms of profits (dividends) and and value growth
| (appreciation of the stock value). And conventional wisdom of
| lending also applies to bonds.
|
| Except that is not technically true. Unless buying stocks
| purely for dividends, you are investing in a _secondary market_
| of shares and the "value" you're talking about is the
| _expected value_ the other secondary market participants will
| appraise the stock for, independent of the company 's
| operations. There is only a directional correlation because
| there is a tacit assumption between the investors to equivocate
| between the two. If you look at the historical trends of P/E of
| S&P composite price index, prices have gone way more up than
| the actual earnings.[1] so there is an element of wishful self-
| deception here.
|
| Consider this; bitcoin might one day build enough track record
| to prove itself a good enough investment for a large amount of
| people, and then the stock market will have to seriously
| compete with this non-derivative instrument for investment
| money of those people, which will reduce the price of stocks
| _in aggregate_ , independent of the "value" of underlying
| company performances.
|
| If you take that into account, crypto-or-not a currency is
| simply another instrument which we bet for the future expected
| value for gains. In fact, while the value of traditional
| currencies are backed by their purchasing power performance in
| a given market, crypto currencies theoretically don't have that
| limit because it has unlimited supranational reach.
|
| Mind you, US stock markets have at most one century of roughly-
| comparable historical data, and that is just not enough sample
| size to make 30-50 year assumptions (speaking for retirement
| buy-and-hold strategies).
|
| [1]
| https://en.wikipedia.org/wiki/Stock_market#/media/File:IE_Re...
| jamesmehaffey wrote:
| If you are using blockchain tokens to run an application, then
| you are essentially paying A large network of computer
| operators for their combined processing capacity. This means
| their electricity, maintenance cost, etc. instead of investing
| in servers that will be old by the end of the year. So
| purchasing cryptocurrency is in fact a very real investment.
| Think of it like an airline purchasing jet fuel three months
| ahead of time.
| misnamed wrote:
| A great investment if the cost of fuel goes up, but a bad one
| of if it goes down. Processing power is getting cheaper and
| cheaper.
| jamesmehaffey wrote:
| It really just comes down to the idea that blockchain
| networks are cheaper, more secure, more reliable and more
| scalable than traditional server arrangements. That's not
| just my opinion; most of the top tech companies are
| ploughing huge amounts of money into it. market investors
| will do what they always do, but all I know is that I would
| rather have a crypto wallet with some stored value than an
| old, inefficient server sitting in the corner.
| misnamed wrote:
| I mean if you're literally talking about the difference
| between 'buying physical servers' and 'buying Bitcoin'
| ... well, it seems to me you're missing out on a range of
| other options, like: investing in companies developing
| new hardware, for starters. Personally, I just lease what
| I need at going rates, which get ever cheaper. And by
| cheaper I mean: in dollar terms - so to keep up with
| that, I don't see the need to hold highly volatile
| Bitcoins when I can just hold inflation-adjusted Treasury
| bonds.
| jamesmehaffey wrote:
| Bitcoin is probably not the best case study for this
| aspect of the conversation, but I suppose you have a fair
| enough point. Although to be clear, I am thinking of the
| assets more like commodities than speculative stocks or
| equities. I do not mean to suggest that traditional
| servers are going to go away or become obsolete any time
| soon, but after you get past the cryptocurrency hype in
| the headlines there really is a huge amount of potential
| for the technology. This is definitely what long-term
| investors are considering and why this is even a topic
| here.
| misnamed wrote:
| My main issue is conflating the potential for an approach
| to technology with something like, say, Bitcoin
| specifically. Yes, many blockchain applications exist,
| but that doesn't translate into profits from investing in
| cryptocurrencies.
|
| I've always liked the saying 'sell pickaxes to the
| miners' - rather than investing in the virtual gold, why
| not sell things to those who want to go find it? The real
| winners will likely be the companies who facilitate
| things (much like active trading platforms make money
| while the options traders on them often lose money
| overall).
| didibus wrote:
| When you buy into a Crypto you're investing into the technology
| itself.
|
| If you believe that more and more payments will be handled
| through it, its value will go up, thus making it a good
| investment.
|
| If you take Bitcoin, there's a small pool of total Bitcoin and
| that's guaranteed by the technology. Each new coin costs real
| money to mine, due to needing physical compute resource to do
| so, and it gets harder and harder overtime. That means as more
| and more people transact in Bitcoin, the demand for Bitcoins
| will go up, thus your Bitcoins are going to be worth more.
|
| Similarly for Ethereum2, there's not a fixed maximum, but there
| are set rates and limits that affect how much new Ether per
| year will be added. So there's some guarantees that there's a
| restricted supply. So again, if you believe that more and more
| people will rely on its network to transact, the demand for
| Ether will go up, thus its value.
| diab0lic wrote:
| > When you buy into a Crypto you're investing into the
| technology itself.
|
| This argument of technology + limited supply is fallacious.
| If the technology is so useful the coin can just be cloned
| with more supply. The technology itself doesn't force me to
| participate in a limited supply market in order to get the
| benefits.
| staplers wrote:
| Imagine your bought the rights to a tree that would later be
| turned into thousands of $100 bills.
|
| Bitcoin is a speculative bet that it will become a popular
| global currency. The idea is eventually you will be able to use
| the bitcoin as currency once it scales up.
| cody3222 wrote:
| For the same reason gold is an "investment." It's a store of
| value and a hedge against government controlled currencies such
| as the US Dollar.
| macspoofing wrote:
| >How is any cryptocurrency even considered an investment
| vehicle
|
| You're right that crypto currencies are not like equities. It's
| an investment vehicle in a similar way that gold is considered
| an investment vehicle.
|
| >why would cryptocurrency ever be considered as a good
| investment vehicle
|
| That's another question. I don't think it's a good investment
| vehicle.
| vocatus_gate wrote:
| I'll try to use my elevator pitch:
|
| With cryptocurrency, you're right they're not an "investment"
| in the traditional sense. Right now more of a long-term gamble.
|
| In my opinion the value is in the network and the ability to
| move money instantly (or at very least faster than traditional
| methods), securely, to anywhere in the world for a fraction of
| a cent. That ability alone is valuable and hasn't existed until
| now.
|
| There are other arguments along the lines of deflationary vs.
| inflationary, anonymous vs. private, irreversibility of
| transactions (no charge-backs) that are good or bad depending
| on your views, but in general crypto represents a brand-new
| "investment" (or gamble if you like) for this generation.
|
| The different cryptocurrencies that various teams are building
| follow different philosophies, but I think the space in general
| is pretty interesting.
| jonahss wrote:
| The "anywhere in the world" part is really huge. As of now,
| most cryptocurrencies aren't run by nation states, unlike
| traditional currencies. Cryptocurrencies have to potential to
| become a global currency that's fair to all.
|
| I actually think that the nation states really missed out
| when they didn't mint their own cryptocurrency that has the
| same value as their physical money. If they controlled a
| currency completely, they could tax every transaction!
| Surprised they didn't jump on this.
| eruleman wrote:
| Central Bank Digital Currencies (CBDCs) are incoming --
| 2020s will be the fight of MMT vs BTC as Balaji says.
| xur17 wrote:
| I honestly think CBDCs are complementary to Ethereum,
| Bitcoin, etc.
| unclesams-uncle wrote:
| > In my opinion the value is in the network and the ability
| to move money instantly (or at very least faster than
| traditional methods), securely, to anywhere in the world for
| a fraction of a cent. That ability alone is valuable and
| hasn't existed until now.
|
| I spent some time working in a relatively-unknown but high
| volume clearing bank.
|
| Banks can and do move billions instantly, and have done so
| for years through SWIFT and ACH. It takes literal seconds for
| a confirmation to pass through different clearing networks
| around the world.
|
| Even today, we're seeing banks improve their correspondence
| networks with each other.
|
| For example, you could have a Transferwise Account where you
| receive USD and convert to GBP.
|
| If you wanted to move that to a Monzo account, you can do so
| instantly as Transferwise and Monzo have accounts either with
| each other or in the same institution.
|
| The bank debits and credits each counterparty immediately.
|
| At the end of the day, it nets its position, then sends its
| report to the central bank, netting positions between other
| participants.
|
| Looking at crypto from the outside, I really don't see the
| added value based on existing infrastructure.
|
| It seems more like a proof of concept rather than a viable
| long-term asset.
| JxLS-cpgbe0 wrote:
| SWIFT gpi can't compete with Ripple on a number of
| important issues. Ripple transfers don't pass through
| multiple banks and the actual _value_ of the XRP is
| transferred, not just the _data_ (of the SWIFT ledger).
|
| > Banks can and do move billions instantly
|
| We're not just talking about banks, and if I open my own
| bank tomorrow I can't use SWIFT the same day (the way I can
| with Ripple), I have no relationships with correspondent
| banks.
|
| This is the added value to existing infrastructure.
| diab0lic wrote:
| I think what the grandparent post is trying to make clear
| is that there is no technical impediment to moving money
| instantly as some others have claimed here. It isn't that
| the amazing technology of blockchain has allowed us to
| achieve this for the first time. The reality is that this
| completely unregulated space is allowing people to
| sidestep a bunch of regulation and thus move money
| faster. If crypto becomes an issue the powers that be are
| going to do one of two things;
|
| 1) Regulate crypto such that it isn't an issue anymore
| and is in line with existing systems.
|
| 2) Improve the regulation such that the existing monetary
| systems move money more quickly/easily/whatever.
|
| Crypto has an edge in neither of these situations.
| [deleted]
| JxLS-cpgbe0 wrote:
| > there is no technical impediment to moving money
| instantly as some others have claimed here
|
| Yes, there are quite a few where crypto has an undeniable
| advantage, I listed a couple.
|
| > has allowed us to achieve this for the first time
|
| That is wrong, we have never been able to use the
| improvements to the 45+ y/o SWIFT network (Ripple
| creates) that we can today.
|
| > Regulate crypto such that it isn't an issue anymore
|
| How will you require correspondent banking when 200+
| banks are already side-stepping it?
|
| > make the existing monetary systems move money more
| quickly
|
| How would you make SWIFT settle accounts more quickly?
|
| How would you remove the incredibly high prices on
| traditional wire transfers?
| JoshTko wrote:
| the cost/speed of transaction value of Bitcoin is probably
| overstates vs existing alternatives. The real bitcoin
| advantage is that bitcoin transactions require no
| authority's approval in order to make the transaction.
| Meaning you can still make the transaction even your
| residing country decides you are an enemy of the state.
| Imagine having the power to control your finances as you
| wish even if you are a dissident in an authoritarian
| regime.
| pwm wrote:
| The fundamental point of bitcoin is that you don't need
| banks. Whether that's good or bad will be debated for years
| to come.
| notreallytrue wrote:
| You don't need banks to transfer money, you need them for
| loans
| clarky07 wrote:
| so why does it still take me 3+ business days to move money
| between banks? I assume it's just because they use that
| float to make money, but it still sucks. i for one like
| transactions clearing in a few seconds rather than a few
| days.
| notreallytrue wrote:
| For the same reason you vote for the president in October
| and the guy is actually elected in January
| joosters wrote:
| It's because you don't live in the EU. Millions of people
| have had instant money transfers for years now.
| mettamage wrote:
| But this is the power of bitcoin right? Now I can live in
| South America and get near-instant (crypto)currency
| transfers as well.
| badestrand wrote:
| That's not really a unique value proposition, as there
| are PayPal (and probably others) for many years already.
| And PayPal is free for private transfers, compared to
| BitCoin's ~$5/transaction.
| short_sells_poo wrote:
| In fact what parent is saying is that fast transaction
| speeds are not something that are solely enabled by
| bitcoin. There is absolutely no technical reason why
| transfers have to take days between banks. That's just
| down to the banks in your country having a crappy
| infrastructure.
|
| In fact, among the interesting properties of Bitcoin, I'd
| rate transaction speeds as the least relevant - chiefly
| because network throughput and transaction speed is
| actually pretty poor if you compare it to what is
| achievable with classical tech.
| ravingraven wrote:
| I live in the EU. I don't have instant money transfers
| (they are within the day but not instant). Across EU
| countries it still takes days.
| thesimon wrote:
| Wrong banks then. I can instantly transfer money between
| my accounts in Ireland, Portugal, Germany, Latvia,
| Belgium and The Netherlands.
| JxLS-cpgbe0 wrote:
| _Some_ wire transfers are instant and they are much more
| expensive than BTC or ETH
| notreallytrue wrote:
| But then the money is immediately available and I can buy
| a new pair of shoes with it
|
| Honestly, how much money one needs to move that the cost
| of the operation actually matters?
