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All profits anyone makes on cryptocurrencies comes out of the pockets of other "investors". A lot of them will be like this, addicted people who were lured in b

All profits anyone makes on cryptocurrencies comes out of the pockets of other "investors". A lot of them will be like this, addicted people who were lured in by dishonest promises. Cryptocurrency is a negative-sum game. There is an inflow of cash into the markets, and two outflows: Regular traders cashing out, and miners cashing out. The market caps, the supposed dollar value of your holdings, it is all imaginary. The only thing that is real is money being paid in, and money going out. And unless you sell and take your profits, that outflow is not going to you. It is going to someone else. And if you do, the money comes from somebody less fortunate. The only ethical thing is to not get involved.

lend000 5y ago
If someone is consistently profitable/market making/etc., then they are making the market less volatile than it would be if it consisted solely of retail gamblers like those described in the article. But the same can be said of popular stocks, which are actually more volatile than the most liquid cryptos nowadays (GME, AMC, etc.). The problem, to me, isn't that people are allowed to invest their money freely in digital markets (regardless of asset). The problem is that so much money has been injected into assets that people feel (correctly) that they are falling behind if they don't try to play the game. The hidden inflation tax really harms people who lack a high degree of financial literacy or who lack the discipline required to make balanced, long term investments (i.e. a vast majority of people). For most of human history, saving was the key to building upper middle class wealth. Now, good luck with that as M2 grows by 20+% in a year and CD's are paying record low interest rates.
- lottin 5y ago
  An inflation rate of ~2% doesn't really harm anyone, especially not the lower end of the socio-economic spectrum. I think the problem is rather the fact that many people have unrealistic expectations. If the economy is growing at a rate of 1% annually, meaning the entire wealth produced in the country during a whole year grows by 1%, why do people think that their personal wealth should grow by 10%, 20%, 30% or more? It's not gonna happen.
  - lend000 5y ago
    SPX grows 8% a year (6% when adjusted for GDP growth), US real estate increases 3.8%, and bank interest rates pay FAR less than even "reported" CPI, which is a joke of a metric almost entirely weighted by oil prices, which are not determined by a free market [0]. And that's before the insane levels of money printing and spending we've seen this year, which show no signs of being undone, even as the country opens back up. Inflation isn't 2%. People like you lose a lot of relative wealth to the "smart money" by thinking that's true, and it isn't fair to have a system that exponentially benefits financially smarter investors (an inflationary environment). Barring an improbable windfall or significant income growth, a responsible, hardworking person can't meaningfully improve their financial situation by saving all their money in the bank, which is a sad reality. Asset inflation benefits the wealthy, while bear markets improve wealth inequality, and printing money and QE reduces the corrective measure to wealth inequality to instead reduce the short term pain [1]. Consumer inflation is a tossup. [0] https://www.usinflationcalculator.com/gasoline-prices-adjusted-for-inflation/ https://www.usinflationcalculator.com/gasoline-prices-adjust... [1] https://www.federalreserve.gov/releases/z1/dataviz/dfa/distribute/chart/#range:1989.3,2020.4;quarter:125;series:Net%20worth;demographic:networth;population:1;units:levels https://www.federalreserve.gov/releases/z1/dataviz/dfa/distr...
    - lottin 5y ago
      > Inflation isn't 2% Okay, then what is it? Obviously you have taken the trouble to measure inflation because you know it's not 2%. So tell us, what is the inflation rate? And show us your calculations please.
      - lend000 5y ago
        Here's a good approximation [0]. Didn't mean to insult your intelligence. That's just consumer inflation, by the way. Asset inflation is a different beast that is better measured in terms of wealth inequality. I'd recommend you digest the links in my original post if you're interested in the topic. [0] https://www.lynalden.com/inflation/ https://www.lynalden.com/inflation/
ArkanExplorer 5y ago
The most ethical thing to do is to ban the formal exchange of cryptocurrencies. The same way that the USA bans online gambling. Cryptocurrencies are essentially distributed ponzi schemes (which are also illegal), with a side order of immense waste of electricity, waste of advanced manufactured goods, and enablement of ransomware. Its getting to the point now where we need to begin contacting our democratic representatives and requesting that they ban them, and submitting citizen's petitions and direct ballot actions.
