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Pretend alice bought bitcoin for $10. Alice sells to bob when it reaches $1,000. The price is currently $13,500. Alice gained $990. Who lost $990?
by reefoctopus 9y ago
Pretend alice bought bitcoin for $10. Alice sells to bob when it reaches $1,000. The price is currently $13,500. Alice gained $990. Who lost $990?
- aardvark291 9y agoBob is out $1000 until he finds a "greater fool". The zero-sum aspect occurs if at some point all participants cash out.
- IronKettle 9y agoThis argument is also true of any equity that doesn't pay out dividends. Most people wouldn't consider the stock market to be a zero-sum game. Maybe in the ultimate long-term, but not within a time frame that's meaningful for anyone.
- Blackthorn 9y agoNo, it isn't. Dividends are only one way for stocks to return value. There are also buybacks and mergers.
- IronKettle 9y agoEr, buybacks and mergers both involve a "greater fool" (either the company itself or the acquiring company).
- jhwang5 9y agoIsn't it obvious that buying shares in a public company gives you proxy, fractional ownership of a business that's generating cashflow? You don't get that with crypto. Crypto, on the other hand, literally requires someone else to take you out in order for you to profit.
- nerfhammer 9y agoYou're forgetting book value and future earnings valuation. If a company earns $X billion per year, even if they don't issue a dividend, if their market cap dropped to fifty bucks an acquirer could swoop in and pay themselves the company's earnings directly for as long as it keeps running, or shut it down and sell off the book value for a profit. If there's no dividend, any earnings + book value still exists as a potential profit to someone who would own the company. So you just have to assume that in the future someone would be willing to buy $X for $X-1.