| iamspoilt wrote:
| Okey, calling it a "long-term gamble" only sounds fair to me.
|
| Talking about value, isn't blockchain / crypto analogous to a
| medium that enables moving money quickly? If yes, internet
| would be similar in some sense (we have instant local money
| transfers these days) but we don't have anything that tracks
| internet as an investment.
|
| Coming back to it, I can rationalize myself investing in a
| money transfer business that is build on blockchain (think
| Transferwise that uses a mix of technology and banking
| agreements) and generates some revenue for me. But if that
| middleman can be removed, I cannot suddenly start considering
| that piece of technology, an investment.
| aboodman wrote:
| Any cryptocurrency can be used to move money quickly. So if
| you buy a cryptocurrency, you are automatically "investing"
| in that "business". You don't need Transferwise.
|
| Bitcoin is the canonical example. The value investment
| argument for Bitcoin is that you think Bitcoin is (or will
| become) a good way to move money. You're buying a scarce
| piece of that utility.
|
| ===
|
| Some cryptocurrencies additionally have other utilities.
| Example, ethereum can be used to write very slow, shitty
| software that runs on the blockchain. So far nobody has
| come up with a super amazing use case for this, but
| theoretically, if somebody did this would dramatically
| increase the demand for ethereum tokens - (b) above.
|
| A better example would be something like
| https://handshake.org/ - a cryptocurrency that is trying to
| power a decentralized replacement for dns. Remains to be
| seen whether this can be done and will have adoption. These
| systems have all the problems of traditional startups, plus
| all the problems of low level protocol development, plus
| standardization problems, _plus novel math_.
|
| However, I hope it's easy to see the value investment
| argument for something like handshake: dns is valuable, dns
| has problems, handshake is trying to solve those problems,
| by buying hns tokens I'm buying a part of this network, and
| if they succeed demand for those tokens goes up.
|
| Hope this helps.
| iamspoilt wrote:
| Thanks for the input. It does put things into some
| perspective but I am still wondering.
|
| So something analogous to owning a part of the network,
| would it be correct to say that, for instance,
| governments own and auction telecom spectrums to
| businesses. They do make money out of that ownership
| through the initial auction price and then potentially
| tax you later. So a cryptocurrency could be looked at in
| a similar way in the future. When you later sell the
| currency you have owned for a while (given that it takes
| off well over the couple of years), you are basically
| transferring that "spectrum" ownership to another party.
| aboodman wrote:
| That's right. Selling a piece of spectrum is a very good
| analogy.
|
| Another easy analogy would be IP addresses. Early on in
| the internet huge chunks were just given out for free.
| Now they're valuable because they're scarce and the
| demand for them has skyrocketed as the internet grew.
|
| You need spectrum to participate in the radio business
| (and other kinds of businesses). You _need_ IP addresses
| to participate in the internet. Similarly you _need_ HNS
| (as an example) to participate in the Handshake network.
|
| And as with spectrum and IP addresses, there's only a
| fixed amount of HNS (or at least that is the expectation,
| the details vary in each cryptocurrency).
| iamspoilt wrote:
| But there is another factor for cryptocurrencies. Anyone
| can create a new network and do an ICO and as long as the
| protocol is sound and audited, the new network can still
| enable money transfers the same way as a Bitcoin network.
| The collection of networks can potentially never become
| as scarce as, for instance, IPV4 range or the radio
| spectrum for telephony in the earlier analogy that I
| mentioned.
| aboodman wrote:
| Anybody could create a new protocol that competes with IP
| (many did). So that part of your argument doesn't hold.
|
| The reason that IP addresses are scarce is not because
| it's not possible to invent a new protocol, but because
| everyone else uses IP so only IP addresses are useful.
|
| Spectrum might initially appear to be fundamentally
| scarce, but even then, people can invent other ways to
| communicate (and they did! copper wires! IP!).
|
| These are all examples of networks - their value is
| proportional to their popularity. So yes, anybody can
| create a new cryptocurrency, but currencies are mainly
| valuable because of who you can use them with. Dollars
| are valuable because so many people accept them!
|
| So if one cryptocurrency really gains traction, it will
| be hard for any other cryptocurrency to compete unless it
| offers something fundamentally new and different.
| pashamur wrote:
| Even domain names follow the same pattern - in the last
| decade there has been a huge number of new domain
| extensions that have been approved for use; if you go to
| namecheap these days you have hundreds of options for
| your personal site.
|
| Yet the vast majority will still use .com, .net and .org,
| and those still remain the most valuable. :)
| didibus wrote:
| Think of it that way, payment processing is a valuable
| product, especially online. It's costly and challenging to
| take money from one person and send it to the other in a
| secure and trusted way. So companies come along to offer it
| as a service, like PayPal, Stripe, and you can think of
| CreditCard companies as well.
|
| So you could imagine yourself investing in those correct?
|
| Alright, now imagine I made an open source software that
| lets two people process a payment between each other? They
| can just install the software on their computer, and
| suddenly they can start transacting money with one another?
| For free! No need for PayPal or Visa anymore. So what's the
| catch?
|
| The catch is that software can't actually move real
| physical money around, that requires trucks and truck
| drivers and safes, and all that. So it's not possible to
| move USD dollars with software alone.
|
| What does PayPal do then?
|
| PayPal enters into an agreement with your bank or credit
| card. When you send me 100$ through PayPal. PayPal and your
| bank agree that eventually 100$ will be moved from your
| bank to PayPal's bank account. That is done digitally, and
| both PayPal and your bank write that down in their system
| on their own ledger. Now PayPal assumes it will eventually
| have 100$, and it agrees with my bank to eventually deposit
| 97$ into my bank account. Similarly PayPal and my bank
| write that down.
|
| Now eventually money will actually get moved physically,
| but it'll play catch up. You, me, PayPal, and our banks, we
| all trust each other, so we assume it will be moved for
| sure, and so even before that happens you might have sent
| me some item through the mail in exchange for that money.
|
| Now back to my open source software alternative to PayPal.
| What if instead of this big dance, and eventual physical
| exchange of money. What if we made a currency that was
| fully digital? So when you processed a payment with my
| software, you arn't exchanging USD dollars, but something I
| shall call Bitcoin instead. That can easily be exchanged
| through software alone, no need to actually physically move
| anything.
|
| Well, there's a few challenge to this. First, since the
| software is open source and we're each running it (no
| central service), how can we trust that you removed the
| amount you gave me from your account? And that I didn't add
| more than what you gave me to mine? That's where
| cryptography comes into play.
|
| Okay, so now let's assume I figured out the tech, so my
| open source software can truly be used to exchange securely
| and without possible cheating some amount of a digital
| currency between two parties without any central
| coordinator. Now we have the problem of how do you get some
| of that currency in the first place before you can exchange
| it?
|
| Well, my software also guarantees that there's only 1
| million coins of it max. And as the author, I gave myself
| 100k coins. And I randomly distributed the rest amongst the
| first thousand users.
|
| Now you were a lucky one, and you have 100 coin if it. So
| again, maybe I want to buy something from you, but you're
| in another country. So I tell you, I'll give you 100 of my
| crypto coin, exchanged through my open source software, and
| you'll send me by mail my item I buy from you.
|
| Perfect, now we have a way to exchange a currency without
| having to physically move anything, it is fully handled by
| software and can be exchanged over the internet only.
|
| So maybe you say, well what can you buy with my coins?
| Well, you started selling goods in exchange for them? And
| so did others. So maybe Joe Blo sells Video Games and
| accepts my coin in exchange for them. And you sell plants.
| So now you can use my coins to buy video games from Joe and
| he can use them to buy plants from you. And so on. So the
| coins are slowly starting to be worth real assets, as more
| and more people start to accept them in exchange for goods
| and services they'll be worth more and more.
|
| What's cool about a fully digital currency is that
| exchanging it is super fast, easy and cheap. It's just
| really convenient. You might also believe it to be more
| trust worthy then the agreement between PayPal and our
| banks, if you think the tech is harder to cheat. And you
| might believe the software is more stable than some
| government backed currency at managing inflation. So you
| might actually find that my software and my currency is
| overall more convenient, more secure, more safe, and more
| stable as a currency to exchange and trade in, so maybe you
| just fully move to it and stop accepting USD in exchange
| for plants.
|
| Now back to investment. Say you thought that this piece of
| software was amazing, and you believe that people will
| slowly stop using other payment processors in favour for
| it. Well, sell your stock in PayPal cause eventually
| everyone will move to using my software instead. Now you
| want a piece of that pie, but I don't sell stock, and I
| don't sell my software for money, it's free and open
| source. Except there'd still a way for you to profit from
| my software gaining in popularity. If you find a way to
| acquire some of its digital coins, for less than what
| people will be willing to exchange for them in the future,
| you can profit from it. Thus it becomes an investment
| vehicle.
|
| Sorry for the length, hope that explains it though.
| zapdrive wrote:
| A cryptocurrency cannot be put into any traditional bracket of
| commodity, currency, stock etc. It's a new breed in itself. It
| has features of a currency, a commodity, a stock and much more.
| raziel2701 wrote:
| So is it a jack of all trades and master of none sort of
| thing? I still see it as a speculation tool and it's grabbing
| a lot of momentum. But I don't see what's so fundamentally
| useful about the technology unless you're interested in
| laundering money and/or buying illegal stuff.
| shuntress wrote:
| Bitcoin is a currency.
|
| The fundamentally useful thing about Bitcoin is it's proof-
| of-work shared ledger that allows transactions to be
| conducted and verified between individuals (through the
| shared network) independent of any third party or broker.
|
| It is the electronic equivalent of handing someone a
| physical coin.
|
| It is genuinely pretty neat.
|
| Any actual meaningful application of this use has yet to be
| realized.
| bollu wrote:
| > It is genuinely pretty neat.
|
| This captures my feelings exactly about BTC, thank you
| for phrasing it so succinctly!
| cryptica wrote:
| It's not about ROI anymore. It's mostly about which asset can
| capture most of the newly printed fiat money now and in the
| future.
|
| New fiat currency is constantly being created and all assets
| are competing for the biggest possible chunk of that new money.
|
| The reason why crypto is doing well comes down to a contrast
| between monetary abundance and scarcity. Some people in this
| world have access to an essentially infinite supply of fiat
| currency at 0 risk... So fiat currency is not worth anything to
| these people; so if these people start buying some scarce
| resource, they will quickly realize that it will drive up the
| price of that resource ad infinitum. The only other variable is
| how hard people HODL the asset.
|
| If enough of these people buy up the same scarce resource, the
| growth of that scarce resource will outpace that of all other
| scarce resources.
| umanwizard wrote:
| Bitcoin's ambition is to become the new gold: something that
| has been ingrained in human culture as "money" for so long that
| people accept it as such by habit.
| shuntress wrote:
| It is exactly the same as you trading Currency-A in exchange
| for Currency-B.
| ur-whale wrote:
| By your reasoning, gold isn't an investment vehicle either (a
| rather widely-held belief, btw).
|
| Yet, a somewhat sizeable category of people still invest in
| gold ...
|
| Could it be that the definition of "investment vehicle" is
| broader that what you may have willingly restricted yourself
| to?
| eldaisfish wrote:
| You logic is correct. Gold is not an investment, it is a
| hedge. Gold does no useful work and produced no measurable
| output. It's "purpose" is simply that society has assigned it
| a value that most people will agree to exchange for other
| forms of value. In exactly the same way, crypto or any fiat
| currency is not an investment.
| mrlala wrote:
| >Gold does no useful work and produced no measurable output
|
| What? Gold us physically useful and relatively scarce, THAT
| is why it has value.
|
| You are acting like people just got together and said "hey,
| let's take this useful hunk of garbage and assign it some
| value to see how rich we all are".
| eldaisfish wrote:
| >You are acting like people just got together and said
| "hey, let's take this useful hunk of garbage and assign
| it some value to see how rich we all are".
|
| Correct. Gold's value in an industrial sense is no
| different from any other relatively scarce material. This
| is precisely why gold is not an investment. Its value is
| simply a group of people assigning a value to something
| driven in part by scarcity.
| spir wrote:
| One answer to this question is that Ethereum will soon become a
| "real investment" because fees will accrue to ETH holders and
| the huge expense of electricity-intensive proof of work mining
| will be discontinued forever.
