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This is my fourth bubble. Bitcoin in 2011 and every one since. It's old hat and quite amusing at this point. I certainly know not to put any money into it I

by retrac 6y ago

This is my fourth bubble. Bitcoin in 2011 and every one since. It's old hat and quite amusing at this point. I certainly know not to put any money into it I cannot lose. Do they, though? Even if they know DOGE is a joke, do they have the rest of the knowledge on cryptocurrency to quite understand what they're putting their money into? The risks? The issues of things like time delay and transaction fees which may inhibit pulling funds out quickly? Etc. The first result on Google for Dogecoin currently auto-completes to "Dogecoin stock". This indicates the degree of ignorance some people are coming into it with. Large-scale price instability is a general negative. As is lack of wealth among the middle class. For an individual, losing a bunch of wealth on DOGE would just be a silly, or tragic, story. And I tend to agree that fools should be parted from their money... But if a significant number of ordinary middle class and working class people are vaporizing their savings, that's a social and institutional problem to some degree. It would have ramifications that go beyond those individuals. See when large banks fail. One can wash their hands of it and say they should have chosen a better bank. But you still have mass unemployment and lack of liquidity issues to deal with, from a policymaker's perspective. And as you say, wealth inequality is a problem. And chances are it's not the 19 year old college student who bought 100,000 of a DOGE a year ago who is cleaning house, on average. Much of this is flowing into investors who have six to eight $ figures locked in DEX exchange contracts raking in fees. For all the democraticizing potential of cryptocurrencies, a lot the wealth is flowing from the gullible to the already-rich.

inteoryx 6y ago
"I tend to agree that fools should be parted from their money" I disagree with this. Fools have a hard enough life without permitting predators to take their money. Nobody chooses to be a fool. I don't know what a good solution is, or how to stop something like dogecoin without being too paternalistic, but it also feels wrong to me to just ignore this game of musical money even though the most likely outcome is many people losing and a small number gaining, in a zero-sum gambling game designed to look a bit like investing.
- betwixthewires 6y ago
  Nobody is permitting anyone to take their money but themselves. And beyond that, there are ample resources to learn how not to behave like a fool in the markets. And even further beyond that, there are plenty of fools that are good at one thing and do well with it, taking away the opportunity to try their hand at something they might be good at to save people who were too busy watching tiktok to save themselves is not how you create a just society. Also I'd like to add that the only thing speculative investing has in common with gambling is that risk is being taken, it isn't gambling, and speculation in cryptocurrencies is certainly not a zero sum game.
  - inteoryx 6y ago
    There are at least two kinds of fools. Perhaps you are thinking of "ignorant fools" - people who could know better but don't. There are also people who basically just can't know better. Chris Sacca, who went on to become a billionaire investor in companies like Twitter, tells a funny story [1] about how he made foolish decisions in the stock market and lost a ton of money. Over the course of his career he reverses his fortune and becomes rich. The message of the story is something like "Don't stop grinding or hustling" or something like that. I think he's a good example of the ignorant fool that I imagine you are thinking of. There's another class of fool though that basically cannot know better. This could include a wide variety of people, mentally unwell, gambling addicts, desperate people, elderly, people with an IQ of 80, etc. These people flat out are not going to read books on investing, or whatever mitigation path you would recommend to the ignorant fool, and if they did, they might not understand them or be able to use what they learned effectively. This is something like an "inherent fool" that I was thinking of. What proportion of people who are going to lose money on dogecoin are ignorant fools, for whom this will be a valuable lesson and a stepping stone on their way to better living, versus inherent fools for whom this will be a setback in an already challenging life? I can't speak for all cryptocurrencies in general, and I can only share my opinion, but I'm pretty confident that coins like dogecoin are certainly zero sum games. The best argument I can make for this is that zero value is being produced from dogecoin. Money is being put in, eventually people will want to take money out, but with no value being produced all the money that comes out of the system will come at the expense of those who put money in. It's kind of the quintessential example of a zero sum game. I'd compare it to the company Coke. I can buy a share of Coke like I can put money into dogecoin. Coke is going to produce cans of sugar water. People are going to buy that sugar water, putting their money into the system, and, crucially, never expecting to get it back. They put their money in so that they can consume the value that is the can of sugar water. This addition of money to the system, and the consumption of value, are what makes owning Coke not a zero sum game. Money games into the system from participants who do not expect their money back. As a shareholder of Coke, some of that money will come to me. I can own my share of Coke and benefit from the increased value that comes from the value Coke produces and the money of people who consume that value. Conversely, dogecoin doesn't produce any value. You can move dogecoins around, but nothing is getting made and nothing is getting consumed. Every participant who is putting money in expects money back. There is nobody analogous to the person buying and drinking the Coke. Worse, everyone is hoping for MORE than the money they put in to come back. As a simple matter of math, there is no real way for this to work so that everyone, or even most people, can benefit. If someone makes money, then someone else loses it. In this way, dogecoin is not at all investment. You aren't putting money towards a company or a venture, you are just buying lottery tickets that may or may not be worth more later. It's a gambling game of musical chairs. 1 - https://www.youtube.com/watch?v=EYffNTLL7go https://www.youtube.com/watch?v=EYffNTLL7go
betwixthewires 6y ago
In markets money does sometimes flow from the gullible to the rich. Or I should say, the competent, caveat that with free market. A service provided by heavily abstracted markets such as financial instrument markets is that it allocates capital in the hands of those that are competent at managing it. It might sound calloused, but really, any time real wealth is being risked it is calloused, nobody can change that.
55555 6y ago
What is the relevance/risk of time delay to retail investors involved in online cryptocurrency trading? What do you mean by that term?

