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Isn't that the case for pretty much all exchanges? How is that different than in the stock market?

throwaway210222 5y ago
> How is that different than in the stock market? For at least the USA exchanges, the USG has made it clear major companies will never fail and is printing so much money that has to go somewhere.
- rawtxapp 5y ago
  A lot of that money also flows to crypto, real estate, etc.
ptsneves 5y ago
The stock market has other mechanism of value creation, one of them that the company distributes dividends which is money outside the stock market. Companies also use it to fund themselves to grow. It is not a zero sum game. Crypto currency is a zero sum game and i think this is what OP was implyining.
- pizza 5y ago
  Seems like any currency conversion or speculation of any kind is a zero sum game then. But ostensibly if it's spent like any currency it's not zero sum
  - chii 5y ago
    > Seems like any currency conversion or speculation of any kind is a zero sum game then it's not really zero sum - this sort of speculation creates liquidity. This liquidity allows people who want to use the underlying asset in some other way to have a buyer (or seller) on the other end of the transaction.
- DocTomoe 5y ago
  I was under the impression that dividends were essentially forced value selloffs, given that stock prices drop the exact amount of the dividend the moment it is paid. How is value created during dividend payment?
  - klodolph 5y ago
    To flip it around, the stock had a higher price to begin with because it is expected to pay dividends. I don’t think anyone is saying that the dividends themselves are what creates value.
  - joosters 5y ago
    Value is created by the company making profits. How it uses those profits, whether by paying out dividends, buying back stock, or investing in the business, is mostly irrelevant to the value creation part.
    - DocTomoe 5y ago
      So, given that dividends are priced in to the value estimation by investors - which we have established is completely disconnected from actual value - and priced out once paid... it turns out that for exchanges, value is not very relevant?
      - klodolph 5y ago
        > … which we have established is completely disconnected from actual value … This part is false. The price of a stock is not completely disconnected from actual value. The money for the dividends has to come from somewhere. If you own AAPL, the dividends are funded Apple’s business activities. If you think that Apple’s business is a dead end, you would sell off your AAPL stock and move your money somewhere else. Dividends are also only a small part of the picture.
- oceanplexian 5y ago
  > The stock market has other mechanism of value creation, one of them that the company distributes dividends which is money outside the stock market. I'm not sure I would describe high-flying tech stocks with no dividends, trading at 30-70 times earnings as much different. How many investors are really snapping up these stocks because they're sold on the 30+ year value proposition?
  - frozenport 5y ago
    Some of us think Tesla or will dominate auto manufacturing.
- tinco 5y ago
  I'd be totally with you until 2 years ago. Now I'm not so certain. Can you truly look at TSLA and say that there's value creation behind that valuation? Or GME? And frankly, the dollar? And if it's not the case for these pathetic cases, what does that say about the rest? BTW I'm not arguing the dollar is worthless, especially not when compared to crypto, obviously the dollar has a lot more use than Bitcoin. But look at what rich people / money managers are doing with their dollars. If a Saudi prince is buying a painting by a student of Da Vinci for 450 billion dollars, what does that really say about the value of the dollar? Things are not what they seem, I guess it's always been the case that quantities of money don't scale linearly in value but it seems particularly true today. And whatever is going on, it is foolish to dismiss cryptocurrency based on something that's not true for securities and not even for other currency.
  - chii 5y ago
    > Can you truly look at TSLA and say that there's value creation behind that valuation? the value of TSLA hasn't been created yet - the event is still in the future. The current price is based on the expectation (by many people) that their value creation in the future will occur. As for GME - the short squeeze certainly did create value. It's like charging someone dying of thirst in the desert for water. But as soon as those people got _some_ water, you can no longer charge the same high price. Thus GME's rise and fall is rational.
    - tinco 5y ago
      That expectation is not based in any reality, not by anyone working at Tesla, and not by anyone with any sort of realistic view of what the company will do in the future. The value of the stock simply does not have any relation to the company itself. It's easy to verify this by asking anyone holding TSLA what amount of profit Tesla will make at the point that its current valuation is justified. It doesn't even really matter how far in the future that point is, it would for an investor basing their investments on fundamentals, but that's not what's going on. As soon as you dive into the numbers, their answer will stop even mentioning the company Tesla, it will be about the American economy or the global economy in general. I agree the short squeeze held value, it was great, but its value hasn't fallen yet, it's still over