|
| Here is how it'll work
|
| - in 2021, an improvement to the Ethereum network known as
| EIP-1559 will launch, causing a portion of all new transaction
| fees to be burned/destroyed, which is effectively a "stock
| buyback" for ETH. This will be the first time that ETH holders
| receive any kind of "earnings per share". But, it's not enough:
|
| - EIP-1559 alone is not enough for ETH to be a profitable
| investment from a cashflow perspective. The problem is that
| Ethereum's proof of work mining is extremely expensive, like
| Bitcoin's. Ethereum will run at a "net loss" until proof of
| work is discontinued.
|
| - two days ago, the Ethereum v2 "beacon chain" launched after
| years of research and effort. This "beacon chain" is currently
| not used for any ethereum transactions and won't be for two
| years. Here is a 3rd party UI for exploring the beacon chain
| https://beaconcha.in/
|
| - in 2022, the main ethereum blockchain will merge with the new
| ethereum v2 beacon chain and proof of work mining will go away
| forever. The new system, proof of stake, is dramatically less
| expensive. It's so cheap that it's effectively free.
|
| - in 2022, with proof of stake fully live, ethereum's
| transaction fees will effectively accrue to ETH holders and
| there will be no material expenses to offset this income. The
| result is that ETH will become a real investment vehicle from a
| cashflow perspective.
|
| Learn more https://ethereum.org/en/eth2/#roadmap
| Zamicol wrote:
| >How is any cryptocurrency even considered an investment
| vehicle? [...] [Y]ou are investing in a business by owning a
| part of it which naturally means that you will and do get the
| returns on it[.]
|
| That is how Ethereum works. Validators get returns from
| Ethereum by holding shares, i.e. ETH. Validators, after
| EIP-1559, will be paid with newly minted ETH and anything
| over the base burn fee. (Currently there is no mandatory
| burning of fees.)
|
| To stake in ETH 2.0 a stand alone validator needs 32 ETH
| (~$20,000). It reminds me of Outback's business model of
| requiring managers to buy in as stake holders
| (https://hbr.org/2005/09/a-stake-in-the-business).
|
| This is before all the crazy features that can be built on
| top of eth-as-programmatic-money, such as lending.
| https://defipulse.com/
| sneak wrote:
| That headline, as written, is a real missed opportunity.
| dandanua wrote:
| It shouldn't be called an investment. Investment supposed to be
| spent on the production of new value. Bitcoin, despite its good
| intentions, is a pyramid scheme -- its price grows only because
| of newcomers. I wrote a blog post about why it's a bad
| "investment" -- https://dandanua.github.io/posts/why-i-wouldnt-
| recommend-usi...
| Osiris wrote:
| Since there is a limited supply of Bitcoin, people are buying
| Bitcoin now with the hope that there will be more demand for
| the limited supply in the future. There is a hope that
| Bitcoin becomes "useful", thus driving demand. Since supply
| is fixed, demand causes an increase in value.
|
| So, it's a speculative "investment". I suppose whether it's
| an "investment" depends on your definition of "investment".
| dandanua wrote:
| It's useful and it has demand for its use. But most people
| buy it only to make a fortune. This makes it a Ponzi
| scheme. No contradiction here.
| JxLS-cpgbe0 wrote:
| A Ponzi Scheme relies on a central authority, BTC has
| none. I think you just mean "scheme?"
| dandanua wrote:
| There is Satoshi's wallet in the root, no need for
| authority as we can see.
| JxLS-cpgbe0 wrote:
| Yes, there is need for a central authority, Charles Ponzi
| for example. They actively and consciously channel the
| funds from new, defrauded investors, to that authority.
|
| BTC is not a Ponzi Scheme ; Satoshi is not steering the
| profits from a pump-and-dump. Passively profiting off new
| investors buying BTC does not make a Ponzi Scheme.
|
| Market manipulation is not a Ponzi Scheme. A Pyramid
| Scheme is not a Ponzi Scheme. "Ponzi Scheme" has a real
| definition.
| dandanua wrote:
| Agree, I've used it in a more general sense. I mean it's
| just like a pyramid.
| JxLS-cpgbe0 wrote:
| It's not a Pyramid Scheme either, there is no central
| authority. The benefits of a Pyramid scheme are
| specifically _not_ investments, but instead explicitly
| payments for recruiting. Pyramid Scheme also has a real
| meaning.
| UShouldBWorking wrote:
| Here comes the hn, "durrr, I don't get it, it must be fake.
| There's no real value..."
|
| How is it that a group of people that purportedly understand so
| much about programming and systems are so incredibly obtuse
| about a programming system?
|
| Bitcoin has value because there is an unlimited supply and it
| is a useful tool for moving and storing value, how hard is this
| to understand?
| csomar wrote:
| If you think of an investment vehicle as something that creates
| useful infrastructure in society and collects fees to pay
| dividends, then no. But then, look again, we are way past that.
| We are pulling Gold from the grounds to hide it again in the
| ground. We are trading weather futures. And people are buying
| apartments no to rent them or use them; but just to close them
| and leave them empty.
|
| In this sea of non-sense economic reality, Bitcoin actually
| makes lots of sense.
| dcolkitt wrote:
| I consider it a deep out of the money call option. There's a
| small but real chance that Bitcoin (or another crypto)
| essentially replaces the US dollar as the world's reserves
| currency.
|
| Bitcoin's total capitalization today is $200 billion. The total
| value of the dollar is harder to measure and depends on what
| you count as money or just money-like. But M3 is $20 trillion,
| and add in short-term T-bills and money markets and it's
| substantially higher. So in this scenario, it's possible for
| BTC to rise from $20,000 to $1,000,000+ or higher.
|
| Given that, I think it's prudent to allocate 1-2% of your
| overall net worth to crypto exposure. Especially because we
| expect it to out-perform in high-inflation/low-growth
| environments, which is the worst environment for traditional
| 60/40 portfolios.
| flignats wrote:
| The world's first global, decentralized, transparent, immutable
| ledger has come into existence. And you can own a piece of it
| by owning Bitcoin.
|
| Who knows what it will be used for, but it will be used.
| justaman wrote:
| Drugs, the answer is(and was) drugs.
| wsc981 wrote:
| I see Bitcoin as a hedge against the USD and EUR as I feel the
| currencies will be in trouble in the coming years.
|
| I see Bitcoin as a store of value. Keeping some of my assets in
| Bitcoin keeps some of my assets out of the hands of governments
| and banks and will not be affected by devaluation. There's no
| risk of a bail-in [0] for example.
|
| I don't invest all my assets in Bitcoin, currently perhaps 10%
| of my net worth. I do feel Bitcoin will rise to 100.000 USD in
| the next few years and possibly even 1.000.000 USD in 10+
| years, my aim is to gain a total of at least 3 BTC or so in the
| next year. I just hope Bitcoin doesn't rise too quick in value
| in that time period, since I can only afford to buy for maybe
| 1.000 USD per month.
|
| I might sell a bit of my Bitcoin assets after my total Bitcoin
| asset value reach around 500.000 USD, since at that point I
| should be able to take things slow. At that point I would
| diversify a bit more into ETFs or stocks.
|
| Perhaps this video [1] by Raoul Pal can give you some insight
| in my point of view, as I agree with him on most points.
|
| ---
|
| [0]: https://www.forbes.com/sites/nathanlewis/2013/05/03/the-
| cypr...
|
| [1]: https://www.youtube.com/watch?v=qL2LfVRl3J0
| vladimirralev wrote:
| I have a lot of respect for Raul Pal, but when he talks about
| crypto you start to see his limits in understanding. He still
| thinks governments can't ban crypto if they wanted, he is
| very wrong about that. He also thinks that governments would
| allow a crypto to rival a state currency.
|
| The most likely success story for crypto is it will be only
| for banks while regular people will be banned from owning it.
| There is simply no way a government will allow irreversibly
| hackable assets in the wild. There are no limits to the
| damage entities can do with anonymous GDP-scale wealth.
| misnamed wrote:
| If you want to hedge against inflation, I suggest TIPS and
| maybe a bit of gold.
|
| I would also point out that the market expectation clearly
| isn't aligned with currencies being 'in trouble' - very low
| inflation in general right now.
| pashamur wrote:
| Generally, the only way to make outsized returns in the
| market is to go against market expectations, otherwise you
| would just make market returns.
|
| So yes, a bet on crypto is a bet against the market
| consensus, sort of by definition :)
| misnamed wrote:
| A good way to get high returns is to simply use a low-
| cost, tax-efficient combination of stock and bond index
| funds. After taxes and fees, the results compound in your
| favor. I have no interest in gambling on even higher
| returns - those are plenty for me. If you want to
| maximize your chances of getting rich as well as getting
| poor, yes, you can put it all on Bitcoin, or Tesla, or 32
| at the roulette wheel, but I'm more interested in growing
| a nest egg than taking those risks.
| wsc981 wrote:
| _> If you want to hedge against inflation, I suggest TIPS
| and maybe a bit of gold._
|
| I need to read up on TIPS, haven't heard about that before.
| Yes, gold is a decent option as well. However I view
| Bitcoin as digital gold and it has a few nice properties
| that gold doesn't have (of course gold has some good
| properties that Bitcoin doesn't have). One of the aspects
| of Bitcoin that I appreciate the most, is that it's very
| easy to carry around with me, for example when travelling
| on an airplane to another country. The same is not true for
| gold.
|
| _> I would also point out that the market expectation
| clearly isn 't aligned with currencies being 'in trouble' -
| very low inflation in general right now._
|
| Inflation is actually really high, but its mostly hidden in
| rising prices for stocks and real estate.
| pashamur wrote:
| > Inflation is actually really high, but its mostly
| hidden in rising prices for stocks and real estate.
|
| Sort of. There's inflationary forces (fiscal /
| stimulatory policy) battling deflationary forces (mainly
| technological innovation), mainly netting out to a low
| inflation rate at the moment, as defined by the CPI.
|
| Assets that are not affected by the deflationary forces
| (such as land, and some types of housing), do tend to
| increase in value, though some of that is increase is
| just due to interest rates being so low (since for most
| consumers the house payment is more important than the
| absolute price; when interest goes down, prices normally
| go up).
|
| It would be interesting to do a graph of interest-
| normalized house/asset prices over time.
| misnamed wrote:
| I won't get into the 'is the CPI accurate?' debate, but
| will just say I haven't seen a better metric. So I'll
| stick with: inflation is low.
|
| As for the portability of Bitcoin ... OK, but then
| Bitcoin > Bitcoin ETF, if your goal is to transport and
| spend it outside of online brokerages.
| nostrademons wrote:
| It's analogous to investing money in USD or GBP before those
| countries were given a license to print as many USD and GBP as
| they wanted.
|
| Before then (1931 for the pound and 1933 for the dollar, though
| they maintained de-facto parity with gold until 1971), dollars
| and pounds were considered good investments. That's why we had
| bank runs: people thought their money would be safer under
| their mattress, and preferred to own physical currency rather
| than numbers in a bank's ledger. The only reason holding USD is
| a bad investment is because inflation is basically guaranteed:
| you _know_ that a dollar will be worth less tomorrow than it
| will be today, because the authorities that control the dollar
| say so. Not so with Bitcoin: the total supply is fixed at 21M,
| forever, and there 's no central authority with the power to
| change that.
| iamspoilt wrote:
| It is fixed at 21M but technically, this can be changed
| through an Economic Majority [0][1].
|
| [0] https://en.bitcoin.it/wiki/Economic_majority
|
| [1] https://bitcoin.stackexchange.com/questions/3945/how-
| could-t...
| tuberelay wrote:
| 21M is the basis of bitcoin for most hodlers.
|
| Any fork or decision by anyone to change this 21M number
| means that for me (and most hardcore bitcoiners I know) the
| chain which sticks to Satoshi's 21M becomes the REAL
| bitcoin chain.
|
| 21M is non negotiable. If it doesn't have 21M, it simply
| isn't BTC.
| dehrmann wrote:
| This should actually scare "investor" speculators: if the
| number of mining pools gets much smaller, miners collude,
| or someone performs a DDOS attack some miners, fundamental
| assumptions of the currency go out the window.
| hammock wrote:
| What does this concept of Economic Majority look like of we
| consider it for the US Dollar, rather than btc?
| anythingdude321 wrote:
| economic majority for the USD is the Federal Reserve
| Board
| ur-whale wrote:
| Doesn't apply. The feds control the USD and if there's
| one thing the fed isn't it's a democratic mechanism.
| ur-whale wrote:
| "Could" being the operative word here.