by retrac 6y ago

inteoryx 6y ago

"I tend to agree that fools should be parted from their money" I disagree with this. Fools have a hard enough life without permitting predators to take their money. Nobody chooses to be a fool. I don't know what a good solution is, or how to stop something like dogecoin without being too paternalistic, but it also feels wrong to me to just ignore this game of musical money even though the most likely outcome is many people losing and a small number gaining, in a zero-sum gambling game designed to look a bit like investing.

betwixthewires 6y ago
Nobody is permitting anyone to take their money but themselves. And beyond that, there are ample resources to learn how not to behave like a fool in the markets. And even further beyond that, there are plenty of fools that are good at one thing and do well with it, taking away the opportunity to try their hand at something they might be good at to save people who were too busy watching tiktok to save themselves is not how you create a just society. Also I'd like to add that the only thing speculative investing has in common with gambling is that risk is being taken, it isn't gambling, and speculation in cryptocurrencies is certainly not a zero sum game.
- inteoryx 6y ago
  There are at least two kinds of fools. Perhaps you are thinking of "ignorant fools" - people who could know better but don't. There are also people who basically just can't know better. Chris Sacca, who went on to become a billionaire investor in companies like Twitter, tells a funny story [1] about how he made foolish decisions in the stock market and lost a ton of money. Over the course of his career he reverses his fortune and becomes rich. The message of the story is something like "Don't stop grinding or hustling" or something like that. I think he's a good example of the ignorant fool that I imagine you are thinking of. There's another class of fool though that basically cannot know better. This could include a wide variety of people, mentally unwell, gambling addicts, desperate people, elderly, people with an IQ of 80, etc. These people flat out are not going to read books on investing, or whatever mitigation path you would recommend to the ignorant fool, and if they did, they might not understand them or be able to use what they learned effectively. This is something like an "inherent fool" that I was thinking of. What proportion of people who are going to lose money on dogecoin are ignorant fools, for whom this will be a valuable lesson and a stepping stone on their way to better living, versus inherent fools for whom this will be a setback in an already challenging life? I can't speak for all cryptocurrencies in general, and I can only share my opinion, but I'm pretty confident that coins like dogecoin are certainly zero sum games. The best argument I can make for this is that zero value is being produced from dogecoin. Money is being put in, eventually people will want to take money out, but with no value being produced all the money that comes out of the system will come at the expense of those who put money in. It's kind of the quintessential example of a zero sum game. I'd compare it to the company Coke. I can buy a share of Coke like I can put money into dogecoin. Coke is going to produce cans of sugar water. People are going to buy that sugar water, putting their money into the system, and, crucially, never expecting to get it back. They put their money in so that they can consume the value that is the can of sugar water. This addition of money to the system, and the consumption of value, are what makes owning Coke not a zero sum game. Money games into the system from participants who do not expect their money back. As a shareholder of Coke, some of that money will come to me. I can own my share of Coke and benefit from the increased value that comes from the value Coke produces and the money of people who consume that value. Conversely, dogecoin doesn't produce any value. You can move dogecoins around, but nothing is getting made and nothing is getting consumed. Every participant who is putting money in expects money back. There is nobody analogous to the person buying and drinking the Coke. Worse, everyone is hoping for MORE than the money they put in to come back. As a simple matter of math, there is no real way for this to work so that everyone, or even most people, can benefit. If someone makes money, then someone else loses it. In this way, dogecoin is not at all investment. You aren't putting money towards a company or a venture, you are just buying lottery tickets that may or may not be worth more later. It's a gambling game of musical chairs. 1 - https://www.youtube.com/watch?v=EYffNTLL7go https://www.youtube.com/watch?v=EYffNTLL7go

betwixthewires 6y ago

In markets money does sometimes flow from the gullible to the rich. Or I should say, the competent, caveat that with free market. A service provided by heavily abstracted markets such as financial instrument markets is that it allocates capital in the hands of those that are competent at managing it. It might sound calloused, but really, any time real wealth is being risked it is calloused, nobody can change that.

55555 6y ago

What is the relevance/risk of time delay to retail investors involved in online cryptocurrency trading? What do you mean by that term?