ten times its fundamental value, if such a thing even exists. If GME's new plans succeed, and it does exceptionally well and it really becomes a big player in the online games industry, maybe its stock would be worth $40 or even $80. If it doesn't, then all this capital is wasted and the stock is probably worth under $4. With those two very extreme scenarios and their appropriate valuations, what is its stock doing sitting at $150? The answer is simple, just find a social gathering of GME investors, like r/superstonk, and read what they're saying about the stock. They're calling the squeeze to 450 a "baby squeeze", and that the big one is still coming. Even though as far as I know the squeeze to 450 was the largest squeeze in the history of the stock market. I'm not saying these stocks are overvalued by the way. If you've got a firm grasp on the dynamics of those stocks, it might make sense to buy/hold at these prices. Just like it made sense to hold Dogecoin to that Goldman Sachs guy. Just don't pretend it's different somehow.
fighterpilot 5y ago
There's a distinction there. In the stock market, your decision to buy leads to a price increase which improves the ability of that specific company to raise money. Your investment decision directly impacted the prospects of that company over others. In an ideal world, speculation in the stock market means that the best companies receive funding and the worst companies are unable to and therefore appropriately go out if business.
- nicoburns 5y ago
  Yes, but in the real world people are makong jsut as much if not more money on comaoniea that they think other people will later invest it, rather than companies that they think are good companies. That makes it little better than crypto.
  - fighterpilot 5y ago
    There's a bubble now in speculative stocks, and it's not good because it means billions in funding are going towards failing companies. That's why I said "in an ideal world". I do believe this bubble will pop eventually and the stock market will return to its appropriate primary function (which it still is doing ex-retail hype stocks) of allocating capital to the most productive companies. Note also that I was responding to the statement that no wealth was created or destroyed by speculation in the stock market. My point is that this statement is false because it makes a real world difference whether it's GME versus MRNA that gets to raise money.
    - nicoburns 5y ago
      > the stock market will return to its appropriate primary function (which it still is doing ex-retail hype stocks) of allocating capital to the most productive companies. Do you think it has done this in the last 30 years? I am of the opinion that has it has at best done this exceedingly poorly. There are many reasons for this: 1. Speculating is the one we've already covered 2. HFT, which isn't that much different to speculating 3. The consolidation of market power in a few huge funds 4. The rise of index funds which don't attempt to judge companies on merit at all It would/will take significant reforms to return the stock market to anything remotely resembling an ideal market.
botman_ 5y ago
This is only the case for pump&dump schemes. In case of a sustained growth of a company (think Apple over the past 20 years) what the shareholders gain comes from the earnings of the company. Apple shareholders have gained trillions in the past years - no one has lost an equivalent amount.
- baby 5y ago
  I’m not sure what your point is. Are you talking about a small fraction of stocks that pay dividends? Because otherwise the stock market is completely based on this: money changing hands.
  - SgtBastard 5y ago
    You’ve conveniently ignored reinvested dividends that in turn fund future growth, splits, reverse splits, mergers and acquisitions... That’s a very weak strawman.
    - baby 5y ago
      Money changing hands changing hands that makes it look like it’s totally legit. Copy that.
  - dnautics 5y ago
    Buybacks are also a mechanism of connecting stock price to company performance, but arguably that is also tenuous and rare, except for the last few years when several companies have done buybacks. Oh, and in other direction, bankruptcy.
- WA 5y ago
  Yes, sustained growth of Apple over the past 20 years makes buying Apple stock an investment. Shareholder gains come either from dividends or stock buybacks (which is kinda the same), but not every uptick in the stock price is because of value creation. Some stock price movements are also zero-sum. Active trading is zero-sum.
lottin 5y ago
> How is that different than in the stock market? Stock holders own the underlying business and businesses do create wealth—all the inputs that are used in making a product are worth less that the product itself.
- baby 5y ago
  How do businesses create wealth?
  - chii 5y ago
    by using labour, and capital (plant and equipment usually) to generate something that didn't exist before, that other people would pay more for than the cost of inputs. That's how _all_ wealth gets created. Even under communism (where the difference is that under communism, the capital is provided, and owned by the state, rather than privately owned).
  - arc-in-space 5y ago
    Why is "the inputs that are used in making a product are worth less that the product itself" an unsatisfying answer?
- gjs278 5y ago
  no they don’t lol. try and buy any percent of any company stock and tell them what to do
frozenport 5y ago
When you invest in a company you provide capital for it grow. Crypto is not capitalism.