|
| But then, this is where Bitcoin is genius: the code isn't
| everything.
|
| There's a whole bunch of built-in economic incentive
| feedback loops.
|
| And getting to an "Economic Majority" is very unlikely to
| happen because none of the participants have to gain from
| that change.
|
| Also: since a bitcoin is divisible to 10e-8, it's going to
| be a very long while before there's an actual _shortage_ of
| the darn thing.
| px43 wrote:
| It can also be changed if Mathematicians all decide to
| redefine what numbers mean, which has just about as much
| chance of happening.
| phkahler wrote:
| >> Not so with Bitcoin: the total supply is fixed at 21M,
| forever, and there's no central authority with the power to
| change that.
|
| But as TFA indicates, there are over 500 other crypto coins.
| When anyone can create a new one they become irrelevant.
| hnuser123456 wrote:
| They are relevant because, for any given coin/chain, it
| seems to be pretty damn hard to hack the numbers. The only
| way to get some is to mine for a long time with expensive
| hardware, or to convince someone to give you some by giving
| them cash. Turns out enough people have enough interest in
| the things that they don't give them up very easily.
| Consultant32452 wrote:
| The dollar was just created but is not irrelevant.
| JMTQp8lwXL wrote:
| Anybody can easily create a coin, but if the coin has no
| market share or broad usage, it has no practical value.
|
| We can make infinite coin types, with each coin type having
| an infinite number of tradable units; all that matters is
| adoption. Bitcoin is far more likely to be accepted than a
| coin you invent tomorrow.
| misnamed wrote:
| You had it with 'we can make infinite coin types' - who
| cares about what is adopted today? People change
| platforms every few years. What happened to MySpace?
| What's happening to Facebook even now? Where did TikTok
| come from? There is turnover.
| Mc_Big_G wrote:
| Anyone can create a Craigslist clone, but somehow they
| still make 100s of millions of dollars per year.
| thorwasdfasdf wrote:
| And not just a craigslist clone, but a much much better
| one too!
| single_source wrote:
| Yep, this is what people are not understanding. Too many
| engineers and not enough business owners on HN. The
| hardest part of starting a business is getting the
| network effects on your side, it isn't the tech.
| phkahler wrote:
| Sure, but then why have a market for hundreds of coins?
| We dont have a public market for all the craigslist
| wannabes because they are not relevant at that level.
| wskinner wrote:
| Bitcoin, and to a slightly lesser extent Ethereum, are
| schelling points for crypto. There are good reasons for
| this. Both bitcoin and ethereum created something new and
| interesting. In a world where you are trying to pick the
| coin that everyone else is going to pick, which one will
| you pick? The Nth of its kind, or the one that created the
| kind to begin with? That's why they account for a huge
| majority of total value of all crypto currencies.
|
| Edit: obviously this is an oversimplification and there are
| other factors like quality of governance, quality of the
| underlying tech, and so on. But I believe the above is the
| crucial factor.
| [deleted]
| Triv888 wrote:
| Bitcoin specs change all the time and they could decide to
| increase the supply
| csomar wrote:
| That would result in a certain fork. We had already had
| that and it seems the majority has decided to stick with
| the initial rules even though the fork wasn't about supply
| but something that will give bitcoin more practicality.
| Osiris wrote:
| Being a decentralized application, certainly the core devs
| could attempt to make such a change but I guarantee that
| would cause a fork and the community would decide which
| fork they want to put their mining effort into.
| joosters wrote:
| The 'community' at large doesn't mine Bitcoin. A few
| gigantic mining farms mine bitcoin, and their self-
| interest could well change the bitcoin issuance. It's not
| as decentralised as you think.
| ozorOzora wrote:
| enters Litecoin
| Imnimo wrote:
| The supply of capital-B Bitcoin is 21M, but at any time,
| anyone can create Bitcoin2, which is an exact clone of
| Bitcoin but with a fresh chain. Any Bitcoin2 token has
| exactly the same utility as a Bitcoin token in principle -
| the only difference is that, for now at least, lots of people
| are mining Bitcoin and no one is mining Bitcoin2. If there
| comes a day when a lot of people think there should be 42M
| bitcoins, instead of 21, what would stop them from just
| starting a second chain? Granted, these "a lot of people" are
| not a "central authority", but is there really a difference
| when it comes to the question of bitcoin's total supply? As
| long as those people have enough compute they're willing to
| put to work mining Bitcoin2, there's nothing stopping them
| from creating more tokens that are just as useful as original
| Bitcoins.
|
| And, of course, they could freely choose to make Bitcoin2
| have a trillion tokens instead of 21M, or whatever number
| they want.
| spurgu wrote:
| Similar things have already happened (Bitcoin Cash, Bitcoin
| Gold). The original is still standing tall. But if you
| think you can convince someone your Bitcoin is better, feel
| free to do a fork!
| anythingdude321 wrote:
| yes but the beauty is that, due to the lack of a central
| authority, the game theory of the situation virtually
| ensures that no one would ever do that -- that is, take
| bitcoin2 seriously
| Imnimo wrote:
| I don't know if I agree with that. Like take the example
| of a country whose currency collapses due to government
| mismanagement and its people decide that they would be
| better off with a cryptocurrency. I'm not sure how
| realistic this is, but it's at least a scenario that I
| see proposed from time to time. Those citizens face a
| trade-off when deciding between Bitcoin and Bitcoin2.
| Bitcoin has a lot of active miners, which is valuable, as
| it means their future transactions will be more secure.
| But Bitcoin is also very expensive, and difficult to
| acquire. Joining the bitcoin economy is entering into a
| game where other players (bitcoin early adopters) have a
| huge head start, and these newcomers have nothing. If
| they instead start a new chain, they will need to bring
| their own compute power, but will have an opportunity to
| have a meaningful share of the tokens, and therefore some
| amount of influence on steering the currency.
|
| It's probably unlikely that an enfranchised bitcoin user
| would be incentivized to jump to a newborn chain, but I
| don't think it's the case that a new user is always
| incentivized to adopt the existing chain. As the price of
| bitcoin increases, and the remaining coins to be issued
| decreases, a new chain becomes more attractive for new
| users.
| Yizahi wrote:
| Well Bitcoin does have almost central authority - if Top
| 3 mining pools decide to change their software in
| literally any way, then everyone else will comply of will
| be left in the dust. It's not that hard for 3 people to
| agree on a common action plan.
| mettamage wrote:
| Is that true though? Bitcoin cash, bitcoin gold, etc.
| eruleman wrote:
| It's easy to create a fork of software.
|
| It's hard to create a fork of firmware running in people's
| minds.
| e_y_ wrote:
| I think the main thing Bitcoin has going for it is name
| recognition. Would be better if we could leave proof-of-
| work in a flaming trash pile and migrate Bitcoin to
| Ethereum (and rename it Bitcoin)
| misnamed wrote:
| A deflationary asset class encourages hording, not spending
| or using in other ways. There's also no real limit to the
| number of crytocurrencies that might appear later (see:
| MySpace replaced by Facebook), unlike gold. As for inflation:
| safe government bonds have historically kept up with that
| over the long haul, so no big loss there.
| spurgu wrote:
| Imagine a society not based on consumerism and quarterly
| report increases. Gasp!
|
| Back in the day people used to get interest (covering more
| than inflation) from holding money in their bank accounts.
| What's changed?
| brightball wrote:
| My understanding has always been interest rates. Interest
| rates on savings accounts are supposed to be slightly
| lower than interest rates on loans with the bank taking a
| profit in the middle.
|
| Home loans used to be much higher, in the 10-15% range
| and you could get 6-7% on your savings account.
|
| With home loans in the 2-3% range, those margins aren't
| feasible anymore.
|
| But that's probably an old understanding. I'm sure
| there's a lot more financial wizardry to it now.
| nmlnn wrote:
| https://www.bankofengland.co.uk/-/media/boe/files/quarter
| ly-...
| spurgu wrote:
| I'm not an economist either but what you said makes
| sense. We instead nowadays have tons of various fees on
| our bank accounts so the return ends up being negative.
| And we're supposed to accept that this is fine and
| normal? Economy is booming? Give me a break.
|
| This is why creative solutions like bitcoin, if not
| (necessarily) directly solving anything, do give pause
| for thought, and maybe shine some hope for a non-corrupt
| (immutable) system of money.
|
| I need to read up on whether a deflationary
| currency/economy would really be an issue, or if it just
| wouldn't work with how things are _currently_ set up.
|
| Edit: And yes, it's a complex issue with no outright easy
| answers. Doesn't hurt to think about it though.
| misnamed wrote:
| Rates have been declining for years (decades, really),
| but so has inflation. The spread hasn't actually changed
| that much.
|
| > Imagine a society not based on consumerism and
| quarterly report increases. Gasp!
|
| I have literally no idea what that would look like or how
| Bitcoin would play a role. I guess hodlers who bought
| early would be rich and normal people poor?
| raziel2701 wrote:
| The 21M can absolutely be changed. It's not a law of physics,
| it's just a line of code that can be changed. If enough
| people agree to it, it can be changed, they can even change
| the number of coins you get for successfully mining a block.
| onlyrealcuzzo wrote:
| You can't print gold, and BTC is appreciating much faster
| than gold (or any commodity or store of value or even other
| cryptocurrencies).
|
| It is not appreciating because fiat money is being devalued.
| That can account for -- at max -- 20% of the price increase.
|
| It's appreciating because of speculation.
| centimeter wrote:
| > You can't print gold
|
| You can 10x the world gold supply by capturing a single
| medium-sized metallic asteroid.
|
| You also can't send gold over the internet or store it in a
| private key. Given that Bitcoin is otherwise quite similar,
| mutatis mutandis, it's not unreasonable to imagine that
| Bitcoin might displace gold to some degree as a reserve
| asset.
| dehrmann wrote:
| People also lose bitcoins, I assume easier than losing
| physical currency or a bank account.
| Afton wrote:
| One of the ways I don't feel bad about not making
| millions in BTC even though I was aware of it long ago is
| the absolute certainty that I would have simply lost the
| paper wallet, had a hard-drive failure, etc, etc. There
| is just no way I would have held onto my keys for the 7
| years that I was aware of it. I imagine that the breakage
| here for early investors is probably pretty high. I never
| did cash out on my dogecoin...
| pshc wrote:
| It's not impossible to make copies of and secure private
| keys if you have a plan. (But even if you had bought some
| and preserved it, would you have had the
| tenacity/foresight to hold onto the BTC for 7+ years?)
| Afton wrote:
| > It's not impossible to make copies of and secure
| private keys if you have a plan
|
| I was 100% discussing _my_ scenario. I would absolutely
| not have enacted a careful plan with multiple fall-backs.
| Which is it 's own kind of self-indictment tbh, but one
| that I am at peace with. :D
| arisAlexis wrote:
| think gold with finite supply and easily transmissible.
| Bogleheads approved :)
| elevenoh wrote:
| ETH for instance is used for fees in the decentralized economy
| (e.g. p2p lending/borrowing/investing/marketplaces).
|
| If demand for fees in the ethereum economy outpaces supply, the
| price is likely to rise.
|
| https://cryptofees.info/
|
| Aside: If I issue equity in my company, I'd do it directly on a
| decentralized network like Ethereum > IPO. I'd prefer to not
| have an underwriter like goldman sachs take 3%+ & manipulate
| retail investors.
| Spivak wrote:
| I think your phrasing of "demand for fees" is kinda weird.
| Since it really comes down to "demand for validators" or
| "demand for compute resources on the ETH network."
|
| ETH's fundamental value is that it's the only form of payment
| accepted to use the eth network. It can and does have
| secondary value as a medium of exchange but that's what's at
| the bottom and the reason you need ETH opposed to something
| else.
| elevenoh wrote:
| Agree that demand for network compute/validation is more
| accurate than 'demand for fees'. My error.
| brightball wrote:
| Same reasons as buying gold or silver.
| twox2 wrote:
| Pretty sure 90% of retail crypto investors are just FOMOing,
| but more and more people are excited by the technology and
| looking for creative applications. DeFi has been interesting to
| watch.
| lordnacho wrote:
| This is not a comment on crypto as such, it's more a comment on
| how markets work.
|
| By the time you know what you're buying, it's priced in. When
| everyone agrees that some opportunity is amazing, they also
| agree the vehicle that provides it (shares, bonds, coins,
| whatever) has got to be expensive. At least more expensive than
| when it was just ideas.
| thorwasdfasdf wrote:
| I'll explain it to you in one sentence: There IS NOTHING else.
