9 ms·

Is Buying Crypto Assets “Investing”

20 points by ca98am79 8y ago

drcode 8y ago
Any discussion of whether "X is Y" like this is kind of pointless. More than that, it just devolves into sub-arguments. In this case, it will devolve into arguing whether an "investment" requires purchasing things with "intrinsic value", and furthermore whether the term "intrinsic value" has any sort of objective meaning at all, anyway. At the end of the day, if people prefer to call me a "gambler" or "speculator" or "investor" for owning Bitcoin, any of those terms are fine.
- asfasgasg 8y ago
  Most of the time, I agree with you. Especially with a lot of the pointless pedantry that people argue about on here. However, the question of whether X should be termed an investment or speculation can be quite important in people's lives. Marketing in general is really important, especially marketing around which many people base serious financial decisions. If the label you put on the box leads people to expect one thing, and what's in the box is something else, that's problematic. This is part of why the SEC cares so much about who various securities are marketed to. And since, so far, the SEC has not stopped in to stop BTC et al from being marketed to The Average Jane, it's important to unofficially call out unrealistic claims and misleading terminology.
  - Jommi 8y ago
    I initially agreed with the parent comment, but you drive a good bargain as well with yours. Still, I think the actual problem is not that it needs to be defined, but that we are trying to define it in the scope of singular current definition, while we actually need to implement a new definition, possibly with the help of mixing current definitions.
    - asfasgasg 8y ago
      The whole reason I made my comment was going through a back and forth with myself about whether there was a case to be made here. I'm still not positive, so I hope I'm not driving that bargain harder than it deserves to be driven. I do 100% agree that the default stance on debating definitions should be that one ought not, and one ought instead be more specific. Maybe the real thing to take care of is that most investors are really innocent and we have to be very careful about what kinds of expectations we give them (if we care about ethics, at any rate).
- themodelplumber 8y ago
  When you set a boundary like that (X is a Y because of reasons Z1, Z2) you gain systematization leverage. You now have a technology or framework for which you can develop various tools and other informatic resources. So even if it doesn't necessarily matter what people call you, it may be worth your time to understand where and why they set boundaries and conditions for activities in which you are involved. This could save you a lot of energy that might have otherwise been wasted in repeating hard lessons. Even if you are less "don't reinvent the wheel" and more "NIH" and just want to learn in isolation, you could also gain some helpful tips on defining your own boundaries.
- vertexFarm 8y ago
  Our minds are largely associative computers. Virtually all human thought consists of comparing something to something else. It can be meaningless, but it can signify an important concept as well.
- sshine 8y ago
  I agree very much that the question 'Is buying crypto assets "Investing"?' is quite unclear. I would rather ask the questions 'Is buying crypto assets speculative?' (It depends on your intent and ideology.) or 'Is buying crypto assets risky?' (Yes. If you need to ask, your risk model is probably not very quantified.)
anonu 8y ago
Assuming a crypto asset is a currency, then no. You cannot invest in a currency. You can only speculate. Investing confers ownership in an income producing asset of which you have a percentage ownership stake in.
- lopatin 8y ago
  Bitcoin is not a currency (it's a commodity) meaning other coins are also not currencies because Bitcoin is the most currency-like of the bunch.
  - MatthewDPX 8y ago
    So if it's a commodity, it's just speculation. Nobody invests in "corn" or "oil" for retirement.
    - deleted 8y ago
      [deleted]
    - dahdum 8y ago
      They are more similar to commodities like gold, silver, or other precious metals in that they behave much like monetary assets. Tons of people do invest in gold/silver for retirement.
      - Xixi 8y ago
        Gold/silver are also speculative assets, not investments (per Warren Buffet definition, which I like and use myself). Just because they are speculative assets doesn't mean it's a bad idea to buy them. An investment would be putting your retirement money in a startup for instance. And that would be a very very risky investment with near guarantee of complete loss of capital.
    - MR4D 8y ago
      I disagree - especially with you second sentence. I think you’d have a bunch of owners of XOM and CVX, etc stock that would beg to differ with you. And if you don’t like those, take a plane out to Midland, Texas and drive around a bit - you’ll find quite a large number of people who do invest in oil. They may be further out on the risk spectrum than you are, but if they aren’t investing, then you can’t call buying FB or GOOG an investment either.
beefsack 8y ago
The shifting semantics of "crypto" is incredibly frustrating; it makes it very hard to talk about in the technical sense. I know that language is in a constant state of flux (my background happens to be linguistics) but it seems the mainstream media has a real penchant for butchering technical terms.
- vertexFarm 8y ago
  It's also starting to get really weasel-wordy. There's a billion crypto scams going on these days. It's not the only thing going on, but there's a hell of a lot of old-school cons and then there's a hell of a lot of softer, less malicious scamming that is just based on over-confidence in a very buzzy trend.
Ologn 8y ago
