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Let's call a spade a spade. This market is a bust, and there's no value-driven economic model to justify cryptos collectively being worth $50B-$100B. With any

• jf- 8y ago
  BTC is still around $3500, not bad for something that was worth a few hundred three years ago. I'm not willing to call it dead just yet. There are plenty of assets that make little sense to value, and yet they are. The bias here is to assume that cryptocurrency is useless or valueless because the technology isn't all it's hyped up to be, and that is true, but value is not a rational game. Let's wait and see how it develops.
  • muhneesh 8y ago
    I'm not arguing that BTC hasn't returned value to earlier investors. I'm arguing that cryptocurrencies don't have the same economic model as most startups - which is essentially the expected future value generated by their operations discounted to the presented. There are startups within that definition that have a low probability of achieving such - but it's the same fundamental economic model that applies to Apple that applies to a seed-stage biotechnology startup. This doesn't extend to cryptocurrencies - given that currencies don't generate operating cash flows.
    • jf- 8y ago
      Sure, there's no rational way to predict what bitcoin "should" be worth like with a startup, or any other company. Exactly because it's less a technology and more a social construct, as you say it's based on momentum and prayers, it's worth what people think it's worth. We may not be disagreeing, I took "this market is a bust" and the picaxe seller analogy to mean that you foresaw cryptocurrencies dying out completely, but you may have just been referring to the crash that's already happened.
      • muhneesh 8y ago
        Yes - we probably don't disagree. I believe that there's probably some technological value in digital currencies. In terms of the "market being a bust", the statement was a criticism of the current valuation of the cryptocurrency market - particularly, that it is based on a cauldron of unholy factors that I mentioned in the first post.
      • hndamien 8y ago
        I don't quite understand the staunch love for the current payment and monetary system versus private peer to peer payments.
      • tptacek 8y ago
        Wait, isn't that a false equivalence? Plenty of compelling rational arguments have been made for a $0 Bitcoin: its value is based on mania, it competes unfavorably with other cryptocurrencies, and it sees minimal (and decreasing!) real-world use as a medium of exchange.
        • jf- 8y ago
          What am I falsely equating? I don't think that the store of value argument is absurd, even with real world assets like gold their value is really just socially constructed. I don't see why it couldn't in principle be the same for bitcoin, it just needs to be the biggest cryptocurrency and concrete the idea of it's own value in people's minds for a long enough time, until they take it for granted. Whether that actually will happen I don't think anyone can say. I think it's a mistake to assume that the value here has to do with the technology, e.g. the "best" cryptocurrency must win. It's likely just long-term momentum.
    • mhluongo 8y ago
      Some tokens are designed as a right to cash flows... see "work tokens".
      • nosuchthing 8y ago
        Do you know of any "work tokens" which are not minted for free and sold to speculators before entering the closed loop economy of their giftcard network? http://www.niemanlab.org/2018/11/i-had-to-borrow-money-to-pay-my-rent-civils-tokenomics-has-left-some-of-its-journalists-wondering-where-their-salary-is/ http://www.niemanlab.org/2018/11/i-had-to-borrow-money-to-pa...
  • robryan 8y ago
    Last year it was $20000, a month or so ago $6000. I can't see any major changes in the underlying utility of the coin throughout that period.
    • jf- 8y ago
      Yeah, it doesn’t really have utility. It’s a thing other people will trade things for based on a kind of collective insanity. It just happens to be the same kind of collective insanity that we apply to lots of things, only we dress this thing up in tech-speak while we dress others up in aesthetics.
    • beerlord 8y ago
      The utility has actually decreased. Before this huge speculative boom, shady characters could use cryptocurrencies to buy drugs and launder money. Now, with KYC/AML implemented by exchanges worldwide, plus the outright banning of the coins in some countries, those activities are much more difficult. If you want simply transfer money internationally, services like TransferWise do it better than any coins.
  • arcticbull 8y ago
    The question is how much, if any, of that price is derive from actual market activity and not scams like front running, tape painting, spoofing and just plain tether. If people actually tried to move any serious amount of it out it might just fall down on itself, that number may not be real.