|
| There's only 4 main assets classes:
|
| 1) Equity valuations are at all time highs by nearly every
| objective measure out there
|
| 2) Fixed income is really vulnerable to the onslaught of
| inflation that looks ever more likely with all the MMT that's
| been going on.
|
| 3) Real Estate is a possibility but not scalable and not tax
| efficient and takes a great deal of skill and time to execute
| properly. (not counting REITs and other real estate ETFs)
|
| 4) All that leaves is commodities: Gold and Bitcoin.
| deeviant wrote:
| Investing is buying things that gain value over time.
|
| Bitcoin was originally worthless, now it's ~19k a coin. Anybody
| that bought or mined a large amount of coins back in the day
| and held on to them, is now rich, so a pretty good investment.
| The same forces that acted on bitcoin and brought it from
| worthless to 19k are still acting on it now.
|
| Doesn't seem like it's very difficult to understand why bitcoin
| is considered an investment vehicle.
|
| There are certainly good arguments for why may or may not be a
| poor investment vehicle or not the right one for a particular
| strategy, but arguments of whether it _is_ one are moot.
| tekkk wrote:
| I neither can understand why it is considered as investment but
| I guess scarcity and how it can be exchanged anonymously and
| cheaply for large sums makes it lucrative. Especially if you
| want to avoid governments for some reason.
| PretzelPirate wrote:
| I think part of the confusion is the word "currency", which
| implies it's something like USD.
|
| Ethereum's ETH token, for example, is an asset that will
| appreciate if demand of the Ethereum network increases for
| real-world business applications (not just financial payments).
| That makes it much more like investing in a limited resource
| (ex: oil) that will go up in value.
|
| It's still speculating, but most stock investments are close
| enough to speculation that you can't really tell the
| difference.
| [deleted]
| misnamed wrote:
| Stocks are shares in profitable companies. They have risks,
| sure, but they also have expected returns based on sound
| fundamentals and a long history of generating income.
| bgitarts wrote:
| You could say the same about Ethereum's ETH. It's a capital
| asset that when staked to validate blocks generates an
| expected return. You can discount those expected returns to
| the present like you would with any business.
|
| Investing in profitable companies by itself does not
| generate above average returns. Only 1 of the original
| companies of the Dow Jones is still in it today, G.E. and
| it's performance as investment has been below average the
| past 20 years.
| misnamed wrote:
| > Only 1 of the original companies of the Dow Jones is
| still in it today
|
| Small companies become bigger, driving returns. That's
| why you don't just buy the DJIA but rather index the
| whole market. Of course there will be turnover - the
| point isn't to lock into any one stock - don't look for
| the needle, buy the haystack (i.e. a broader-market
| index).
|
| If you want to include crypto in the haystack, sure,
| fine, whatever, but at market weights, it's going to be a
| very small portion of the investable market of stocks,
| bonds, cash and other asset classes. At some point, it's
| enough to just keep it simple and broad. A fraction of
| percent of this or that won't make or break a diversified
| portfolio.
| pashamur wrote:
| That depends on how good you are at finding needles :)
|
| The thing not many people seem to talk about is that the
| 20th century had unprecedented growth in terms of
| population around the world (which has slowed
| significantly in the last few decades, although the
| effects usually lag by quite a bit - when the children
| enter the workforce and such). We're making up for some
| of it with technological progress, but ultimately what
| impact that makes is up to everyone to think about
| individually (look at Japan as a potential leading
| indicator of what demographic change can do).
| misnamed wrote:
| Statistically, everyone trading across all different
| asset classes evens out, so ... sure, if you're
| consistently good at finding needles, power to you. Most
| people aren't. Many people however think they are. I
| prefer not to worry about it either way.
| okokok___ wrote:
| >Stocks are shares in profitable companies.
|
| Not always, tons of companies are losing money but the
| share price goes up.
| misnamed wrote:
| Sure, not always. To clarify: I mean stocks are shares in
| companies, which generally generate profits. Yes, some
| companies may not, or may even go under, but none of this
| is an issue if you hold a diversified set of stock and
| bond indexes for the long haul (I'm talking about
| equities as an asset class, not any one stock). Stocks
| are stakes in companies - bonds pay a risk premium -
| crypto, gold, etc... don't generate income, which by
| definition makes them speculative.
| [deleted]
| okokok___ wrote:
| >bonds pay a risk premium - crypto, gold, etc... don't
| generate income, which by definition makes them
| speculative.
|
| What about staking? In this case, you're providing a
| service to the network and being compensated for it.
| misnamed wrote:
| I know what it means but have no idea how profitable it
| is or whether those profits are guaranteed or fleeting.
| Best I can tell it's like any service (business, not
| investment): depending on demand and competition, you can
| make money for a time, then stop at some point. So far
| that has never been an issue for people investing in the
| global stock market (i.e. the global stock market
| persists even as individual stocks, sectors, industries,
| even whole countries have crashed in the past).
| iamspoilt wrote:
| Exactly my point. They add certain value to the economy and
| have fundamentals. From my understanding, I don't even
| consider Gold (a limited resource) a long-term investment.
| fractionalhare wrote:
| Gold is a good portfolio asset for reducing overall risk
| in a long term investment strategy. You can beat the
| market over time with less risk by holding the S&P 500
| and gold and weighting each according to respective
| volatility. This also has a lower beta exposure than just
| holding stocks.
|
| Gold (and commodities more generally) have fundamentals -
| just different ones from equities. You can't take
| advantage of the universe of sound investment
| opportunities if you restrict your attention to equities.
| misnamed wrote:
| We have fairly little data on gold as a freely available
| modern asset class (around 50 years), but yes, in small
| amounts it can limit volatility and potentially even
| increase returns (or at least: risk-adjusted returns).
| That said, over the long haul, independently, it has
| tended to roughly track inflation. I'm not against it,
| just see it as something of limited utility to an
| ordinary investor.
| pashamur wrote:
| Technically, everyone in the U.S. was an investor in gold
| up until 1971 since USD was supposedly backed 1-1 by gold
| :)
| misnamed wrote:
| It's a little trickier than that, but yes, that's why I
| mentioned 50 years. Before that gold was a different
| animal.
| smabie wrote:
| Using minimum variance optimization with gold and spy
| produces a portfolio that is often 50% or more of gold.
| This beats the risk adjusted return of spy by a
| reasonable margin.
|
| So I guess the point I'm making is that often a lot of
| gold makes sense too.
| [deleted]
| centimeter wrote:
| > Isn't it analogous to me investing my money in buying USD or
| the British Pound
|
| It would be, if those were hard (non-inflationary) monies.
|
| In a hypothetical future equilibrium where Bitcoin is a world
| reserve asset, buying Bitcoin is approximately isomorphic to
| buying spoos or other wide-market indices.
| phkahler wrote:
| >> 550 of the top traded coins,
|
| This is all I needed to know. The markets are complete fiction
| these days. We are awash in bullshit investments with zero
| underlying value.
| Benmcdonald__ wrote:
| There is around 4,000 scam token sales going on right now.
| Sorry I mean 4,000 innovations and technical experiments in
| pump and dumps.
|
| and 1,984 dead scam coins
|
| https://deadcoins.com/
| vmception wrote:
| S&P is known for making indices of hundreds of names, Russell
| is known for expanding that concept to thousands
|
| Its a little late, being the year 2020, to just notice that
| there are hundreds (and thousands) of digital assets with
| markets and communities, to validate your preexisting opinion
|
| About a half decade late
| blackrock wrote:
| So is Bitcoin finally becoming legitimate?
| bitxbitxbitcoin wrote:
| Just ask Larry Fink.
| smabie wrote:
| If you count that some of the most sophisticated market makers
| and trading shops have entered the space then yes. If you count
| the fact that most less sophisticated investors have not
| entered, then no.
|
| But I think we could be seeing a situation in the next 5 or 10
| years when the market cap of bitcoin grows somewhere between 10
| and 50 fold.
| modeless wrote:
| I think there is a lot of confusion here. This is not an index
| _fund_. You can 't buy it. It's just an index, a number that
| tells you what the price is.
|
| It may be a step toward a future index fund designed to track the
| index, the way SPY tracks the S&P 500 and DIA tracks the Dow
| Jones Industrial Average. But for now, it's only an index.
| vmception wrote:
| S&P has indices that have options contract directly on them.
| Which is way more fun!
|
| Also, index options enjoy the same better taxation that futures
| contracts do, as they are both Section 1256 contracts. Where no
| matter how long the trade is, 60% of the profits are taxed at
| long term capital gains rates and the other 40% are taxed at
| short term capital gains rates.
|
| Gotta read between the lines :) This is a great step for what
| could be a wildly popular product.
| modeless wrote:
| Sure, and the futures have been available for a long time
| already. But an index fund is far simpler and more
| accessible, and can also be 100% long term capital gains.
| Most people can't trade options in their 401k.
| vmception wrote:
| They aren't launching an index fund though, so 401K
| accounts that couldn't hold index options would not benefit
| in any capacity from this product. This product can only be
| a reference value and also infrastructure for index options
| launches.
| absolutelyrad wrote:
| My bank wouldn't allow me to buy cryptocurrency. Cryptocurrencies
| let you decide your future, they offer freedom. No banks, you
| decide where your money goes.
| elevenoh wrote:
| How do I short your bank's stock?
| monkeydust wrote:
| There is already a crypto index 'BCGI Bloomberg Galaxy'. Info
| including methodology here:
|
| https://www.bloomberg.com/professional/product/indices/bloom...
| andrewmcwatters wrote:
| I'm enjoying sitting on the sidelines and watching people
| "invest" in a digital "currency" that you cannot spend, does not
| produce cash flow, and whose values are determined by other
| shmucks buying it from previous shmucks.
|
| What a time to be alive. No wonder the S&P 500 CAPE ratio is
| beyond the 1929 high. No one has any idea of what the intrinsic
| value is of anything.
|
| Investing in companies that don't make a profit, investing in
| companies whose investment returns are below real inflation,
| investing in SPACs that don't expose financials.
|
| You'd literally make more money today taking your cash and
| starting a business than dumping it in some of these worthless
| pursuits.
| misnamed wrote:
| Agree re:CAPE. Meanwhile, people are ignoring the relatively
| attractive valuations of small, value, plus developed and
| emerging ex-US markets. While retail investors pile onto
| overvalued US stocks, these are now slowly catching back up and
| starting to get ahead. Funny thing about all of this to me is
| that people are always fighting the last proverbial war. Ten
| years ago, US stocks and tech in particular were in the
| doghouse - no one was buying them then.
|
| TL;DR A lot of investors buy high and sell low. We're seeing
| that now with crypto as well as US stocks.
| [deleted]
| free2OSS wrote:
| Wait until you hear about gold index funds/trusts....
|
| Anyway, the reason you buy it is so you don't need to manage
| the security.
|
| Both Binance and Circle Pay ended United States operations
| causing my friends to either move their Bitcoin or they didn't
| and had it sold at 3k/coin and can get it from their states
| "lost money".
| px43 wrote:
| > You'd literally make more money today taking your cash and
| starting a business than dumping it in some of these worthless
| pursuits.
|
| Well yeah, starting a business is literally the riskiest thing
| you can do with a wad of cash. Much riskier than
| cryptocurrencies, riskier than most casinos. Of course it's
| going to have higher potential upside, but 75% of companies go
| completely broke within their first 15 years.
| andrewmcwatters wrote:
| You'd also find that most public companies don't increase
| their earnings growth substantially over extended periods of
| time, causing one to lose value correspondingly.
| NicoJuicy wrote:
| And where halve of the raise on crypto is because of tether...
| imaginenore wrote:
| I call BS. Bitcoin's trading volume has been between $20 and
| $50 billion USD _per day_ (in the last year).
|
| Tether's total valuation is $19.4 billion. It's a drop in the
| bucket.
| Yizahi wrote:
| I'd say not less than 75% of this year Bitcoin raise is
| because of tethers. They are printing "money" like crazy
| since early summer.
| pradn wrote:
| If the value of a cryptocurrency is dependent on the community
| of the faithful, it's possible to "start the engines of faith",
| and keep it going for a long time. Fine art has been a large
| component of generational wealth in the West for the past six
| centuries. Of course, art has value as aesthetic objects; the
| same can be said for the potential use of cryptocurrency,
| however nebulous it may be. Religions, too, demand faith and,
| once they get started, often have staying power on the order of
| centuries.