> Bitcoin and Zcash are stores of value that allow users to participate in this decentralized application space without the need for fiat currencies. How is Bitcoin a store of value? An ounce of gold is a store of value - someone had to do the work of finding and mining it, and it can be used to fill teeth and conduct electricity. Gold is portable, uniform, durable and divisible, so it is a commodity that has good currency qualities. But almost every commodity that can be sold is a store of value - what value does Bitcoin have? Bitcoin boosters scout around the world for some commodity to compare it to and fail, as it is inherently valueless and ultimately worthless, i.e. ultimately worth nothing. So they come across the US dollar, an item whose value has a question mark over it. So they say "this is like a dollar". Of course, one can then just say a joke cryptocoin like Dogecoin should have a market cap that is over half a billion dollars. And it does ( https://coinmarketcap.com/currencies/dogecoin/ https://coinmarketcap.com/currencies/dogecoin/ ). Even Dogecoin's creator says the half billion dollar market cap is all just a big joke. Bitcoin doesn't even have the portable quality of a good currency. Bitcoin transactions have hit large transaction latency issues (or had them when I last looked into it when I did a transaction a few months ago). So the "currency" isn't even good as a currency any more. US fiat currency was indirectly backed by gold until 47 years ago, and with the window then shut, it is now doubly-indirectly backed by that gold (the US did not get rid of its 8000 tons of gold at Fort Knox and other locations in 1971 when, apparently, a magic wand was waved over Treasury department printing presses, giving them the power to create value). I won't go into why the dollar and Bitcoin are not equivalent here (but if someone makes a coherent explanation why the US did not get rid of its 8000 tons of gold, I will). At least Pets.com, subprime new housing development real estate and so forth had value at some level. These cryptocurrencies have no value. They are all going to crash. I wondered for a while when and how that will happen, but now I know - things like Dogecoin and its clones will bring it down. Another thing - anyone who bought Bitcoin, Ethereum or Lumen in January is currently under water. All three currencies dipped at that time, and in fact all cryptocurrencies dipped simultaneously. So when the (total) crash comes, I predict all cryptocurrencies will go to zero. As Keynes said, markets can remain irrational longer than you or I can remain solvent.
- Jommi 8y ago
  >How is Bitcoin a store of value? An ounce of gold is a store of value - someone had to do the work of finding and mining it, and it can be used to fill teeth and conduct electricity. Gold is portable, uniform, durable and divisible, so it is a commodity that has good currency qualities. But almost every commodity that can be sold is a store of value - what value does Bitcoin have? Why do we keep going over this? There are tons of material online to help you to the other side of this argument, not to mention the article itself. One value of Bitcoin is in its decentralization. How can you say that is worthless? Is it worthless to have an alternative means of payment that is available to nearly anyone around the world and is not controlled by a single authority? I would very much like to see your thoughts on this topic, but please, before responding take a moment to think. Your current comment is so full of vitriol that I think it might blind your rationality.
vertexFarm 8y ago
I always hear people saying that blockchain is being used for all kinds of interesting things that gives them intrinsic value, but that's not why bitcoin's price has gotten so high (and recently dropped so dramatically, but still very high). Bitcoin and most other cryptocurrency is almost exclusively used for speculation. People generally buy bitcoin for one reason and one reason only: to get rich from selling it later. A currency driven in this great a percentage by speculation is a dangerous bubble. Until it lives up to the hype and this blockchain ecosystem actually exists in a density large enough to realistically support the currency's valuation, I would listen to Warren Buffet's advice. There's a lot of adherents who are reaching fanatical levels of devotion to blockchain, and those types will explain away any unbeliever's lack of faith. The fact remains--cryptocurrency is almost entirely driven by speculation. A sustainable currency doesn't do that. A Ponzi scheme does that. A lot of the blockchain applications seem really kind of flimsy and hollow, as if they are really there to prop up a crypto fortune in the hopes that some kind of ecosystem develops and prevents the inevitable crash. Those probably aren't going to work. Once again, it points to fact that the primary purpose of the currency is currently just a get rich quick scheme.
- 21 8y ago
  Speculation is a critical part of the process. It's called "signaling". If price of Aluminium goes up a lot, people will be "signaled" to build more Aluminium mines, Aluminium smelters and so on. All of these people are driven by profit. Yet their profit-seeking provides a service, at least until Aluminium will not be needed anymore. The same for bitcoin. The ever-increasing price signals all kind of people to do all kind of things. This is critical for adoption.
  - vertexFarm 8y ago
    Thing is, that aluminum industry in your example existed before the investment and independent from the investment. People need aluminum and are going to buy it. If you have a signal to purchase more currency, and that currency's value only goes up if more people show up to buy it at a higher price, and those people can only get a payout if another tier of people show up and pay a higher price... See the shape of that structure? Vaguely... triangular? Legitimate investment takes advantages of inefficiencies in pricing. It's not possible to always sell a commodity at the absolute ideal and correct price at the correct time, especially for an industry just getting its start. So people with a lot of assets can take some commodity, hold it for a period of time, then sell it wisely to take advantage of an existing industry. Or nurture it and reap the rewards when it is successful. See how cryptocurrency is potentially different? Most of the price of crypto is not supported by any industry. It's people buying more in hopes of getting rich quick. It's absolutely a bubble in its current incarnation, although hopefully it develops a more diverse underpinning as time goes on. If it develops that foundation then it will be like investing in a fledgeling industry, nurturing it until it can become self-sustaining and profitable. If those applications don't come through, it's just another scheme.
Cypher 8y ago
Its speculating, same as penny stops isn't investing.