- user-the-name 5y ago
  Yes, absolutely. HN for some reason does not want to hear it, but this is the cold hard truth of the matter.
vmception 5y ago
That is reductive and doesn't make it negative sum. You identified the reasons of outflows and neglected to identify the reasons of inflows, or the magnitude of either. Any supply and demand system is negative sum by your standard. Remember to always ask “Did I just make a separate fictional higher standard for an asset class just because I don't like it?” If you create a criteria for crypto assets that no commodity, currency, equity, or property can meet, the question is why? Is it ignorance or intentional?
- user-the-name 5y ago
  The only inflow is people sending money to exchanges, as the tokens being traded and created have zero intrinsic value. This is not the case commodities, currencies, equities or property. Those things have value outside of the market itself, while cryptocurrencies basically do not. They are in practice only used for trading.
  - karottenreibe 5y ago
    What is the intrinsic value of a currency outside of trading then?
    - user-the-name 5y ago
      Are you planning on trading the money in your bank account? If not, can you give it to me as it apparently has no value?
Freestyler_3 5y ago
Is normal stocks any different?
- singularity2001 5y ago
  Yes, you invest money and (ideally/mostly) they produce wares worth more money. Positive sum.
  - drexlspivey 5y ago
    That's not what positive sum means. Both stocks and crypto are positive sum though. Whenever someone buys a stock someone else sells it, one's loss is the other's gain. That would make it zero sum but the company has the option to issue new shares, akin to the fed printing money or a new bitcoin being minted in a block, that makes both games positive sum.
    - user-the-name 5y ago
      The newly issued shares represent a share in the underlying value of the company, which has increased. For cryptocurrencies, there is no such underlying value.
      - Freestyler_3 5y ago
        A company value is part speculation. If everyone sold their stock would the bottom price be high because of inflated value?
        user-the-name 5y ago
        Cryptocurrency value is entirely speculation.
- lottin 5y ago
  Yes, it's different. Owning a stock is like owning a business. Unlike a coin, a business generates a profit. This means you don't have to sell the business to another investor in order to profit from it.
deleted 5y ago
[deleted]
scatters 5y ago
To be fair, cryptocurrencies do have genuine cash flows as well. People who need to launder money out of the criminal economy or out of oppressive economic regimes will be willing to pay a considerable cut to do so, and that money goes to "investors" as well as to miners.
bonestamp2 5y ago
> All profits anyone makes on cryptocurrencies comes out of the pockets of other "investors". That's not necessarily true. It's the same as the stock market. I could buy a stock or crypto token/coin for $1 and sell it for $2, while the person I bought it from paid less than $1 and the person who bought it from me sold it for more than $2. In other words, all three of us made money. There's also the possibility that the other two parties lost money. But there's nothing unethical about buying something for a price someone is willing to sell it for or selling at a price where someone else is willing to buy it. I mean, not unless you think capitalism as a whole is unethical.
- lottin 5y ago
  > In other words, all three of us made money. Yes, the three of you made money, but you're forgetting about the fourth investor. The fourth investor won't make money until a fifth investor comes and buys the coin. And so on, and so on. The revenue received by each investor always comes from a subsequent investor. So the OP was right. This is not true of stocks, as stocks do generate income.
  - bonestamp2 5y ago
    > Yes, the three of you made money, but you're forgetting about the fourth investor. I didn't forget. That fourth investor is not part of my transaction. The point of my comment was that OP's claim that all crypto profits come from someone else's pocket is false. Just like non-dividend stocks, sometimes that's true, and sometimes it's not. As I stated, it's possible that my seller and buyer could lose money too. The same is true for stocks. > This is not true of stocks, as stocks do generate income. Yes, dividend stocks generate income for their investors, but not all stocks pay dividends. On that note, some crypto coins/tokens pay distributions and interest too (let's call them dividend crypto for simplicity). Are non-dividend stocks equal to non-dividend crypto? In both cases, profit can only be realized by the investor when the share/coin/token price goes up. Is that ok? I think any Capitalist should say yes. I'm not advocating for stocks or crypto, but there are some similarities that we have to acknowledge to avoid hypocrisy.

