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> 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

> 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 6y ago
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.
- colejohnson66 6y ago
  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 6y ago
    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.
- sneak 6y ago
  > 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.
- nadahalli 6y ago
  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 6y ago
    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.
    - zalkota 6y ago
      It’s a monetary network that stores energy at no power loss. What makes Facebook valuable? THE NETWORK
    - shawnz 6y ago
      The intrinsic value of gold (i e. for jewellery/electronics uses) seems likely to be much less than the current market value of gold. So I don't think those limited use cases are a good explanation for gold's value. Also, Bitcoin was not necessarily designed to replace every fiat currency for every single everyday spending use case and it's a strawman to imply that if it can't do then it's "dead on arrival". There are plenty of important possible use cases which don't presuppose the collapse of all fiat currencies. Finally we don't really know the volatility of Bitcoin in the long term. It hasn't existed long enough. Looking at the price behavior in the first decade of its existence is not likely to give you a promising picture of any new asset class.
- viraptor 6y ago
  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 6y ago
    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 6y ago
      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.
      - deleted 6y ago
        [deleted]
zgydfwekor 6y ago
Why are we ignoring dividends? That's a significant piece of stock valuation
mrbabbage 6y ago
> 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.
itsoktocry 6y ago
>Is that any different than a stock though? Nobody is claiming that stocks will replace fiat currency, though. In fact, it makes no sense.
- colejohnson66 6y ago
  Was Bitcoin created to replace currencies? Or was it created to be another one? Genuine question. Because if it’s the first, you’d have an argument, but if it’s the latter, it’s a straw man to make the claim you did.
shawnz 6y ago
I think Bitcoin has a promising future, but it is not like investing in stocks. When you invest in stocks it is sort of like giving a loan to a corporation so that they can spend your money on growth, to create more profits, which allows them to become more valuable. That is why stocks are expected to continually grow in value over time. Bitcoin might be many things, like a store of value, transaction network, etc., but it is not really a long term investment vehicle except maybe as an inflation hedge.
- andrewmcwatters 6y ago
  You don’t invest in stock. You invest in companies. Companies are expected to grow over time. A share does nothing. It’s a percentage.
  - shawnz 6y ago
    Just semantics, you clearly interpreted my point just fine.

andrewmcwatters 6y ago

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.

colejohnson66 6y ago
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 6y ago
  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.
sneak 6y ago
> 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.
nadahalli 6y ago
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 6y ago
  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.
  - zalkota 6y ago
    It’s a monetary network that stores energy at no power loss. What makes Facebook valuable? THE NETWORK
  - shawnz 6y ago
    The intrinsic value of gold (i e. for jewellery/electronics uses) seems likely to be much less than the current market value of gold. So I don't think those limited use cases are a good explanation for gold's value. Also, Bitcoin was not necessarily designed to replace every fiat currency for every single everyday spending use case and it's a strawman to imply that if it can't do then it's "dead on arrival". There are plenty of important possible use cases which don't presuppose the collapse of all fiat currencies. Finally we don't really know the volatility of Bitcoin in the long term. It hasn't existed long enough. Looking at the price behavior in the first decade of its existence is not likely to give you a promising picture of any new asset class.
viraptor 6y ago
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 6y ago
  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 6y ago
    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.
    - deleted 6y ago
      [deleted]

zgydfwekor 6y ago

Why are we ignoring dividends? That's a significant piece of stock valuation

mrbabbage 6y ago

> 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.

itsoktocry 6y ago

>Is that any different than a stock though? Nobody is claiming that stocks will replace fiat currency, though. In fact, it makes no sense.

colejohnson66 6y ago
Was Bitcoin created to replace currencies? Or was it created to be another one? Genuine question. Because if it’s the first, you’d have an argument, but if it’s the latter, it’s a straw man to make the claim you did.

shawnz 6y ago

I think Bitcoin has a promising future, but it is not like investing in stocks. When you invest in stocks it is sort of like giving a loan to a corporation so that they can spend your money on growth, to create more profits, which allows them to become more valuable. That is why stocks are expected to continually grow in value over time. Bitcoin might be many things, like a store of value, transaction network, etc., but it is not really a long term investment vehicle except maybe as an inflation hedge.

andrewmcwatters 6y ago
You don’t invest in stock. You invest in companies. Companies are expected to grow over time. A share does nothing. It’s a percentage.
- shawnz 6y ago
  Just semantics, you clearly interpreted my point just fine.