• dorgo 8y ago
  >It's gambling, not investing What would you pay for something worth 10^13 with a probability of 10^-10? Yes, it is more gambling than investing. But still...
  • ahh 8y ago
    Less than a tenth of a billionth of my net worth: https://en.wikipedia.org/wiki/Kelly_criterion https://en.wikipedia.org/wiki/Kelly_criterion
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• Moodles 8y ago
  Indeed Warren Buffet made a similar point: if you buy a farm, you're buying the land, the potential to grow crops that people actually consume, etc. whereas cryptocurrency doesn't really have a purpose except as a store of value. It's not a productive asset; it doesn't produce anything. It is a bit like buying gold. https://www.youtube.com/watch?v=LtITDtZPYEw https://www.youtube.com/watch?v=LtITDtZPYEw
  • craftyguy 8y ago
    Well, except in the case of gold it has a real use (electronics and jewelry, to name a couple).
    • Moodles 8y ago
      Of course, although probably most people investing in gold are using it as a store of value rather than to create jewelry.
      • latchkey 8y ago
        ... and jewelry has (artistic) value beyond the value of what it is made of.
      • newnewpdro 8y ago
        Isn't the whole point of this thread that gold is superior to bitcoin as a store of value because it also has intrinsic value/utility? If most people investing in gold are using it as a store of value, it says nothing of the other uses for the material. When you're making an investment in something, it's a feature for that thing to have more, not less, potential applications.
        • Moodles 8y ago
          Haha personally I am a little baffled that my one small comment on gold sparked such a big thread. Yeah, gold is kinda similar to bitcoin, kinda different. I don't think much of what has been said is particularly new to most people.
• joshuaunitus 8y ago
  I don't see it exactly like this. I see where you're coming from, but some of us who buy cryptocurrency believe in the technology and back only projects that we believe will have a future. It is still speculative on an investment level, but I also use this technology and hope to build on these protocols in the future. The space has a lot of growing up to do and I hate the "wen lambo" mentality because that is not what this is about for me and I believe it deviates attention away from technology which is what is actually important here. Not every blockchain project will succeed, many will fail Your analogy is flawed though, Coinbase wouldn't be selling pickaxes they are simply providing a means of digital asset exchange as well as selling the digital assets directly. Mining hardware would be the pickaxe.
  • reitzensteinm 8y ago
    That might be the most literal interpretation of "selling pickaxes during a gold rush" I've ever seen. The analogy is absolutely fine.
    • joshuaunitus 8y ago
      Still disagree, the pickaxe would be a tool to harvest the good. Coinbase sells the good directly and provides a exchange to trade with others.
      • reitzensteinm 8y ago
        The idea behind the phrase is that when a ton of speculation money is flooding in to a market, you should make money by proving services to the speculators, not by speculating yourself. Creating mining hardware is actually more speculative than an exchange, because you're picking winners and losers based on what your hardware can accelerate. Selling pickaxes to miners has been used to describe platforms like CDNs or game engines like Unity. The fact that there is something called a miner in this context is a red herring. A metaphorical one, I mean.
        • joshuaunitus 8y ago
• jayd3e 8y ago
  For those of us in the industry, we recognize that this is all one grand experiment. In my mind, it is worth all of the hype b/c digital currencies pose the following two big benefits: - Digital currency is a new asset class and an improved form of money. Money as a concept has been around since the dawn of recorded history and it has gone through a number of iterations since. We have only been using nation-backed currencies for between 100-200 years depending on where you set the departure from the gold standard. For most of human history, we have had "hard money", meaning that no one had the power to inflate our money and lower its value(through gold). Nations have that ability today, and it has had far reaching implications. Digital currency has the potential to reduce or eliminate government control of our money. If you think this is a libertarian vision, you would be wrong. Just look at the internet and how it has quickly changed the publishing industry. Digital currencies are also programmable, meaning they have features that normal money simply does not have. Shared custody of funds and time locked funds are just two great examples. - Digital currency paves the way for superior payment networks. The ability to send digital currency is cheaper, faster, and more global than any payment network ever invented. Our traditional financial system is steeped with trust-based relationships, manual checks, competing parties, and fraud. This results in inefficiencies from top to bottom. This all results in bank wires taking between 4-14 days, whereas a digital currency transaction takes an hour to settle on average. In the future, digital currency will also be capable of sending smaller value transactions than ever before. If you think that aspects of this industry are ridiculous and mere gambling, you would be correct. As a person in the industry, I tend to ignore much of the industry. That being said, there are some incredibly novel ideas that are motivating the best of us to get this system working. If we succeed, we will have a much more open, fast, less expensive, and global financial system to use.