> How is that different than in the stock market? For at least the USA exchanges, the USG has made it clear major companies will never fail and is printing so much money that has to go somewhere.

rawtxapp 5y ago
A lot of that money also flows to crypto, real estate, etc.

ptsneves 5y ago

The stock market has other mechanism of value creation, one of them that the company distributes dividends which is money outside the stock market. Companies also use it to fund themselves to grow. It is not a zero sum game. Crypto currency is a zero sum game and i think this is what OP was implyining.

pizza 5y ago
Seems like any currency conversion or speculation of any kind is a zero sum game then. But ostensibly if it's spent like any currency it's not zero sum
- chii 5y ago
  > Seems like any currency conversion or speculation of any kind is a zero sum game then it's not really zero sum - this sort of speculation creates liquidity. This liquidity allows people who want to use the underlying asset in some other way to have a buyer (or seller) on the other end of the transaction.
DocTomoe 5y ago
I was under the impression that dividends were essentially forced value selloffs, given that stock prices drop the exact amount of the dividend the moment it is paid. How is value created during dividend payment?
- klodolph 5y ago
  To flip it around, the stock had a higher price to begin with because it is expected to pay dividends. I don’t think anyone is saying that the dividends themselves are what creates value.
- joosters 5y ago
  Value is created by the company making profits. How it uses those profits, whether by paying out dividends, buying back stock, or investing in the business, is mostly irrelevant to the value creation part.
  - DocTomoe 5y ago
    So, given that dividends are priced in to the value estimation by investors - which we have established is completely disconnected from actual value - and priced out once paid... it turns out that for exchanges, value is not very relevant?
    - klodolph 5y ago
      > … which we have established is completely disconnected from actual value … This part is false. The price of a stock is not completely disconnected from actual value. The money for the dividends has to come from somewhere. If you own AAPL, the dividends are funded Apple’s business activities. If you think that Apple’s business is a dead end, you would sell off your AAPL stock and move your money somewhere else. Dividends are also only a small part of the picture.
oceanplexian 5y ago
> The stock market has other mechanism of value creation, one of them that the company distributes dividends which is money outside the stock market. I'm not sure I would describe high-flying tech stocks with no dividends, trading at 30-70 times earnings as much different. How many investors are really snapping up these stocks because they're sold on the 30+ year value proposition?
- frozenport 5y ago
  Some of us think Tesla or will dominate auto manufacturing.
tinco 5y ago
I'd be totally with you until 2 years ago. Now I'm not so certain. Can you truly look at TSLA and say that there's value creation behind that valuation? Or GME? And frankly, the dollar? And if it's not the case for these pathetic cases, what does that say about the rest? BTW I'm not arguing the dollar is worthless, especially not when compared to crypto, obviously the dollar has a lot more use than Bitcoin. But look at what rich people / money managers are doing with their dollars. If a Saudi prince is buying a painting by a student of Da Vinci for 450 billion dollars, what does that really say about the value of the dollar? Things are not what they seem, I guess it's always been the case that quantities of money don't scale linearly in value but it seems particularly true today. And whatever is going on, it is foolish to dismiss cryptocurrency based on something that's not true for securities and not even for other currency.
- chii 5y ago
  > Can you truly look at TSLA and say that there's value creation behind that valuation? the value of TSLA hasn't been created yet - the event is still in the future. The current price is based on the expectation (by many people) that their value creation in the future will occur. As for GME - the short squeeze certainly did create value. It's like charging someone dying of thirst in the desert for water. But as soon as those people got _some_ water, you can no longer charge the same high price. Thus GME's rise and fall is rational.
  - tinco 5y ago
    That expectation is not based in any reality, not by anyone working at Tesla, and not by anyone with any sort of realistic view of what the company will do in the future. The value of the stock simply does not have any relation to the company itself. It's easy to verify this by asking anyone holding TSLA what amount of profit Tesla will make at the point that its current valuation is justified. It doesn't even really matter how far in the future that point is, it would for an investor basing their investments on fundamentals, but that's not what's going on. As soon as you dive into the numbers, their answer will stop even mentioning the company Tesla, it will be about the American economy or the global economy in general. I agree the short squeeze held value, it was great, but its value hasn't fallen yet, it's still over ten times its fundamental value, if such a thing even exists. If GME's new plans succeed, and it does exceptionally well and it really becomes a big player in the online games industry, maybe its stock would be worth $40 or even $80. If it doesn't, then all this capital is wasted and the stock is probably worth under $4. With those two very extreme scenarios and their appropriate valuations, what is its stock doing sitting at $150? The answer is simple, just find a social gathering of GME investors, like r/superstonk, and read what they're saying about the stock. They're calling the squeeze to 450 a "baby squeeze", and that the big one is still coming. Even though as far as I know the squeeze to 450 was the largest squeeze in the history of the stock market. I'm not saying these stocks are overvalued by the way. If you've got a firm grasp on the dynamics of those stocks, it might make sense to buy/hold at these prices. Just like it made sense to hold Dogecoin to that Goldman Sachs guy. Just don't pretend it's different somehow.