20 points by ca98am79 8y ago

Any discussion of whether "X is Y" like this is kind of pointless. More than that, it just devolves into sub-arguments. In this case, it will devolve into arguing whether an "investment" requires purchasing things with "intrinsic value", and furthermore whether the term "intrinsic value" has any sort of objective meaning at all, anyway. At the end of the day, if people prefer to call me a "gambler" or "speculator" or "investor" for owning Bitcoin, any of those terms are fine.

asfasgasg 8y ago
Most of the time, I agree with you. Especially with a lot of the pointless pedantry that people argue about on here. However, the question of whether X should be termed an investment or speculation can be quite important in people's lives. Marketing in general is really important, especially marketing around which many people base serious financial decisions. If the label you put on the box leads people to expect one thing, and what's in the box is something else, that's problematic. This is part of why the SEC cares so much about who various securities are marketed to. And since, so far, the SEC has not stopped in to stop BTC et al from being marketed to The Average Jane, it's important to unofficially call out unrealistic claims and misleading terminology.
- Jommi 8y ago
  I initially agreed with the parent comment, but you drive a good bargain as well with yours. Still, I think the actual problem is not that it needs to be defined, but that we are trying to define it in the scope of singular current definition, while we actually need to implement a new definition, possibly with the help of mixing current definitions.
  - asfasgasg 8y ago
    The whole reason I made my comment was going through a back and forth with myself about whether there was a case to be made here. I'm still not positive, so I hope I'm not driving that bargain harder than it deserves to be driven. I do 100% agree that the default stance on debating definitions should be that one ought not, and one ought instead be more specific. Maybe the real thing to take care of is that most investors are really innocent and we have to be very careful about what kinds of expectations we give them (if we care about ethics, at any rate).
themodelplumber 8y ago
When you set a boundary like that (X is a Y because of reasons Z1, Z2) you gain systematization leverage. You now have a technology or framework for which you can develop various tools and other informatic resources. So even if it doesn't necessarily matter what people call you, it may be worth your time to understand where and why they set boundaries and conditions for activities in which you are involved. This could save you a lot of energy that might have otherwise been wasted in repeating hard lessons. Even if you are less "don't reinvent the wheel" and more "NIH" and just want to learn in isolation, you could also gain some helpful tips on defining your own boundaries.
vertexFarm 8y ago
Our minds are largely associative computers. Virtually all human thought consists of comparing something to something else. It can be meaningless, but it can signify an important concept as well.
sshine 8y ago
I agree very much that the question 'Is buying crypto assets "Investing"?' is quite unclear. I would rather ask the questions 'Is buying crypto assets speculative?' (It depends on your intent and ideology.) or 'Is buying crypto assets risky?' (Yes. If you need to ask, your risk model is probably not very quantified.)