  • arcticbull 8y ago
    I suggest you learn more about the financial space. In no world do bank wires take 4 to 14 days. Trust is an efficiency. Inflation is not bad because you’re not supposed to be using Cash as an investment you’re supposed to be investing it, as long as you’re not doing that under a mattress, inflation is a relevant to you other than as a forcing function toward investment. Nobody wants to be their own bank, it sucks that’s why we have banks.
• sjg007 8y ago
  Crypto needs a middle man bank to make the market to allow people to use it to buy stuff.
• artpop 8y ago
  Murdered with words. I have to admit to more than a little schadenfreude. Future generations would likely want to sent back time cops to arrest crypto miners for their egregious waste of energy.
  • joshuaunitus 8y ago
    I believe it is important to look into other consensus algorithms that are not as energy heavy, but I don't think mining should be considered a crime. Also, it is important to remember that the detrimental cost of energy waste is dictated by how we are getting that energy. If the source of energy is clean, efficient and abundant then there is less need to ration our energy use.
  • bitrrrate 8y ago
    +1
  • lkdjjdjjjdskjd 8y ago
    Seriously? Are you sure they are worst "wasters" of energy on the planet right now? What about cars, and eating meat, and Christmas lights, and so on? Have you checked your own energy consumption today?
    • edoceo 8y ago
      Not "worst" just "egregious". You made a strawman, down-votes incoming.
      • lkdjjdjjjdskjd 8y ago
        I had to look up "egregious", and as a foreign speaker, I am afraid I don't see a significant difference to "worst". The argument made was that time travelers would go through the effort to punish miners, of all people. There is a lot of other senseless wasting of energy going on theses days.
    • wycs 8y ago
      All these things get something in return. For all thats been spent on mining, we are getting 7 transactions per second in exchange. It is absurd.
• bouncycastle 8y ago
  See that's the thing. You shouldn't buy any of these for investing - only for use and only when you need to. These are all mostly 'utility tokens' being added to Coinbase. One of the biggest areas that these might see usage in the future is decentralized finance and decentralized gaming. Probably the most interesting project now is DAI, and no, people definitely do not buy DAI because it's going to go up! There are some other great projects listed there, and I urge you to take a closer look at them before you dismiss them.
  • jpatokal 8y ago
    And exactly which utility tokens have real usage today, as opposed to vague promises about tomorrow? As far as I can tell, the primary real-world use case for cryptocurrencies today appears to be money laundering.
    • flyGuyOnTheSly 8y ago
      DAI actually works as a stablecoin today. It's pegged to the USD using crypto collateral.
      • bouncycastle 8y ago
        Yes! You can actually do this on the blockchain right now: buy DAI on a decentralized exchange (or mint your own DAI by opening a Collateralized Dept Position), then lend it out for interest. (Last time I've checked, the paying interest rates were very attractive). The tech is still very experimental, but has been functioning well for almost a year, despite this year's deep crypto market crash. I also think those who think crypto is only useful for speculation or crime are very much stuck with the 2013 opinion of it.
        • jpatokal 8y ago
          And why do you think those interest rates are "very attractive"? Are you by any chance picking up pennies in front of a steamroller? https://en.wikipedia.org/wiki/Taleb_distribution https://en.wikipedia.org/wiki/Taleb_distribution
• crunchlibrarian 8y ago
  Terms like "market" and "gold rush" are probably too generous, more like "pyramid schemes unraveling".
• deleted 8y ago
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• retrogradeorbit 8y ago
  > there's no value-driven economic model to justify cryptos collectively being worth $50B-$100B. Of course there is. You are just starting from your ideology (that there must be no value to them) and work backwards to your dismissal and so you have closed your mind to the possibilities. Here's 1.8 trillion of possible value, just to help put things in perspective http://www.colorsmagazine.com/stories/magazine/85/story/drugs http://www.colorsmagazine.com/stories/magazine/85/story/drug... Not saying it's right. Just that there is much you have not considered.