fighterpilot 5y ago

There's a distinction there. In the stock market, your decision to buy leads to a price increase which improves the ability of that specific company to raise money. Your investment decision directly impacted the prospects of that company over others. In an ideal world, speculation in the stock market means that the best companies receive funding and the worst companies are unable to and therefore appropriately go out if business.

nicoburns 5y ago
Yes, but in the real world people are makong jsut as much if not more money on comaoniea that they think other people will later invest it, rather than companies that they think are good companies. That makes it little better than crypto.
- fighterpilot 5y ago
  There's a bubble now in speculative stocks, and it's not good because it means billions in funding are going towards failing companies. That's why I said "in an ideal world". I do believe this bubble will pop eventually and the stock market will return to its appropriate primary function (which it still is doing ex-retail hype stocks) of allocating capital to the most productive companies. Note also that I was responding to the statement that no wealth was created or destroyed by speculation in the stock market. My point is that this statement is false because it makes a real world difference whether it's GME versus MRNA that gets to raise money.
  - nicoburns 5y ago
    > the stock market will return to its appropriate primary function (which it still is doing ex-retail hype stocks) of allocating capital to the most productive companies. Do you think it has done this in the last 30 years? I am of the opinion that has it has at best done this exceedingly poorly. There are many reasons for this: 1. Speculating is the one we've already covered 2. HFT, which isn't that much different to speculating 3. The consolidation of market power in a few huge funds 4. The rise of index funds which don't attempt to judge companies on merit at all It would/will take significant reforms to return the stock market to anything remotely resembling an ideal market.

botman_ 5y ago

This is only the case for pump&dump schemes. In case of a sustained growth of a company (think Apple over the past 20 years) what the shareholders gain comes from the earnings of the company. Apple shareholders have gained trillions in the past years - no one has lost an equivalent amount.

baby 5y ago
I’m not sure what your point is. Are you talking about a small fraction of stocks that pay dividends? Because otherwise the stock market is completely based on this: money changing hands.
- SgtBastard 5y ago
  You’ve conveniently ignored reinvested dividends that in turn fund future growth, splits, reverse splits, mergers and acquisitions... That’s a very weak strawman.
  - baby 5y ago
    Money changing hands changing hands that makes it look like it’s totally legit. Copy that.
- dnautics 5y ago
  Buybacks are also a mechanism of connecting stock price to company performance, but arguably that is also tenuous and rare, except for the last few years when several companies have done buybacks. Oh, and in other direction, bankruptcy.
WA 5y ago
Yes, sustained growth of Apple over the past 20 years makes buying Apple stock an investment. Shareholder gains come either from dividends or stock buybacks (which is kinda the same), but not every uptick in the stock price is because of value creation. Some stock price movements are also zero-sum. Active trading is zero-sum.

lottin 5y ago

> How is that different than in the stock market? Stock holders own the underlying business and businesses do create wealth—all the inputs that are used in making a product are worth less that the product itself.

baby 5y ago
How do businesses create wealth?
- chii 5y ago
  by using labour, and capital (plant and equipment usually) to generate something that didn't exist before, that other people would pay more for than the cost of inputs. That's how _all_ wealth gets created. Even under communism (where the difference is that under communism, the capital is provided, and owned by the state, rather than privately owned).
- arc-in-space 5y ago
  Why is "the inputs that are used in making a product are worth less that the product itself" an unsatisfying answer?
gjs278 5y ago
no they don’t lol. try and buy any percent of any company stock and tell them what to do

frozenport 5y ago

When you invest in a company you provide capital for it grow. Crypto is not capitalism.