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I buy bitcoin, it changes in value, I cash out, I now have a different amount of money than I put in. How is that not an investment?
by DerfNet 9y ago
I buy bitcoin, it changes in value, I cash out, I now have a different amount of money than I put in. How is that not an investment?
- tptacek 9y agoI put money down on a blackjack table, play a hand, win, and cash out with more money than I put in. How is that not an investment?
- tannerwj 9y agoBecause it is not luck that determines the outcome. However speculative Bitcoin is, it isn't based on luck
- tptacek 9y agoBecause...?
- tannerwj 9y agoBecause it is based on supply and demand, it's just more volatile than what you're used to. Doesn't make it luck
- vec 9y agoThe price is a function of the supply and demand. The supply is mostly a function of time, as defined by the blockchain's algorithms. The demand is a function of what, exactly? Still looks mostly like luck to me.
- WhiteOwlLion 9y agoyou have hodlers which reduces supply even more. demand is a function of greed.
- bluntfang 9y agoblackjack tables are based on supply and demand. the margins on blackjack are ~51% in favor of house. if they don't get enough traffic, a swing could take the house. So if there isn't enough demand, than it's not financially feasible for the house to play those odds.
- Lewton 9y agoHow can you tell?
- Artemis2 9y agoRight, it’s based on market manipulation.
- GenericsMotors 9y agoCorrect that it's not entirely luck, at the moment its price is being propped up by Bitfinex. Whenever BTC value starts to dip below 10K USD, they just print more Tethers (USDT) and start buying up coins at above market price...and there's a new upswing. It's not at all sustainable, though.
- chaboud 9y agoBy the way, given sufficient demonstrated counting ability and savvy, I would be willing to invest in a blackjack team. And it's worth noting that people do invest in currency. It is not merely an exchange vehicle.
- fileeditview 9y agoBecause "real" currencies are tied to an economy?
- darawk 9y agoA better question might be: How is anything an investment? If the stock market is priced efficiently, it is as much a gamble as Bitcoin. The stock market is of course not perfectly efficient, but it is likely extremely efficient relative to the knowledge of your average retail investor. Which means that buying Bitcoin or other cryptos is no more a gamble than any stock market investment with a similar volatility.
- dlubarov 9y agoA perfectly efficient market can still have investment opportunities with nonzero expected gains, as long as there's a shortage of capital.
- paulgb 9y agoIf the market is priced perfectly efficiently you will still make money because your capital is put to work. A perfectly efficient market just means you can't beat that intrinsic rate of return.
- ZitchDog 9y agoWouldn't this expectation be built into the current price of the stock?
- paulgb 9y agoYes, but money in the future is valued at a discount today. So even if an asset is 100% sure to be worth $100 a year from today, the market will value it at slightly less than that because there's no sense tying up $100 in capital for a year unless you get some profit in return.
- brokensegue 9y agothe risk you take for those returns means the price won't fully match the expectation. but you can mitigate that risk via diversification.
- darawk 9y ago
- clarkmoody 9y agoIn gambling, you stand to lose your entire stake if luck is against you. In (spot) market movements, your value goes down as the market declines, but you don't stand to lose everything in a moment.
- vec 9y agoImagine a raffle where tickets cost $1. After the winner is drawn, the house agrees to buy back the first few losing tickets for $0.99, the next few for $0.98, and so on until they work down to $0. The players don't stand to lose everything in a moment, but it's still pretty clearly gambling.
- pixie_ 9y agoWhen you put money into blackjack you're not buying an asset. A crypto coin is an asset that can be held. Just like a share of a company, or a dollar itself.
- adrr 9y agoI can hold a lottery ticket.
- solotronics 9y agoyes but it's a bad analogy because the odds are known and if you don't win the lotto the ticket is worth nothing. all bitcoins are equally valuable ( fungibility ).
- vec 9y agoBut all cryptocurrencies are not equally valuable, and there's no reason to think that all of any given crypto won't eventually equally be worth (arbitrarily close to) $0. I can imagine a lottery where usually nobody wins anything but every now and then everyone who bought a ticket wins collectively. It's still a lottery.
- pixie_ 9y agoHow is that different from any other asset? One day it can be valuable, the next it might not. It doesn't change the fact that it is immutable.
- vec 9y agoOther assets are tied to real phenomena. With stocks, for example, I can make a prediction about a company's future performance, buy or short accordingly, and expect that if I am correct I will profit. I may be wrong about my prediction, but if I am correct then I've got far better than chance odds of also being correct about the future price of the asset. Without making any further predictions about the state of the world I can equally easily imagine the price of Bitcoin in 5 years being $100 or $100,000. Neither price feels "wrong" the way it would if, say, Google's stock price rose or dropped by an order of magnitude without the company changing anything.
- a13n 9y agoThat is an investment! Just a bad one. :P
- DSingularity 9y agoWhen I lose a hand I have nothing in the end. When I buy a bitcoin I won’t lose it if the price goes down until I sell it.
- Alex3917 9y agoBitcoin is backed by an asset with a tangible value that may or may not increase over time. What exactly is Blackjack backed by?