anonu 8y ago

Assuming a crypto asset is a currency, then no. You cannot invest in a currency. You can only speculate. Investing confers ownership in an income producing asset of which you have a percentage ownership stake in.

lopatin 8y ago
Bitcoin is not a currency (it's a commodity) meaning other coins are also not currencies because Bitcoin is the most currency-like of the bunch.
- MatthewDPX 8y ago
  So if it's a commodity, it's just speculation. Nobody invests in "corn" or "oil" for retirement.
  - deleted 8y ago
    [deleted]
  - dahdum 8y ago
    They are more similar to commodities like gold, silver, or other precious metals in that they behave much like monetary assets. Tons of people do invest in gold/silver for retirement.
    - Xixi 8y ago
      Gold/silver are also speculative assets, not investments (per Warren Buffet definition, which I like and use myself). Just because they are speculative assets doesn't mean it's a bad idea to buy them. An investment would be putting your retirement money in a startup for instance. And that would be a very very risky investment with near guarantee of complete loss of capital.
  - MR4D 8y ago
    I disagree - especially with you second sentence. I think you’d have a bunch of owners of XOM and CVX, etc stock that would beg to differ with you. And if you don’t like those, take a plane out to Midland, Texas and drive around a bit - you’ll find quite a large number of people who do invest in oil. They may be further out on the risk spectrum than you are, but if they aren’t investing, then you can’t call buying FB or GOOG an investment either.

beefsack 8y ago

The shifting semantics of "crypto" is incredibly frustrating; it makes it very hard to talk about in the technical sense. I know that language is in a constant state of flux (my background happens to be linguistics) but it seems the mainstream media has a real penchant for butchering technical terms.

vertexFarm 8y ago
It's also starting to get really weasel-wordy. There's a billion crypto scams going on these days. It's not the only thing going on, but there's a hell of a lot of old-school cons and then there's a hell of a lot of softer, less malicious scamming that is just based on over-confidence in a very buzzy trend.

Ologn 8y ago

> Bitcoin and Zcash are stores of value that allow users to participate in this decentralized application space without the need for fiat currencies. How is Bitcoin a store of value? An ounce of gold is a store of value - someone had to do the work of finding and mining it, and it can be used to fill teeth and conduct electricity. Gold is portable, uniform, durable and divisible, so it is a commodity that has good currency qualities. But almost every commodity that can be sold is a store of value - what value does Bitcoin have? Bitcoin boosters scout around the world for some commodity to compare it to and fail, as it is inherently valueless and ultimately worthless, i.e. ultimately worth nothing. So they come across the US dollar, an item whose value has a question mark over it. So they say "this is like a dollar". Of course, one can then just say a joke cryptocoin like Dogecoin should have a market cap that is over half a billion dollars. And it does ( https://coinmarketcap.com/currencies/dogecoin/ https://coinmarketcap.com/currencies/dogecoin/ ). Even Dogecoin's creator says the half billion dollar market cap is all just a big joke. Bitcoin doesn't even have the portable quality of a good currency. Bitcoin transactions have hit large transaction latency issues (or had them when I last looked into it when I did a transaction a few months ago). So the "currency" isn't even good as a currency any more. US fiat currency was indirectly backed by gold until 47 years ago, and with the window then shut, it is now doubly-indirectly backed by that gold (the US did not get rid of its 8000 tons of gold at Fort Knox and other locations in 1971 when, apparently, a magic wand was waved over Treasury department printing presses, giving them the power to create value). I won't go into why the dollar and Bitcoin are not equivalent here (but if someone makes a coherent explanation why the US did not get rid of its 8000 tons of gold, I will). At least Pets.com, subprime new housing development real estate and so forth had value at some level. These cryptocurrencies have no value. They are all going to crash. I wondered for a while when and how that will happen, but now I know - things like Dogecoin and its clones will bring it down. Another thing - anyone who bought Bitcoin, Ethereum or Lumen in January is currently under water. All three currencies dipped at that time, and in fact all cryptocurrencies dipped simultaneously. So when the (total) crash comes, I predict all cryptocurrencies will go to zero. As Keynes said, markets can remain irrational longer than you or I can remain solvent.

