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Don't get me wrong, crypto is incredibly bubbly. It is physically stressful to keep up with at times. The bubbles are observable, though, and we have over a de

by elif 6y ago

Don't get me wrong, crypto is incredibly bubbly. It is physically stressful to keep up with at times. The bubbles are observable, though, and we have over a decade of time elapsed in order to show that in addition to bubbles (and full corrections!) on that basis of hype, there is an overall growth trend that results from the mathematical scarcity which .com shares lack. As far as comparison to a dotcom, they had to make payroll, nurture a profitable market, predict changes, outpace rivals etc. Many ways to suffer catastrophic death in that equation. whereas a bitcoin has no such requirement. All it has to do is not inflate too bad.

FabHK 6y ago
> All it has to do is not inflate too bad. So, question: All the other coins, which are also strictly limited mathematically, they are also good long term investments, since they won't inflate too bad? They do all have "an overall growth trend that results from the mathematical scarcity", do they?
- elif 6y ago
  You can't essentialize "all the other coins" as if bitcoin is just one. Coins which do not have first mover, publicity, hash power, market cap, and capital inflow rate on their side like bitcoin does will behave entirely differently, and must justify themselves existentially. Why bitcoin? because dollars suck. Why altcoin? is a legitimate question, but bitcoin has flaws. Personally I like to believe that the 'flip' will occur at some point to ethereum due to its technical and monetary superiority, but I think its more likely that due to the network effect, bitcoin will keep its crown as main coin.
xyzelement 6y ago
// All it has to do is not inflate too bad. Just for fun, I want to share what I conceive as an easy disaster scenario for crypto. Let's be clear on one thing - the dollar price of BTC is driven by supply and demand. To the extent that more and more people want to buy it, while the available supply for sale is limited, the price goes up. Let's be soberly clear that the there's another side of the coin - IF there was a case where there were relatively few buyers compared to the supply for sale, the price tumbles. Then to conceive a disaster scenario we just need to imagine a situation where this happens: where people are selling and there's nobody to buy. I can easily conceive such a scenario. Let's first think about who's driving the buying. I guess there are now institutional players but there's also a lot of "wow I heard people made money in BTC so I am going to convince my wife to let me buy some instead of fixing our roof" people. To the extent that such people enter the market, they drive the price up. At some point, such people will be tapped out of dollars, and the world will be tapped out of such people. In other words, every dollar that someone was going to aggressively/recklessly (from their own position) put into BTC, is already in BTC. Let's imagine an idealized scenario where no new dollars are going into BTC because of the above, and no dollars are being taken out (because people are HODLing) and ignore mining for this. In this scenario, the price gets "stuck" at whatever level the last trade happened. Now the thing about people who invest money they can't afford, they very quickly need it. The guy's wife says "the roof has been leaking for 3 months now and you aren't making money in BTC, sell it and fix the roof." So the guy goes to sell - but there's nobody to sell it to. There's no people sitting on the sidelines because as mentioned above, everyone's already in. So he has to drop the price lower and lower until someone buys it. Now other people see that the price has moved down. So the prior "greater fool" things "wait, I cashed out my 401k because BTC is going up, but it just sat flat for 3 months and now moved down and I am losing money, OH SH*T, BAIL (or, his wife makes him have this "realization"). So that drops the price even more. Now there are other people who are looking at this downward movement and going "wait a minute, 3 months ago I felt like I was going to be able to buy an island with my BTC holdings, but now it's starting to look like I can only buy a condo. I better cash some out just in case it slides more because my loss aversion is kicking in and I was bullish before, but now I am experiencing the feeling of "not as rich as I once felt" and it's messing with me. But this guy doesn't have that many willing people to sell to either, so it keeps sliding and snowballing down. This is obviously an idealized scenario but you can hopefully see the forces that would cause any bubble to unravel. Once the supply of naive inbound dollars dries out (as it inevitably must), the people who invested last because they were sure it was going to be easy money, get nervous, sell, price slides, that unravels more people who now have something to lose whereas before they felt invulnerable, etc etc all the way down.
- elif 6y ago
  I think you should be concerned when your reasoning quickly slips into narrative.
  - xyzelement 6y ago
    Sure? It was an illustration of supply and demand as I envision them operating as a bubble pops. I think narration is a good way to convey it. Do you follow it but disagree that it's a possible outcome, or something else?
- pontifier 6y ago
  There's a sucker born every minute