- briatx 9y agoBitcoin isn't backed by an asset. It's not really backed by anything other than people's expectation that it is worth something now (and it will be worth more in the future). This is true even for the miners, since they would not build out infrastructure and burn energy if bitcoin was worth zero.
- adjkant 9y agoThe stock market and crypto are both gambles, one riskier than the other.
- asciimo 9y agoIs that an analogy for stock trading or cryptocurrency trading?
- 45h34jh53k4j 9y agoIm watching the blackjack game for 9 years, year on year more people are winning and making big bucks. This game is clever because nobody can cheat. Even time I think I should play another hand, some new technology gets invented that makes more money for the players in the game. Even some of the scammy non-blackjack games that people keep making, which act like blackjack (and the players also keep making money). But there is no way i will ever take part in blackjack because gambling is wrong and stupid.
- ktta 9y agoThe same way betting on a coin flip is not an investment. Too much risk.
- dguo 9y agoIf you asked that question to Warren Buffett, he would probably point you to Benjamin Graham's distinction between investment and speculation: "An investment operation is one which, upon thorough analysis promises safety of principal and an adequate return. Operations not meeting these requirements are speculative." http://buffettpedia.com/2017/08/investment-versus-speculation-2/ http://buffettpedia.com/2017/08/investment-versus-speculatio...
- ram_rar 9y agoyou can analyse the hell of the stock and still be wrong. Markets can stay irrational much longer than you think!
- xya3453 9y agoInvesting connotes some kind of exchange for rights, usually equity. When you invest in say APPL, you are buying a stake of the company. Bitcoin, like the $US or € doesn't make anything. Bitcoin is not an investment, you're just speculating that it's exchange value will rise.
- fortythirteen 9y agoIs buying gold not an investment?
- xya3453 9y agoBuying gold to hold and then sell at a higher exchange rate is pure speculation.
- fortythirteen 9y agoBut is it not an investment?
- vasilipupkin 9y agoI don't think so, as gold has no inherent expected return.
- fortythirteen 9y agoThe combination of its increasing scarcity and real world use doesn't drive a return?
- vasilipupkin 9y agono. real world use explains why it has value not why this value should increase in expectation relative to general level of inflation.
- bradleyjg 9y ago
- nxsynonym 9y agoThere is no value created in exchange for your money down. It's just betting that the value will change arbitrarily (or through manipulation).
- lechiffre10 9y agoThat's speculation not an investment.
- aje403 9y agoI think when he said " real-world value created through actual investments " - the underlying idea behind an investment is that you provide capital to someone who is trying to build a business that will hypothetically provide jobs and value to society. Putting money into something and taking more money out is a bastardization of the term in that interpretation. That is simply not the case here - this has simply been a mass wealth re-distribution event. People are basically printing and trading pokemon cards at this point.
- AznHisoka 9y agoProviding capital to someone only occurs in the IPO stage. The stock market is a secondary market with people trading stocks, not providing capital.
- aje403 9y agoSeveral different points and comparisons here. Providing capital to someone does not only occur in the IPO stage. I'm not even sure how to go about refuting that statement; that's... not how finance works anywhere on the planet. People do trade stocks with the expectation of stocks rising or falling in varying periods. People also hold stocks for long terms and then sell them afterwards. Just like cryptocurrencies! However - it's just not the same. A share in a company has evolved and subjected to regulation for hundreds of years. An IPO is a highly regulated legal process involving investment banks and many lawyers (and that is how it should be - so that we don't have con artists running ICOs). It is sold by a company that generally provides jobs and services to society. It represents an actual piece of ownership in that company - if you have enough shares, you impact how that company is run. There are many other points I could make differentiating the two comparisons entirely.
- AznHisoka 9y agoFirst, let's ignore cryptos because I'm talking about IPO's only (albeit the thread is about cryptos) "Providing capital to someone does not only occur in the IPO stage. I'm not even sure how to go about refuting that statement; that's... not how finance works anywhere on the planet." First, I provided that statement in the context of the parent comment. In the equities market, providing capital occurs only in IPOs, not in the secondary market. When you buy Apple stock, you typically are exchanging money with another person who is selling it. You are not providing capital to Apple. Second, you could've gone about refuting my statement by providing a counter-example. It's that easy. Otherwise you're simply just trying to put me down, and make me look like an idiot, without explaining why.
- danmaz74 9y agoIn Economics, investment has a different meaning from the common use. I think that's the reason of the misunderstanding. https://en.wikipedia.org/wiki/Investment_(macroeconomics) https://en.wikipedia.org/wiki/Investment_(macroeconomics)
- aphextron 9y ago>I buy bitcoin, it changes in value, I cash out, I now have a different amount of money than I put in. How is that not an investment? This sentence explains everything about the world we now live in.
- golangnews 9y agoDon’t confound investment and speculation.
- akhatri_aus 9y agoIf it doesn't generate cash flows its not an asset. When you invest in something you're buying an asset.
- handzhiev 9y agoInvestment is to buy something that has value even if there is no one to sell it to.