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I don't get how everybody is just making a killing right now. What goes up must come down? Are people going to get uber burned? Like somebody who put in 50% of

I don't get how everybody is just making a killing right now. What goes up must come down? Are people going to get uber burned? Like somebody who put in 50% of their net worth today, and maybe it drops?

lazylizard 6y ago
why must it come down? there is no gravity.
- eloff 6y ago
  All bubbles pop eventually. I think there's little doubt crypto is a bubble right now. Maybe it pops tomorrow, maybe it goes on for years. I don't know, nobody really does.
  - chillacy 6y ago
    If you value stocks based on book value + dividends and discounted cash flow, this bubble's been going on for almost a hundred years by now. We've just gotten used to the new multiples.
    - Aunche 6y ago
      You also have to factor in growth into the equation as well. That's the most subjective part of a company's valuation.
    - eloff 6y ago
      I don't see that. You'll need a source if you want to argue that. We've gone through cycles of higher and lower valuations. You also need to compare that to interest rates, because lower rates make the market more forward looking.
  - qq4 6y ago
    That's the thing about bubbles, you don't know you're in one. My life is a bubble. I'm not going to worry about when it pops.
  - tradertef 6y ago
    >> All bubbles pop eventually. I think there's little doubt crypto is a bubble right now. Same thing was said in 2013 and 2017..
    - eloff 6y ago
      I don't think it was wrong then either. I think this is a greater fool style of bubble like the famous tulip bubble, eventually we'll run out of fools. That's my opinion, but we'll see.
      - mewpmewp2 6y ago
        The other possibility is that it will be widely used in the future as a store of value or for some other purposes. Might be rational to put at least some percentage of your net worth into it. People need and want something like that to exist where they have complete control over their assets without any worries about government or institutions.
        eloff 6y ago
        In reality it is probably both. Unless governments take a hard line against bitcoin by banning it, something they mostly haven't been doing to date, I expect it will have a future as a kind of digital gold. However, gold has tens of thousands of years of history as an asset class, while bitcoin is a little less proven. Don't forget it used to be illegal to own gold in the US, so bitcoin is not as safe from government as people might think. But all financial assets tend to follow cycles of booms and busts. So the question is, where are we in the cycle? Are we nearing the top in the near term? I think we are, the growth of bitcoin has gone nearly vertical lately.
        bl557 6y ago
        Bitcoin is still only 1/10 the market cap of gold, with the argument by Bitcoiners being that the asset is a 10-100x improvement over gold.
        6y ago
  - koonsolo 6y ago
    I will leave you with this cartoon: https://images.app.goo.gl/dzZNEDdz4HkcSEaS8 https://images.app.goo.gl/dzZNEDdz4HkcSEaS8
- 01100011 6y ago
  Isn't inflation the economic equivalent of gravity? If an asset isn't growing faster than inflation, it's losing money. If there are other assets offering better risk/reward then money will flow to them and out of the inflated assets.
  - PragmaticPulp 6y ago
    Inflation is high, but it's nowhere near enough to explain the recent market mania. Likewise, stimulus isn't enough to explain the market mania, especially after you subtract out COVID economic losses. Personal savings rate is up, discretionary spending is down, people are stuck at home, and everyone is glued to their phones. I think a lot of people's extra money is going into crypto and the market. FOMO reigns supreme, at least until the numbers turn red.
    - lottin 6y ago
      Inflation isn't high at all. https://fred.stlouisfed.org/series/FPCPITOTLZGUSA https://fred.stlouisfed.org/series/FPCPITOTLZGUSA
      - stass 6y ago
        CPI might not be high, but inflation can show itself in different places. Asset inflation has been increasingly high since 2019, which is clearly visible in stock market, real estate and commodity markets. Similarly, construction materials are up significantly. It may or may not show up in consumer prices eventually.
        lottin 6y ago
        Sure, but this is not inflation. Inflation is an increase in the price level. When some prices are up and others down so that there is no general increase in prices, we cannot speak of inflation.
        rhodozelia 6y ago
WrtCdEvrydy 6y ago
The market can stay irrational something something.
antoniuschan99 6y ago
There’s a lot of stimulus so assets are being inflated. It will pop at some point though and yea lots of people will get burned so don’t get too greedy on the ride up!
- PragmaticPulp 6y ago
  Stimulus isn't entirely responsible for this. Stimulus is partially offset by COVID losses. This is a market mania at this point. Everything thinks stimulus is all-powerful at this point, but there's a lot of FOMO going on too.
  - nine_k 6y ago
    Since everyone thinks that buying stock is a good idea, stocks grow, and buying more stock becomes a rational decision, fueling the flame even more. It becomes a self-fulfilling prophecy — for some time. A crash-up before a crash-down. Jumping off this train in time is what takes a real skill, not jumping on it.
PragmaticPulp 6y ago
Prices go up because money flows in. In a bubble (up to you to decide if this is a bubble) a lot of people end up very wealthy on paper, but they only keep what they manage to sell before the retraction. Sadly, a lot of people can't resist the urge to double down as prices get higher and higher, meaning they lose more on the way down than they thought they were risking on the way up. > Like somebody who put in 50% of their net worth today, and maybe it drops? YOLOing your net worth into stocks isn't something that happens in the real world very often, contrary to what you see on WSB. The only people doing that either have severe gambling problems, or small enough net worth that they feel like they don't really care if they lose it all because they can start over. The weird thing about this bubble is everyone he gets rich on extreme gambles seems to want to post it for internet cred. Makes it look like everyone's doing it.
- Hydraulix989 6y ago
  YOLOing is different than making cautious educated trades and investing in an index fund
bdcravens 6y ago
It's happened before, it'll likely happen again: a new high that's multiples of the previous high, months of exuberance, and then a 70%+ drop. 2-3 years of teeth gnashing and accumulation, and repeat the process. It seems to come several months after Bitcoin's halvings.