Jommi 8y ago
>How is Bitcoin a store of value? An ounce of gold is a store of value - someone had to do the work of finding and mining it, and it can be used to fill teeth and conduct electricity. Gold is portable, uniform, durable and divisible, so it is a commodity that has good currency qualities. But almost every commodity that can be sold is a store of value - what value does Bitcoin have? Why do we keep going over this? There are tons of material online to help you to the other side of this argument, not to mention the article itself. One value of Bitcoin is in its decentralization. How can you say that is worthless? Is it worthless to have an alternative means of payment that is available to nearly anyone around the world and is not controlled by a single authority? I would very much like to see your thoughts on this topic, but please, before responding take a moment to think. Your current comment is so full of vitriol that I think it might blind your rationality.

vertexFarm 8y ago

I always hear people saying that blockchain is being used for all kinds of interesting things that gives them intrinsic value, but that's not why bitcoin's price has gotten so high (and recently dropped so dramatically, but still very high). Bitcoin and most other cryptocurrency is almost exclusively used for speculation. People generally buy bitcoin for one reason and one reason only: to get rich from selling it later. A currency driven in this great a percentage by speculation is a dangerous bubble. Until it lives up to the hype and this blockchain ecosystem actually exists in a density large enough to realistically support the currency's valuation, I would listen to Warren Buffet's advice. There's a lot of adherents who are reaching fanatical levels of devotion to blockchain, and those types will explain away any unbeliever's lack of faith. The fact remains--cryptocurrency is almost entirely driven by speculation. A sustainable currency doesn't do that. A Ponzi scheme does that. A lot of the blockchain applications seem really kind of flimsy and hollow, as if they are really there to prop up a crypto fortune in the hopes that some kind of ecosystem develops and prevents the inevitable crash. Those probably aren't going to work. Once again, it points to fact that the primary purpose of the currency is currently just a get rich quick scheme.

21 8y ago
Speculation is a critical part of the process. It's called "signaling". If price of Aluminium goes up a lot, people will be "signaled" to build more Aluminium mines, Aluminium smelters and so on. All of these people are driven by profit. Yet their profit-seeking provides a service, at least until Aluminium will not be needed anymore. The same for bitcoin. The ever-increasing price signals all kind of people to do all kind of things. This is critical for adoption.
- vertexFarm 8y ago
  Thing is, that aluminum industry in your example existed before the investment and independent from the investment. People need aluminum and are going to buy it. If you have a signal to purchase more currency, and that currency's value only goes up if more people show up to buy it at a higher price, and those people can only get a payout if another tier of people show up and pay a higher price... See the shape of that structure? Vaguely... triangular? Legitimate investment takes advantages of inefficiencies in pricing. It's not possible to always sell a commodity at the absolute ideal and correct price at the correct time, especially for an industry just getting its start. So people with a lot of assets can take some commodity, hold it for a period of time, then sell it wisely to take advantage of an existing industry. Or nurture it and reap the rewards when it is successful. See how cryptocurrency is potentially different? Most of the price of crypto is not supported by any industry. It's people buying more in hopes of getting rich quick. It's absolutely a bubble in its current incarnation, although hopefully it develops a more diverse underpinning as time goes on. If it develops that foundation then it will be like investing in a fledgeling industry, nurturing it until it can become self-sustaining and profitable. If those applications don't come through, it's just another scheme.

Cypher 8y ago

Its speculating, same as penny stops isn't investing.