| chki wrote:
| That's a good point, also described in the book Sapiens by
| Harari: In a way Religion, currency and contract law (and
| many other things) are all "made up". They have institutions
| (priests, central banks, lawyers) with magic words (amen,
| price stability, due diligence) and a certain combination of
| magic words creates a new reality out of thin air. Think
| about how weird it is to "sign" an important contract and
| thereby changing you own future or the future of your company
| irrevocably.
|
| While I'm definitely not a fan of crypto currency and
| wouldn't seriously consider investing a single Euro into this
| mess, it's certainly misguided to simply laugh at it being
| "not real", because a lot of important things are. Obviously
| the gp makes some other important points.
| adverbly wrote:
| (difficulty to execute hardest to easiest) - Starting the right
| business
|
| - Picking the right businesses to invest in
|
| - Investing in Crypto(used to be easier than it is now)
|
| - Convincing shmucks to invest in the wrong business
|
| - Investing in index funds
|
| ROI if executed successfully(highest to lowest) - Starting the
| right business
|
| - Convincing shmucks to invest in the wrong business
|
| - Investing in Crypto
|
| - Picking the right businesses to invest in
|
| - Investing in index funds
|
| strategic money making popularity scores
|
| Don't try this at home. Very few people do this well. Those
| that do make a lot of money.
|
| - Picking the right businesses to invest in
|
| - Starting the right business
|
| The "Dominant Strategy" of the market right now
|
| - Convincing shmucks to invest in the wrong business
|
| If you know what you're doing
|
| - Investing in Crypto
|
| What shmucks should do
|
| - Investing in index funds
| UShouldBWorking wrote:
| What a salty jerk.
|
| 1. How else are you going to transfer or store wealth across
| borders?
|
| 2. How do you know which business to start/invest in.
|
| 3. You are just more of the same, angry and lashing out because
| you missed the boat.
| colejohnson66 wrote:
| > I'm enjoying sitting on the sidelines and watching people
| "invest" in a digital "currency" that you cannot spend, does
| not produce cash flow, and whose values are determined by other
| shmucks buying it from previous shmucks.
|
| Is that any different than a stock though? You can't spend
| stocks, they don't produce cash flow (ignoring dividends), and
| their value is what other's are buying and selling it for.
|
| Just as I can offer to sell my share for $10,000 despite it
| trading at $100, I can do the same with Bitcoin. There's a
| reason some people call Bitcoin an "investment."
|
| Now, before anyone thinks I'm advocating Bitcoin, I'm not. I'm
| just pointing out the similarities to the stock market.
| andrewmcwatters wrote:
| If I buy a company, I literally _can_ choose what to do with
| its earnings. That's the point of valuing businesses. You're
| not buying the stock. You're buying a portion of the
| business.
|
| Say you have a drywall company in town. You and the owner are
| good friends and the owner wants to retire but doesn't have a
| family member who is interested in the enterprise. He seeks
| out buyers. You mention to him you're interested but you have
| to ask yourself how much you're willing to pay for the
| business, its fleet, tools, leads and customer database,
| current lease agreements, employees, etc.
|
| Someone has to value that, because it intrinsically has
| value. It's not worthless. You can't rebuild a multimillion
| dollar business over night.
|
| So it turns out if you have this entity that produces cash
| flow, it's worth something. So how much are you willing to
| pay for each dollar of earnings? At the end of the day,
| that's what a business produces for its owners.
| viraptor wrote:
| That applies to small companies where you're significant in
| any way. It does not apply for ~anyone investing in stock
| market. The larger companies neither care what you think
| nor know that you exist. Your investment has no impact on
| it and the price you get is a result of collective belief
| influenced by predicted valuations.
|
| If you invest in large companies on the public stock
| market, it's about the same as investing in cryptocurrency.
| andrewmcwatters wrote:
| I think you make a fair argument, but it breaks down
| immediately under two separate but related
| counterarguments.
|
| 1. If companies don't care what they're valued at, it
| makes M&A infeasible. A business could never be sold.
|
| 2. Selling equity is done to raise cash. If no one cares
| what the business is valued at, equity is worthless, and
| 1. is infeasible.
| viraptor wrote:
| That's not quite what I wrote. The larger companies don't
| care about you as the retail investor, but they of course
| care about valuation. But the valuation is often based on
| some belief / future predictions. Otherwise we wouldn't
| have large changes and following corrections. The value
| of the business does not change that much - the
| collective idea about the value, opportunity, chance of
| speculation, and other things influenced by the
| validation is what changes. Also no company would
| complain about having too high valuation as long as it's
| consistently too high.
| colejohnson66 wrote:
| Sure, voting is something different. I didn't say they were
| the same. I said they were _similar._ Also, I know plenty
| of people who purchase stocks simply to make money: I don't
| know anyone who does to vote.
| mantap wrote:
| The existence of companies that have voting and non-
| voting shares allows us to measure how much voting is
| worth. Google's non voting shares trade at basically the
| same value as their voting shares. Berkshire Hathaway's
| reduced voting right shares trade at basically the same
| value as their full voting right shares.
|
| Whatever drives the value of shares it's not voting
| rights.
| nadahalli wrote:
| Just as an aside, you cannot build the Bitcoin blockchain
| overnight as well - because of proof of work and network
| effects of bitcoin full nodes. That gives it "value". It's
| function is to serve as that - a store of value.
| andrewmcwatters wrote:
| The difference to me is that gold is a precious metal
| with finite tangible volume. It can be used to create
| goods. So, there's value there.
|
| But Bitcoin was designed to be a currency. Certainly the
| software is worth something. Or maybe nothing really.
| Look at other FOSS.
|
| As far as a currency goes though? I don't want my
| currency to fluctuate.
|
| The idea of bargaining with an employer or client to pay
| me "more" this week versus last because the value of the
| currency dropped 11% is ridiculous.
|
| Bitcoin is dead on arrival because it's design doesn't
| evade the central banking problem. A currency cannot have
| a limited supply when value as a production of labor is
| not limited.
| sneak wrote:
| > _If I buy a company, I literally can choose what to do
| with its earnings. That's the point of valuing businesses.
| You're not buying the stock. You're buying a portion of the
| business._
|
| I used to think that, but then I saw what happened to TSLA
| this year. I don't think that these markets are as
| different as you think they are.
| zgydfwekor wrote:
| Why are we ignoring dividends? That's a significant piece of
| stock valuation
| mrbabbage wrote:
| > ignoring dividends
|
| Well, this is a bit of an unfair premise :) the whole _point_
| of equity is that it is a claim on a company 's future
| profits, and companies return profits either via directly via
| dividends or indirectly via buybacks (which push up the value
| of existing stockowner's holdings). It's easy to forget this
| in startup land, where most companies are unprofitable and
| thus have no profits to distribute.
| reader_mode wrote:
| >You'd literally make more money today taking your cash and
| starting a business than dumping it in some of these worthless
| pursuits.
|
| You refuted yourself in the second paragraph. I suspect that
| crazy cash and financial instruments are crowding out the value
| of business investment.
| sithlord wrote:
| You don't buy stocks because the company "makes money" you buy
| stocks because the expectation is that they will make more
| money in the future than they are now.
|
| Also, stocks don't really produce cash flow either - A dividend
| drops the price of each stock by the equivelent amount. So if
| you get a 3% dividend a year, the stock price is dropping by
| the same amount.
|
| I will say, it is easier to quantify that Apple/Google/other
| company is in an industry and makes things, and has
| revenue/expense to look at and thats why they are worth xyz
| today. I can't explain why bitcoin goes up or down. (other than
| whale buys a bunch, so the sheep follow)
| andrewmcwatters wrote:
| No, that's pretty much the number one reason someone would
| purchase equity in a company.
|
| I don't know where the concept of dividends dropping the
| value of a company came from, but from a transactional point
| of view it doesn't make sense. Sure, there are more earnings
| that have not been retained for increasing future earnings,
| but the value does not drop correspondingly. That's just not
| how companies are valued.
|
| 3% of earnings going to shareholders just does not at all
| mean the company drops by 3% in value. Companies are valued
| in a number of different ways, but not one of them is based
| on a 1:1 proportion of earnings. Earnings multiples, yes, but
| what you're suggesting is companies drop equivalent to being
| valued at a P/E ratio of 1.
|
| A company making 1 billion in earnings is not worth 1 billion
| dollars. Certainly not a majority of the time, at least.
|
| I don't understand your comment about stocks not producing
| cash flow. You're buying part of a company. You're not buying
| the certificate.
| centimeter wrote:
| > that you cannot spend,
|
| You can spend it.
|
| > does not produce cash flow,
|
| Neither commodities nor currencies produce cash flow. People
| still reasonably invest in both.
|
| > and whose values are determined by other shmucks buying it
| from previous shmucks.
|
| The value of every other asset in existence is also determined
| by this process.
| FridgeSeal wrote:
| Bought any coffees (in person) with the crypto-currency of
| the week recently?
| hiimtroymclure wrote:
| haha yeah I wasn't able to buy my coffee this morning with
| my gold bar so I threw it away. worthless metal amirite
| vmception wrote:
| Although digital asset prices are not a good proxy for their
| utility, there are plenty of utility for enough people and that
| expands and the addressable market expands.
|
| Crypto businesses are very lucrative so don't be too busy
| asking why when you should be asking how
| andrewmcwatters wrote:
| I'm not asking why, because anyone can find instances of
| mania in history such as this. Beanie babies. Tulips.
|
| The law of large numbers, in this case--the speculative
| experiment of seeking returns from assets that do not produce
| value, will iron this out. History does not repeat, but it
| rhymes often enough for those who know the tune to sing
| along.
| MarkPNeyer wrote:
| The tulip derivative bubble lasted for a few months; beanie
| babies were a year or two at most. Bitcoin is over ten
| years old.
|
| Do you have any examples of a bubble which
|
| - lasted more than 5 years - recovered from previous drops
| in value of more than 50 %?
|
| What kind of evidence would convince you that bitcoin were
| different from these past bubbles?
| andrewmcwatters wrote:
| The dot-com bubble played out over a decade. Bitcoin's
| price history has only been significant for 3 years. It
| otherwise looked like any other penny asset.
| lowdest wrote:
| 3 years to whom? I've been following the price since the
| first "bubble" up to $200, in early 2013.
| vmception wrote:
| That one from one dollar to $32 is the best of all time
| vmception wrote:
| > It otherwise looked like any other penny asset.
|
| Before 3 years ago, it wouldn't have looked like "any
| other penny asset" it would have had a similar chart as
| now because its prior booms and busts 3 years prior to
| that all had similar degrees of amplitude. Just zoom in
| on a chart and pretend that it is summer 2017 with no
| future price history available, just like all the traders
| at the time had.
|
| Regarding "penny asset" again, in price 3 years ago and 6
| years ago Bitcoin would have been hundreds of dollars,
| which is not like penny assets, and even if comparing
| "penny stocks" to a digital commodity the marketcap of
| bitcoin 3 even 6 years ago would be greater than 99.9% of
| anything in the penny stock markets (bulletin boards,
| pink sheets), of which - of course - commodities and
| commodities derivative do not trade on.
|
| You speak in hyperbole for emphasis and that's generally
| fine, but that only works if you know what you are
| talking about and it is pretty clear you just conflate
| concepts over and over again.
|
| Its fine if you personally don't want to or don't have
| the risk profile to be in this market, yes you are
| missing a lot of alpha from sitting on the sidelines. No,
| you don't have any insight to support you sitting on the
| sidelines. But again, it is a completely valid choice to
| do so.
| andrewmcwatters wrote:
| You're seeking some deeper meaning here than one that
| exists.
|
| It's supposed to be a currency. And yet it's not. It
| doesn't exhibit any of the traits of a currency I'd want
| to spend at least. Maybe you're OK with that, so have
| fun. It's fundamental existence doesn't work for me.
| vmception wrote:
| > It's supposed to be a currency. And yet it's not. It
| doesn't exhibit any of the traits of a currency I'd want
| to spend at least.
|
| ah _that_ argument, I read that recently, those are
| skeumorphs, here is a quote
|
| > When it comes to this asset class, there are still
| people that argue against the concept of Bitcoin, mostly
| in reaction to one of its sales pitches without ever
| noticing what this really is. For example, people are
| likely to debate about the "coin" or "currency"
| nomenclature of "bitcoin" and "cryptocurrency"
| respectively. Ultimately, what we have is an asset with a
| fixed known supply, which has some attributes of all
| other asset classes, some improvements, is continually
| updated to have more attributes and improvements, in a
| world with massive inflation. This is the macro story of
| bitcoin, the big picture.