by elif 6y ago

FabHK 6y ago

> All it has to do is not inflate too bad. So, question: All the other coins, which are also strictly limited mathematically, they are also good long term investments, since they won't inflate too bad? They do all have "an overall growth trend that results from the mathematical scarcity", do they?

elif 6y ago
You can't essentialize "all the other coins" as if bitcoin is just one. Coins which do not have first mover, publicity, hash power, market cap, and capital inflow rate on their side like bitcoin does will behave entirely differently, and must justify themselves existentially. Why bitcoin? because dollars suck. Why altcoin? is a legitimate question, but bitcoin has flaws. Personally I like to believe that the 'flip' will occur at some point to ethereum due to its technical and monetary superiority, but I think its more likely that due to the network effect, bitcoin will keep its crown as main coin.

xyzelement 6y ago

// All it has to do is not inflate too bad. Just for fun, I want to share what I conceive as an easy disaster scenario for crypto. Let's be clear on one thing - the dollar price of BTC is driven by supply and demand. To the extent that more and more people want to buy it, while the available supply for sale is limited, the price goes up. Let's be soberly clear that the there's another side of the coin - IF there was a case where there were relatively few buyers compared to the supply for sale, the price tumbles. Then to conceive a disaster scenario we just need to imagine a situation where this happens: where people are selling and there's nobody to buy. I can easily conceive such a scenario. Let's first think about who's driving the buying. I guess there are now institutional players but there's also a lot of "wow I heard people made money in BTC so I am going to convince my wife to let me buy some instead of fixing our roof" people. To the extent that such people enter the market, they drive the price up. At some point, such people will be tapped out of dollars, and the world will be tapped out of such people. In other words, every dollar that someone was going to aggressively/recklessly (from their own position) put into BTC, is already in BTC. Let's imagine an idealized scenario where no new dollars are going into BTC because of the above, and no dollars are being taken out (because people are HODLing) and ignore mining for this. In this scenario, the price gets "stuck" at whatever level the last trade happened. Now the thing about people who invest money they can't afford, they very quickly need it. The guy's wife says "the roof has been leaking for 3 months now and you aren't making money in BTC, sell it and fix the roof." So the guy goes to sell - but there's nobody to sell it to. There's no people sitting on the sidelines because as mentioned above, everyone's already in. So he has to drop the price lower and lower until someone buys it. Now other people see that the price has moved down. So the prior "greater fool" things "wait, I cashed out my 401k because BTC is going up, but it just sat flat for 3 months and now moved down and I am losing money, OH SH*T, BAIL (or, his wife makes him have this "realization"). So that drops the price even more. Now there are other people who are looking at this downward movement and going "wait a minute, 3 months ago I felt like I was going to be able to buy an island with my BTC holdings, but now it's starting to look like I can only buy a condo. I better cash some out just in case it slides more because my loss aversion is kicking in and I was bullish before, but now I am experiencing the feeling of "not as rich as I once felt" and it's messing with me. But this guy doesn't have that many willing people to sell to either, so it keeps sliding and snowballing down. This is obviously an idealized scenario but you can hopefully see the forces that would cause any bubble to unravel. Once the supply of naive inbound dollars dries out (as it inevitably must), the people who invested last because they were sure it was going to be easy money, get nervous, sell, price slides, that unravels more people who now have something to lose whereas before they felt invulnerable, etc etc all the way down.

elif 6y ago
I think you should be concerned when your reasoning quickly slips into narrative.
- xyzelement 6y ago
  Sure? It was an illustration of supply and demand as I envision them operating as a bubble pops. I think narration is a good way to convey it. Do you follow it but disagree that it's a possible outcome, or something else?
pontifier 6y ago
There's a sucker born every minute