lend000 5y ago

If someone is consistently profitable/market making/etc., then they are making the market less volatile than it would be if it consisted solely of retail gamblers like those described in the article. But the same can be said of popular stocks, which are actually more volatile than the most liquid cryptos nowadays (GME, AMC, etc.). The problem, to me, isn't that people are allowed to invest their money freely in digital markets (regardless of asset). The problem is that so much money has been injected into assets that people feel (correctly) that they are falling behind if they don't try to play the game. The hidden inflation tax really harms people who lack a high degree of financial literacy or who lack the discipline required to make balanced, long term investments (i.e. a vast majority of people). For most of human history, saving was the key to building upper middle class wealth. Now, good luck with that as M2 grows by 20+% in a year and CD's are paying record low interest rates.

lottin 5y ago
An inflation rate of ~2% doesn't really harm anyone, especially not the lower end of the socio-economic spectrum. I think the problem is rather the fact that many people have unrealistic expectations. If the economy is growing at a rate of 1% annually, meaning the entire wealth produced in the country during a whole year grows by 1%, why do people think that their personal wealth should grow by 10%, 20%, 30% or more? It's not gonna happen.
- lend000 5y ago
  SPX grows 8% a year (6% when adjusted for GDP growth), US real estate increases 3.8%, and bank interest rates pay FAR less than even "reported" CPI, which is a joke of a metric almost entirely weighted by oil prices, which are not determined by a free market [0]. And that's before the insane levels of money printing and spending we've seen this year, which show no signs of being undone, even as the country opens back up. Inflation isn't 2%. People like you lose a lot of relative wealth to the "smart money" by thinking that's true, and it isn't fair to have a system that exponentially benefits financially smarter investors (an inflationary environment). Barring an improbable windfall or significant income growth, a responsible, hardworking person can't meaningfully improve their financial situation by saving all their money in the bank, which is a sad reality. Asset inflation benefits the wealthy, while bear markets improve wealth inequality, and printing money and QE reduces the corrective measure to wealth inequality to instead reduce the short term pain [1]. Consumer inflation is a tossup. [0] https://www.usinflationcalculator.com/gasoline-prices-adjusted-for-inflation/ https://www.usinflationcalculator.com/gasoline-prices-adjust... [1] https://www.federalreserve.gov/releases/z1/dataviz/dfa/distribute/chart/#range:1989.3,2020.4;quarter:125;series:Net%20worth;demographic:networth;population:1;units:levels https://www.federalreserve.gov/releases/z1/dataviz/dfa/distr...
  - lottin 5y ago
    > Inflation isn't 2% Okay, then what is it? Obviously you have taken the trouble to measure inflation because you know it's not 2%. So tell us, what is the inflation rate? And show us your calculations please.
    - lend000 5y ago
      Here's a good approximation [0]. Didn't mean to insult your intelligence. That's just consumer inflation, by the way. Asset inflation is a different beast that is better measured in terms of wealth inequality. I'd recommend you digest the links in my original post if you're interested in the topic. [0] https://www.lynalden.com/inflation/ https://www.lynalden.com/inflation/

ArkanExplorer 5y ago

The most ethical thing to do is to ban the formal exchange of cryptocurrencies. The same way that the USA bans online gambling. Cryptocurrencies are essentially distributed ponzi schemes (which are also illegal), with a side order of immense waste of electricity, waste of advanced manufactured goods, and enablement of ransomware. Its getting to the point now where we need to begin contacting our democratic representatives and requesting that they ban them, and submitting citizen's petitions and direct ballot actions.

user-the-name 5y ago
Yes, absolutely. HN for some reason does not want to hear it, but this is the cold hard truth of the matter.