lazylizard 6y ago

why must it come down? there is no gravity.

eloff 6y ago
All bubbles pop eventually. I think there's little doubt crypto is a bubble right now. Maybe it pops tomorrow, maybe it goes on for years. I don't know, nobody really does.
- chillacy 6y ago
  If you value stocks based on book value + dividends and discounted cash flow, this bubble's been going on for almost a hundred years by now. We've just gotten used to the new multiples.
  - Aunche 6y ago
    You also have to factor in growth into the equation as well. That's the most subjective part of a company's valuation.
  - eloff 6y ago
    I don't see that. You'll need a source if you want to argue that. We've gone through cycles of higher and lower valuations. You also need to compare that to interest rates, because lower rates make the market more forward looking.
- qq4 6y ago
  That's the thing about bubbles, you don't know you're in one. My life is a bubble. I'm not going to worry about when it pops.
- tradertef 6y ago
  >> All bubbles pop eventually. I think there's little doubt crypto is a bubble right now. Same thing was said in 2013 and 2017..
  - eloff 6y ago
    I don't think it was wrong then either. I think this is a greater fool style of bubble like the famous tulip bubble, eventually we'll run out of fools. That's my opinion, but we'll see.
    - mewpmewp2 6y ago
      The other possibility is that it will be widely used in the future as a store of value or for some other purposes. Might be rational to put at least some percentage of your net worth into it. People need and want something like that to exist where they have complete control over their assets without any worries about government or institutions.
      - eloff 6y ago
        In reality it is probably both. Unless governments take a hard line against bitcoin by banning it, something they mostly haven't been doing to date, I expect it will have a future as a kind of digital gold. However, gold has tens of thousands of years of history as an asset class, while bitcoin is a little less proven. Don't forget it used to be illegal to own gold in the US, so bitcoin is not as safe from government as people might think. But all financial assets tend to follow cycles of booms and busts. So the question is, where are we in the cycle? Are we nearing the top in the near term? I think we are, the growth of bitcoin has gone nearly vertical lately.
        bl557 6y ago
        Bitcoin is still only 1/10 the market cap of gold, with the argument by Bitcoiners being that the asset is a 10-100x improvement over gold.
      - 6y ago
- koonsolo 6y ago
  I will leave you with this cartoon: https://images.app.goo.gl/dzZNEDdz4HkcSEaS8 https://images.app.goo.gl/dzZNEDdz4HkcSEaS8
01100011 6y ago
Isn't inflation the economic equivalent of gravity? If an asset isn't growing faster than inflation, it's losing money. If there are other assets offering better risk/reward then money will flow to them and out of the inflated assets.
- PragmaticPulp 6y ago
  Inflation is high, but it's nowhere near enough to explain the recent market mania. Likewise, stimulus isn't enough to explain the market mania, especially after you subtract out COVID economic losses. Personal savings rate is up, discretionary spending is down, people are stuck at home, and everyone is glued to their phones. I think a lot of people's extra money is going into crypto and the market. FOMO reigns supreme, at least until the numbers turn red.
  - lottin 6y ago
    Inflation isn't high at all. https://fred.stlouisfed.org/series/FPCPITOTLZGUSA https://fred.stlouisfed.org/series/FPCPITOTLZGUSA
    - stass 6y ago
      CPI might not be high, but inflation can show itself in different places. Asset inflation has been increasingly high since 2019, which is clearly visible in stock market, real estate and commodity markets. Similarly, construction materials are up significantly. It may or may not show up in consumer prices eventually.
      - lottin 6y ago
        Sure, but this is not inflation. Inflation is an increase in the price level. When some prices are up and others down so that there is no general increase in prices, we cannot speak of inflation.
        rhodozelia 6y ago

WrtCdEvrydy 6y ago

The market can stay irrational something something.

antoniuschan99 6y ago

There’s a lot of stimulus so assets are being inflated. It will pop at some point though and yea lots of people will get burned so don’t get too greedy on the ride up!

PragmaticPulp 6y ago
Stimulus isn't entirely responsible for this. Stimulus is partially offset by COVID losses. This is a market mania at this point. Everything thinks stimulus is all-powerful at this point, but there's a lot of FOMO going on too.
- nine_k 6y ago
  Since everyone thinks that buying stock is a good idea, stocks grow, and buying more stock becomes a rational decision, fueling the flame even more. It becomes a self-fulfilling prophecy — for some time. A crash-up before a crash-down. Jumping off this train in time is what takes a real skill, not jumping on it.

PragmaticPulp 6y ago

Prices go up because money flows in. In a bubble (up to you to decide if this is a bubble) a lot of people end up very wealthy on paper, but they only keep what they manage to sell before the retraction. Sadly, a lot of people can't resist the urge to double down as prices get higher and higher, meaning they lose more on the way down than they thought they were risking on the way up. > Like somebody who put in 50% of their net worth today, and maybe it drops? YOLOing your net worth into stocks isn't something that happens in the real world very often, contrary to what you see on WSB. The only people doing that either have severe gambling problems, or small enough net worth that they feel like they don't really care if they lose it all because they can start over. The weird thing about this bubble is everyone he gets rich on extreme gambles seems to want to post it for internet cred. Makes it look like everyone's doing it.

Hydraulix989 6y ago
YOLOing is different than making cautious educated trades and investing in an index fund

bdcravens 6y ago

It's happened before, it'll likely happen again: a new high that's multiples of the previous high, months of exuberance, and then a 70%+ drop. 2-3 years of teeth gnashing and accumulation, and repeat the process. It seems to come several months after Bitcoin's halvings.