|
| You might begin to notice that I use the term "digital
| asset" and "crypto" in its new asset-based context very
| reliably. It can be transferred peer to peer and I
| frequently do that, I don't use the term currency and I
| typically don't single bitcoin out specifically as I'm
| not usually talking about bitcoin specifically.
| andrewmcwatters wrote:
| The creator was trying to make "electronic cash" that
| evaded central banking manipulation from what I can tell.
|
| Except there's a fixed supply. There isn't a fixed supply
| of value in the world.
| beaner wrote:
| This doesn't mean anything, you need to make an argument
| as to why you believe that for an asset to be successful
| as a currency, its number of units needs to expand or
| contract in relation to value being produced.
| vmception wrote:
| That is correct, there are a lot of things as well as
| incomplete features in the first versions of bitcoin that
| were deprecated by the open source community, some of it
| while in ongoing communication with Satoshi Nakamoto. One
| of the strengths of this asset class is that it has no
| static limitations, while any improvements to its core
| concept must reach overwhelming consensus otherwise it
| debilitates the entire system.
|
| The amendment ratification process has a long lead time,
| even when it is not politicized. The current Taproot and
| Schnoor amendments actually improve the "electronic cash"
| feature set, and has signaling consensus already but they
| must signal for I think 6-12 months before the nodes
| start updating their software. Hopefully wallets and
| exchanges use this time to implement the technology as
| default for the users (but they won't, human nature)
| ZephyrBlu wrote:
| Currency is just a vehicle for the transfer of value.
| What traits should a currency have?
| vmception wrote:
| Rattling off references to other asset bubbles only shows
| how little you know about those asset bubbles and
| undermines the credibility of your strongly held opinions
| on what makes an asset worth paying attention to.
|
| For starters, you should probably start over on whatever
| you think you know about the tulips. Primarily its relation
| to tulip derivatives and the spot market of tulips, and the
| government's role in the dutch derivatives market at that
| time. And secondly, the length of that asset price
| distortion, compared to the crypto markets.
| andrewmcwatters wrote:
| I don't know what you're getting at. It would be like
| trying to better understand the microeconomic factors
| behind Beanie Babies. It's an exercise in futility.
| They're toys and they ended up being resold at prices
| that made no sense to the common man.
|
| Of all the endless knowledge that humanity produces, you
| have to ask yourself whether or not there's meaning in
| pursuing topics endlessly.
|
| They're flowers. This isn't a discussion about some ECON
| 500-level course topic.
|
| There's an academic argument to be had about whether or
| not the accounts of the event are credible, but that's
| not what we're talking about here.
| vmception wrote:
| > This isn't a discussion about some ECON 500-level
| course topic.
|
| It is.
|
| > There's an academic argument to be had about whether or
| not the accounts of the event are credible, but that's
| not what we're talking about here.
|
| It is.
|
| You brought it up. You threw in conjecture. And every
| rebuttal is more complex than you decided to be willing
| to pursue. That doesn't become false by saying we aren't
| talking about something that we absolutely are, and all
| of your hyperbole keeps reinforcing your willing self-
| proclaimed but obvious ignorance.
| andrewmcwatters wrote:
| Yeah, I'm ignorant and flowers can be planted by anyone,
| so great conversation. If you really want to have
| discussions with people maybe try not to focus on
| meaningless pedantry.
|
| Your side of the argument is ad hominem. I'm ignorant.
| OK, great, what's your point? I should rethink tulips.
| Why?
|
| You don't actually make an argument yourself; sure I
| spouted off some things I think are generally bad because
| my statements imply you're not going to find long-term
| returns from that type of "investing," but are you not
| also spouting off some points of your own?
| vmception wrote:
| Okay.
|
| Truce, one last "ad hominem" and I'll move on
|
| > Of all the endless knowledge that humanity produces,
| you have to ask yourself whether or not there's meaning
| in pursuing topics endlessly.
|
| This is a verbose way of saying ignorance.
|
| Okay moving on.
|
| My real argument is that Tulip mania is actually the
| _worst_ poster child of speculative bubbles, as the spot
| market was largely unaffected and for a brief period of
| time the futures market became very divorced. It also
| ended with a local bubonic plague, which means the
| speculators died, so we don 't really know if there was
| merit to the future delivery or not. Also public policy
| played a role in the futures contracts, and for that I
| would have to brush off more literature to expound upon.
| But the idea in popular culture is quite wrong.
|
| I personally did not comment on beanie babies and ignored
| it. My first inclination on that speculative bubble is
| that it was silly, but I didn't comment on it because I
| don't know if there were supply and demand conditions to
| support it, and such imbalances can occur in any asset
| class whether there is utility or not.
|
| Regarding crypto in the light of other speculative asset
| price bubbles, even ignoring the utility that it does
| have for a broader and broader set of people, the staying
| power alone has defeated the bubbles you mentioned. But
| to counter the lowest hanging rebuttal of "but it can
| remain irrational longer than you can remain solvent" you
| have to then counter in how the utility does address a
| wider and wider market. Its not just a payments, it is
| far beyond payments right now, and all of these crypto
| assets inherit the payments capability.
| nadahalli wrote:
| There's your argument for Bitcoin. It cannot be planted
| by anyone, like tulips. Its supply cannot be increased
| arbitrarily. Tulips, in fact, could be a bit more
| complicated. Bitcoin is quite simple that way. Spent
| electricity is stored and traded - and is a good
| yardstick to measure other things, etc. etc.
| natalyarostova wrote:
| The idea that tulips are similar to the tech behind
| ethereum is ridiculous. And that's sort of the implication.
| abetterday wrote:
| There is a whole mindset that has invigorated growth investing
| and has been invigorated by it: success is more luck and social
| proof than correctness or work + winner will take all =
| illusion management is key work + valuations don't matter, but
| getting in does.
|
| It underpins major perspectives on investment, monetary and gov
| policy, and individual agency. It is infuriating, but it has
| worked spectacularly for a long time and has just enough truth
| in it to keep people building castles in the air.
| doggosphere wrote:
| I'm enjoying sitting on the sidelines and watching people
| "save" in a fiat "currency" whose value is not linked to
| anything intrinsic, whose supply can magically be increased at
| the discretion of a few powerful individuals, and whose value
| has been declining relative to almost any tradeable assets.
|
| What a time to be alive. No wonder the M2 money supply is at an
| all time high. No one has any idea of what the intrinsic value
| is of anything.
| andrewmcwatters wrote:
| Central banking as it exists in the US is designed to
| encourage spending. One person's spending becomes another's
| income. Having finite dollars and increasing demand leads to
| a currency that only increases in value. If an asset
| increases in value, there is an incentive to acquire it and
| not part with it.
| jkhdigital wrote:
| No matter how much I read on the subject, I always feel
| like the true nature and complexity of money eludes me. I
| don't mean to disparage your comments, but I believe they
| reflect a lack of appreciation for the magnitude of the
| subject.
| andrewmcwatters wrote:
| I agree with you. I don't mean to suggest economic
| machinations are trivial, but some of the comments in
| this subthread raise counterpoints that I think casually
| dismiss the original points.
| doggosphere wrote:
| Yes, the problem with this power is the inevitable folly of
| short term fixes (through interest rates and government
| stimulus) by mortgaging future value. The pressures and
| short term thinking of believing you can fix your economy
| catches up to everyone eventually.
|
| We are in an era where saving does not exist, where
| interest rates are negative.
| beaner wrote:
| Many believe this to be a good thing. To discuss it we'd
| have to go all the way down the keynesian vs. austrian
| rabbit hole. Someone here might be up for it. I'm content
| to sit on the sidelines and watch it continue to succeed
| and speak for itself.
| andrewmcwatters wrote:
| Yeah, I agree. That's actually a really interesting
| discussion, too!
| elevenoh wrote:
| No brainer considering to buy ETH on the stock market via
| grayscale you're paying a 104% premium. The demand (e.g. within
| registered & margin accounts) is there.
|
| https://ycharts.com/companies/ETHE/discount_or_premium_to_na...
|
| Aside: Seems covid is accelerating understanding & adoption of
| crypto.
|
| I remember when I couldn't perform a wire transfer for a full
| week back in March '20 - at one of the most reputable banks
| globally. I lost money due to this. Never again.
| siliconmountain wrote:
| I don't understand NAV premiums when it comes to ETH. What does
| this mean?
| josu wrote:
| The fund has 100 ETH. Let's assume the price of ETH is $1.
|
| The NAV of the fund is $100. A premium of 100% means that the
| fund is trading at $200.
|
| This means that there is an arbitrage opportunity:
| https://medium.com/amber-group/grayscale-gbtc-and-ethe-
| arbit...
| z77dj3kl wrote:
| That's not an arbitrage due to the lock up period, which
| exposes you to considerable risk.
| anm89 wrote:
| When you say stock market, do you actually mean stock market or
| a crypto exchange? I'm not under the impression that there is
| any way to buy ETH via any stock market.
| skyyler wrote:
| They linked an eth trust that can be traded on OTCQX.
|
| Did you even read their comment?????
| wlesieutre wrote:
| Google found this: https://grayscale.co/ethereum-trust/
|
| Offers a bit more explanation than the parent link.
|
| _> Grayscale Ethereum Trust is solely and passively invested
| in Ethereum, enabling investors to gain exposure to ETH in
| the form of a security while avoiding the challenges of
| buying, storing, and safekeeping ETH directly._
| elevenoh wrote:
| stock-market traded securities that hold crypto underlyings.
| joncrane wrote:
| > I couldn't perform a wire transfer for a full week back in
| March '20 - at one of the most reputable banks globally
|
| Can you explain this in more detail?
| alecco wrote:
| If you cross borders your transaction might get stuck. Also
| some institutions will refuse to send or receive from less
| popular counterparties. Combine that with all the anti-money
| laundering regulations and KYC laws everywhere making a
| bureaucratic mess.
|
| In Swift it's common to specify a routing/intermediary entity
| which usually is a bigger bank or a branch in NYC/London to
| work around this mess. And surprise, you get terrible FX
| rates and magic fees on both ends. One transaction this year
| across my own accounts took 4 business days and cost ~$40,
| within the same continent across two top 10 banks. Now I do
| everything with TransferWise and it's much better. Hopefully
| soon I'll just use crypto. It's my own hard earned money,
| damnit. Fingers crossed.
| flixic wrote:
| Coinbase used to have an Index Fund weighted by market cap.
|
| Launced in 2018[0], it was shut down just a couple of months
| later[1].
|
| From the articles at the time, it seems that the major reason for
| the shut down was that the market was going down, and all
| investors saw losses (because it was 2018 in crypto). Maybe they
| will resurrect this idea now that the market is going up.
|
| [0]: https://blog.coinbase.com/coinbase-index-fund-is-open-for-
| in... [1]: https://www.coindesk.com/coinbase-confirms-shutdown-
| of-crypt...
| StratusBen wrote:
| I would imagine because they knew this was coming.
| pmiller2 wrote:
| That raises a good question: so, there are crypto indices now.
| How do you buy the index? In other words, who is going to
| securitize cryptocurrencies? Until there's a way for someone to
| login to a brokerage account and buy, say, ticker symbol CRYPT,
| I don't see where having an index maintained by a company is
| all that useful.
| modeless wrote:
| There have been many attempts to create ETFs for Bitcoin,
| most famously https://coin-etf.com/. They've all been denied
| by the SEC so far. But an index like this is likely a step
| toward SEC acceptance.
| pmiller2 wrote:
| Why? Why does having an index matter, if the SEC didn't
| even like single coin funds?
| modeless wrote:
| Some of the SEC's objections to Bitcoin ETFs revolved
| around the possibility of market manipulation due to the
| markets being small, unregulated, and overseas. If the
| index is constructed in a way that resists manipulation
| by unregulated overseas exchanges, and if it is used as
| the basis for other products like options in regulated
| domestic markets that gain significant trading volume,
| then it could go some way toward addressing the SEC's
| concerns.
| puranjay wrote:
| I've been dabbling in crypto since the lockdown (all red, but
| I've had fun) and this space is like the wild west early days of
| the internet, with even more scammers. We're past the heady ICO
| days but now, all the scams have moved to Uniswap.
|
| And I might be guilty of being elitist, but I rarely, if ever,
| see founders with A+ tier credentials (Ivy league education,
| FAANG/Investment banking/Mckinsey et al) starting crypto
| businesses.