vmception 5y ago

That is reductive and doesn't make it negative sum. You identified the reasons of outflows and neglected to identify the reasons of inflows, or the magnitude of either. Any supply and demand system is negative sum by your standard. Remember to always ask “Did I just make a separate fictional higher standard for an asset class just because I don't like it?” If you create a criteria for crypto assets that no commodity, currency, equity, or property can meet, the question is why? Is it ignorance or intentional?

user-the-name 5y ago
The only inflow is people sending money to exchanges, as the tokens being traded and created have zero intrinsic value. This is not the case commodities, currencies, equities or property. Those things have value outside of the market itself, while cryptocurrencies basically do not. They are in practice only used for trading.
- karottenreibe 5y ago
  What is the intrinsic value of a currency outside of trading then?
  - user-the-name 5y ago
    Are you planning on trading the money in your bank account? If not, can you give it to me as it apparently has no value?

Freestyler_3 5y ago

Is normal stocks any different?

singularity2001 5y ago
Yes, you invest money and (ideally/mostly) they produce wares worth more money. Positive sum.
- drexlspivey 5y ago
  That's not what positive sum means. Both stocks and crypto are positive sum though. Whenever someone buys a stock someone else sells it, one's loss is the other's gain. That would make it zero sum but the company has the option to issue new shares, akin to the fed printing money or a new bitcoin being minted in a block, that makes both games positive sum.
  - user-the-name 5y ago
    The newly issued shares represent a share in the underlying value of the company, which has increased. For cryptocurrencies, there is no such underlying value.
    - Freestyler_3 5y ago
      A company value is part speculation. If everyone sold their stock would the bottom price be high because of inflated value?
      - user-the-name 5y ago
        Cryptocurrency value is entirely speculation.
lottin 5y ago
Yes, it's different. Owning a stock is like owning a business. Unlike a coin, a business generates a profit. This means you don't have to sell the business to another investor in order to profit from it.

deleted 5y ago

[deleted]

scatters 5y ago

To be fair, cryptocurrencies do have genuine cash flows as well. People who need to launder money out of the criminal economy or out of oppressive economic regimes will be willing to pay a considerable cut to do so, and that money goes to "investors" as well as to miners.

bonestamp2 5y ago

> All profits anyone makes on cryptocurrencies comes out of the pockets of other "investors". That's not necessarily true. It's the same as the stock market. I could buy a stock or crypto token/coin for $1 and sell it for $2, while the person I bought it from paid less than $1 and the person who bought it from me sold it for more than $2. In other words, all three of us made money. There's also the possibility that the other two parties lost money. But there's nothing unethical about buying something for a price someone is willing to sell it for or selling at a price where someone else is willing to buy it. I mean, not unless you think capitalism as a whole is unethical.

lottin 5y ago
> In other words, all three of us made money. Yes, the three of you made money, but you're forgetting about the fourth investor. The fourth investor won't make money until a fifth investor comes and buys the coin. And so on, and so on. The revenue received by each investor always comes from a subsequent investor. So the OP was right. This is not true of stocks, as stocks do generate income.
- bonestamp2 5y ago
  > Yes, the three of you made money, but you're forgetting about the fourth investor. I didn't forget. That fourth investor is not part of my transaction. The point of my comment was that OP's claim that all crypto profits come from someone else's pocket is false. Just like non-dividend stocks, sometimes that's true, and sometimes it's not. As I stated, it's possible that my seller and buyer could lose money too. The same is true for stocks. > This is not true of stocks, as stocks do generate income. Yes, dividend stocks generate income for their investors, but not all stocks pay dividends. On that note, some crypto coins/tokens pay distributions and interest too (let's call them dividend crypto for simplicity). Are non-dividend stocks equal to non-dividend crypto? In both cases, profit can only be realized by the investor when the share/coin/token price goes up. Is that ok? I think any Capitalist should say yes. I'm not advocating for stocks or crypto, but there are some similarities that we have to acknowledge to avoid hypocrisy.