  • arcticbull 8y ago
    That’s all fine and good, but that doesn’t mean that most of those cryptocurrencies are suited to addressing that market. Pretty much only Zcash and Monero are. Those represent only a tiny fraction of the market. The big problem for crypto though is that if it is only used for narcotics, and there’s no plausible use case otherwise, it’ll all get outlawed. For it to support that business it needs to have an equally large legitimate use case and it definitely does not. Otherwise the early adopters will have just about as easy a time cashing out of this is as they would the underlying narcotics.
• gfodor 8y ago
  The cryptocurrency "hope ponzi" is predicated on a relatively unfalsifiable hypothesis: given enough time and effort, geeks using math can create software that will completely nuke our existing economic system. The result of this unfalsifiability is the rapid "boom-bust" bubble cycles we see in crypto prices: - 'informed' speculators buy early on the thesis that 'the old problems have been fixed from the last bubble.' - typical bubble dynamics play out like 'greater fool' and 'your plumber is buying' rise up to the peak - "problems" are brought to the forefront in the speculators' minds in response to events (in this last cycle, it was 'the network can't scale' in response to DoS attacks and 'the SEC is bringing the hammer' in response to their memo(s) for example) - alternative, more foundational valuation measures fail to emerge through the cycle other than the primary hope and speculation in the promise of cryptocurrency, and so the bubble pops once a few whales start harvesting gains - people lick their wounds, the press stops talking about crypto for a while, and people stop checking the tickers. developers are further enticed to keep working in the space because they can optimistically whiteboard out theoretical solutions to a good chunk of the "problems" (the ones that are due to technology or design limitations.) this is happening right now within the ethereum community, all hope is being pinned on the next set of features. - in 1-2 years when plausible 'solutions' to the primary problems identified in the last cycle emerge the cycle repeats. note this doesn't mean they actually need to solve the problems, just be plausible enough to induce FOMO in early speculators that 'crypto's time has come.' if you recall this cycle there were memes that took hold around ethereum smart contracts being the missing piece, and that ICOs were going to incentivize innovation properly. the only way in my mind that this cycle breaks is either a) a more grounded valuation metric comes forward based upon demonstrated value for crypto which rapidly causes some kind of pseudo-market efficiency (but still lots of vol) or b) interest in the ecosystem wanes so much (due to other emerging tech stealing talent or enough people being burned) that the brain drain causes the tech to stagnate and the sentiment that "crypto is dead" takes hold alongside this inertia or c) some fundamental flaw eradicates so much wealth so quickly that it affects most people in the economy. These seem hard to imagine right now, so my guess is we have at least a few more cycles. Two signals that the ecosystem is perma-dead (if you ask me) is if we see: - No active development going on due to "emotional capitulation" by most all tech talent (def not the case now) - We see a crash which directly affected a large % of 401ks (not possible bc bitcoin et al are not fully securitized yet) Market price action in and of itself doesn't say very much (to me) about if we will see another cycle.
• gammateam 8y ago
  > Compares equities to digital assets that function like commodities. Then ironically makes a gold commodity analogy The startups that issue the digital commodities are doing ok and can still raise. The digital assets they created would be valued more by their utility and scarcity, which would have ebbs and flows just like a commodity. It is fine that they dont have utility or scarcity, if the infrastructure and ux around them improves than they will and you can pick them up from the lows. There is a reason that commodity trading never made it into the retail investor portfolio, as there is no reason to have passive investment in them As long as you, and the retail investor, continues expressing their unfamiliarity with this market through equity investment analogies, the information asymmetry will maintain massive and advantageous to those that do have a valuation model.
• nootropicat 8y ago
  This changes with proof of stake. If you own enough tokens, you can 'stake' them and run a node that generates blocks. In return, you get transaction fees. This makes the token effectively a share in the network.
  • arcticbull 8y ago
    In exchange the rich get richer. This is why we shouldn’t outsource fiscal policy to a bunch of people who have no idea how economics works.