|
| Most coins are also like penny stocks - the trading volume is so
| low that a single whale can cause big shifts in valuation, making
| pump and dump schemes extremely easy.
| mlerner wrote:
| The claim about people with "A+ credentials" not working in
| crypto is off base.
|
| Look at the founders of crypto companies from top-tier VCs like
| a16z: https://a16z.com/crypto/#vertical-landing-portfolio
| puranjay wrote:
| I should have been more clear: _new_ crypto projects rarely
| have pedigreed founders anymore.
| sneak wrote:
| Rarely, yes, but there are some. I also think you could say
| "new startups rarely have pedigreed founders". Like any
| business class, most new entrants try and fail.
|
| I like a long tail, because it means there's a better
| correlation of profit and skill in being able to
| (sometimes) predict a company's future. When everything is
| a bit safer across the board, you can't convert wisdom into
| money at quite the same rate.
| vmception wrote:
| thats because they all got their reputations sullied when
| their projects last decade tanked in price 99%
|
| Crypto communities do not understand the concept of
| secession in an organization, and believe that if you
| earned revenue then the runway should last forever and you
| should be married to the project forever
|
| It doesnt matter, the same people are launching projects
| now under different aliases. The market doesnt actually
| care. There is no way to discern between a project that
| will screw you over versus one that wont, versus one that
| will rally 5,000% because that has no correlation to
| legitimacy or any gatekeeping of checkboxes
| fourstar wrote:
| >And I might be guilty of being elitist, but I rarely, if ever,
| see founders with A+ tier credentials (Ivy league education,
| FAANG/Investment banking/Mckinsey et al) starting crypto
| businesses. Spoiler: majority of good engineers never worked at
| big tech companies or went to ivy league schools. Also,
| investment banking isn't exactly a shining beacon of trust.
| puranjay wrote:
| I agree. But it is a signal, especially in a field filled
| with as much noise as crypto. When all you have to go by is a
| whitepaper and a website, past performance of the founders
| becomes important.
| vmception wrote:
| Its not a signal at all.
|
| Thats the entire rebuttal. Your premise is flawed.
| puranjay wrote:
| How else do you figure out whether the devs can actually
| do what the whitepaper promises? Just go by their word?
| vmception wrote:
| First you need to understand that most of this "savant
| developer" stuff is entertainment. If you would only
| purchase the tokens of a project because you see a quirky
| pre-diagnosed aspergers dev on twitter and telegram at
| all hours of the day, then thats the way organizations
| are going to continue to market.
|
| Most of the projects are not that complicated and do not
| require specific expertise. And even the "brand new
| blockchains!" are not that complicated, despite being put
| on a pedestal as the highest order of complexity in the
| crypto space, we are talking about linked lists that a
| freshman in college all get exposed to.
|
| Secondly it is completely fine and normal to just
| outsource the development to contracting firms. Because
| these are normal businesses booking revenue after they
| create and sell digital assets and just hiring a few
| developers to do it.
|
| I don't find that controversial and its completely normal
| to any other software development cycle, although I would
| like the speculators to understand that more in their
| decision making process. What's _not_ normal is
| daytraders pretending to be angel investors.
|
| To answer your question, I would say the only thing to
| look for is token distribution schedule and if there are
| ways to alter that such as minting tokens without any
| input from the community, or if the treasury tokens are
| locked in a smart contract or not.
|
| Regarding the actual product you are still always taking
| them by their word.
|
| I would argue taking a less passive approach and trying
| to help the development effort, or being in a position
| to! You might actually land the development contract,
| which can be more lucrative than speculating to begin
| with.
| timdaub wrote:
| I've been navigating the space since 2014. It's not too
| difficult if you know the tech. Here's some fat tony
| advice:
|
| Good project/founders/devs:
|
| - Are tightly connect to other good projects (e.g. check
| Twitter)
|
| - Are shipping features/products continously (and talk
| about it)
|
| - Adjust their vision/roadmap appropriately (crypto
| changes really quick)
|
| - Are value-driven
|
| - Try to improve upon difficult but possible engineering
| problems (e.g. we build a smart contract for a EUR stable
| coin compared to "we solve remittance for all the
| unbanked")
| vmception wrote:
| > - Try to improve upon difficult but possible
| engineering problems (e.g. we build a smart contract for
| a EUR stable coin compared to "we solve remittance for
| all the unbanked")
|
| +1 to that.
|
| I think in the past it was more tempting to try to solve
| all the problems at once, because it was easy to perceive
| how many problems there were and that not enough people
| were perceiving it.
|
| But now there is enough mindshare and activity to just
| focus on one thing and that made more sense to begin
| with.
| miguelmota wrote:
| What exactly are you seeing on Uniswap that's a scam?
|
| Why do you think people need credentials to create a startup if
| they have a good idea?
| puranjay wrote:
| > Why do you think people need credentials to create a
| startup if they have a good idea?
|
| They don't. But good credentials are a signal in a crowded
| field where most projects are just whitepapers.
|
| They might not matter in the startup world where you usually
| launch with at least an MVP. But in the crypto world, most
| new coins are just whitepapers. You at least need to know
| that the founders have the technical knowhow to bring the
| whitepaper to life.
| miguelmota wrote:
| I think it's simply the nature of crowdsourced funding that
| creates more ideas that get funded, both good and bad.
|
| For example, anyone can start a funding campaign to launch
| a product on Indiegogo and most of the projects on there
| aren't revolutionary.
|
| The same thing occurs in crypto where anyone can invest in
| a new ideas via a token sale or DAO because crypto is
| borderless and open to anyone, analogous to Indiegogo
| projects getting funding from non-institutional investors
| and many of those projects becoming a flop.
| shrimpx wrote:
| The current 24h BTC volume on Coinbase alone is 280M. For
| comparison TSLA (which is a hot stock) is 60M and GOOG is a
| miserable 2-3M...
|
| I know you said "most coins" and I think your statement is
| true, that the bottom 90% are shit coins, but the coins that
| everyone knows trade at higher volume than many popular stock
| tickers.
| smabie wrote:
| How could you be in the red? the number of risk free arbitrage
| opportunities is frankly staggering. Everywhere you look:
| futures, options, defi, etc there are juicy arbs all over the
| place.
|
| For example, short term btc futures are often trading at 30%
| annualized basis over spot. By taking on zero risk (except for
| exchange risk), you can easily capture somewhere between a 20
| and 30 percent annualized return.
|
| It's just too easy, and many professional crypto trading firms
| are making in excess of 25% per _month_ with low net crypto
| delta
| myth_buster wrote:
| Was this the reason prices spiked last month?
| anthonyhodlbot wrote:
| I built a way to enable users to index the cryptocurrency market
| via exchange APIs and have been operating it for about 3 years
| now.
|
| We've done about 100M in transactions. Some of the indices we
| built were a top 20 by market cap (10% cap), top 30 by squared
| root market cap.
|
| If you guys want to check it out: https://www.hodlbot.io
| safog wrote:
| Hey - this looks great. Couple of questions:
|
| - Does re-balancing create a taxable event? If so, given a
| bunch of these cryptos trade in BTC pairs, do you generate all
| the documents necessary to file taxes?
|
| - What do you feel about the top 10 currencies changing so
| rapidly over time? I think every month (or maybe two) the top
| 10 list significantly changes. Doesn't that accumulate a lot of
| trading activity and fees? Given the volatility, is there any
| point to holding the top 10 instead of just holding solid /
| consistent cryptos like BTC and ETH?
| gruez wrote:
| >Does re-balancing create a taxable event?
|
| if the rebalancing involves selling something, then yes you
| have to pay capital gains on it. The only way to avoid this
| is wrapping your trading activity in a ETF.
| giantg2 wrote:
| More stuff for me to lose money on...
| ahelwer wrote:
| Wonder how the weighting will work. If you don't massively
| overweight smaller coins, you'd just end up holding like 80%
| Bitcoin & Ethereum with very little of anything else.
| wp381640 wrote:
| Probably the best strategy tbh, you only have to go to a few
| spots down to find some bad coins and the edge of the top 10 to
| find some outright scams
| anm89 wrote:
| Bitcoin cash comes in at #7 on coinmarket cap and while I
| wouldn't call it a scam, it's not a respectable project IMO.
| And it quickly gets worse from there over the next 10.
|
| Strongly agree that the best bucket is going to be composed
| of a vast majority of bitcoin and ethereum.
|
| I don't believe crypto is on the whole in a bubble right now
| but the fact that Bitcoin Cash has a market cap of >$5B is
| one of the biggest things that makes me question that.
| lawn wrote:
| That you take Bitcoin Cash as an example of a non-reputable
| cryptocurrency is pretty sad. (And it's #5 not #7.)
|
| Ripple is for instance not a cryptocurrency, and everyone
| knows about the scam that is Tether.
|
| Litecoin has zero development (except to copy what Bitcoin
| is doing) and the development in Bitcoin itself has some
| serious issues.
| anm89 wrote:
| It has the number 7 next to it on coinmarketcap. That
| seems a good indication of it being 7th on coinmarketcap.
| tyrust wrote:
| I feel like such a slanted take should come with a
| disclaimer of your holdings.
| lawn wrote:
| I hold much more Monero than anything else.
| safog wrote:
| I think BCH is a reasonable idea, block size is a problem
| with BTC and increasing it is fine even if it makes it less
| likely that normal users will run full nodes.
|
| The scumminess of it comes from people like Roger Ver who
| peddle it as the "true" BTC. e.g., bitcoin.com is owned by
| the BCH folks and they have several intentionally
| misleading things there that try to re-brand BCH as BTC and
| BTC as BTC legacy or whatever.
| anm89 wrote:
| I agree, that community is it's own worst enemy.
| seibelj wrote:
| Bitcoin Cash is a solid project, multiple implementations
| of the client, real developers. I don't personally own any,
| but it isn't a fraud.
| ajay-d wrote:
| I was more shocked to hear there are at least 550 actively
| traded coins.
| safog wrote:
| It's a good time to write a crypto whitepaper and put up
| a fancy website. It's not alt-season yet .. when it
| starts is when you see the real shitcoin proliferation.
| Wouldn't be surprised if the number is in the 1000s.
| puranjay wrote:
| I would assume you'd go by the market cap and trading volume of
| different coins. So BTC and ETH would dominate, but you'd also
| have to make room for LINK, XRP, DOT, etc.
| TuringNYC wrote:
| It wouldnt be uncommon to have multiple indices and one that is
| "Crypto ex-BTC ex-ETH"
| bitxbitxbitcoin wrote:
| ETH and BTC dominance is closer to 73% at the moment.[1] But
| your point is still very much valid.
|
| [1] https://www.coingecko.com/en
| pmart123 wrote:
| Initially, the index might be more for performance benchmarking
| for crypto funds than it would be for passive investing?
| wp381640 wrote:
| So crypto funds can follow hedge funds in demonstrating how
| well they're underperforming the market
| greenonions wrote:
| And just like hedge funds, this will give them better
| access to capital...
| baby wrote:
| I'd be interested in an index tracking the prices of San
| Francisco rents. I'm waiting for the low to buy.
| latchkey wrote:
| https://www.zumper.com/blog/rental-price-data/
| elevenoh wrote:
| Issue a futures instrument tied to a rent price oracle outcome
| ;)
| aazaa wrote:
| I suspect this move will provide new motivation to approve an ETF
| that tracks the index.
|
| The Winklevoss Bitcoin ETF, years in the making, appears to be
| stalled as do the other Bitcoin ETFs.
| eli wrote:
| Can I use this to go short on bitcoin?
| jonahss wrote:
| There's a few cryptocurrency index funds already, where the fund
| itself is completely automated and shares of the index are tokens
| on an ethereum contract. So you buy in with ethereum, then can
| liquidate you shares back to ethereum whenever you want. Still
| relies on a real-world organization, but pretty cool.
|
| https://crypto20.com/en/
| NikolaeVarius wrote:
| Is this just a way of buying multiple cryptocurrencies without
| needing multiple clients and a fee?
| mrosett wrote:
| No - indices are basically a (possibly weighted) average of
| prices. They're informational, not an investment product.
|
| That said, investment companies will frequently launch funds
| that track some index. So the investment products like what
| you're describing may follower.
| dmurray wrote:
| These days, it's common for the tail to wag the dog, and to
| have an index that only exists to be tracked by some fund.
| (The Index of Stocks that Fund Manager X likes).
|
| It's not clear to me from the press release whether S&P Dow
| Jones are doing that here, or if they're planning to have a
| flagship index that lots of fund managers will be trying to
| track or beat.
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