4 ms·

> 1.2 Bitcoin investing is a negative-sum game Bitcoin on the day this was published was trading around $7,500. It's now trading at $37,000. I'd say these guys

> 1.2 Bitcoin investing is a negative-sum game Bitcoin on the day this was published was trading around $7,500. It's now trading at $37,000. I'd say these guys got it wrong. *at least so far*.

ryan-allen 5y ago
If only we could predict the future!
Elzear 5y ago
"At any point in time — past, present, or future — the people who have ever bought bitcoins, considered as a whole, have put into the game more money than they have got back." Are you claiming that this sentence is false?
- keymone 5y ago
  is it not? only tiny fraction of bitcoin's lifetime -- two months out of 12 years -- has it been at higher levels than today.
- ta1234567890 5y ago
  That’s true. And it’s also true for any stock that doesn’t pay dividends as well. Should people not invest in those stocks? Or should we ban non-dividend stocks for being Ponzi schemes?
  - randomsearch 5y ago
    I believe that the missing point there is the expectation that those stocks will _eventually_ pay dividends.
    - mastermojo 5y ago
      I don't think (in my lifetime) I've heard anyone discuss buying or selling a stock in the context of a Dividend Discount Model. This observation isn't really in support of Bitcoin, it's more of a depressing thought that our stock markets are closer to a Keynesian beauty contest. (GME, AMC, etc). I don't personally own stocks or real estate for cash flow purposes. I own them with the expectation that I can sell them for more money down the line.
      - randomsearch 5y ago
        > I've heard anyone discuss buying or selling a stock in the context of a Dividend Discount Model. Pension funds.
  - arcticbull 5y ago
    That's not accurate. Dividends are just one of the many ways that companies accrue value. Companies use revenues to invest in the business, to repurchase shares and also to issue dividends. This net welfare accretion must be considered in its totality. Just because a company doesn't issue dividends doesn't make it a Ponzi scheme, and it doesn't make it a zero sum investment (like precious metals) or an negative sum investment (like PoW coins and to a lesser extent, most (all?) other coins). “In the short run, the market is a voting machine, but in the long run, it is a weighing machine”
  - JediLuke 5y ago
    At least stocks/companies have a balance sheet with real assets. Even if the whole company shut down (and wasn’t bankrupt) investors would still get at least some of their money back after liquidation.
  - deleted 5y ago
    [deleted]
- BenoitP 5y ago
  This is compatible with Bitcoin being a store of value. If velocity stays low, the price will continue to go up.
- pcthrowaway 5y ago
  Let's consider this in the context of another currency, say, the Euro. "At any point in time - past, present, or future - the people who have ever bought Euros [with real currency, aka every other fiat], considered as a whole, have put into the game more money than they have got back." Now the Euro is heavily traded in forex markets, and surely the price fluctuates. Is this statement true? I'd suspect yes, though there are many other factors at play. Has the value of Euro increased relative to the other currencies it trades against? If so, this is probably due to large amounts of money pouring into it as a more lucrative asset than the quote currency. I think this question really only makes sense using another currency as a reference. So let's consider the Zimbabwe dollar during its period of hyperinflation (2007-2009). In this case, citizens of Zimbabwe who bought Euros very likely got back more of whatever currency they eventually converted it to than they would have if they had kept their money in Zimbabwe dollars. But what does this even mean. There is no 'stable' currency to use as a true reference, the value of each in the global market is constantly fluctuating. 'Getting less or more money back' becomes hard to evaluate. So let's talk about purchasing power instead. I suspect the people who have ever bought into bitcoins as a whole, have increased their purchasing power (the number of coca-cola's they can theoretically buy on any given day).
  - arcticbull 5y ago
    > Now the Euro is heavily traded in forex markets, and surely the price fluctuates. Is this statement true? It is not true, because currencies aren't assets. Currencies are a medium of exchange. Their job is to hold value for only as long as it takes you use them to buy necessities or invest them in assets. That's it. Any longer is a non-goal. Goals include low transaction costs, high transaction speed, fungibility, stability and predictability. As for the FOREX market, that's a highly leveraged speculative trade on the relative purchasing power of a pair of currencies. That's not an investment and it's certainly not an asset. With that in mind FOREX is widely regarded as a zero-sum market in the same way options and futures are. Money from the winners goes to pay off the losers. > In this case, citizens of Zimbabwe who bought Euros very likely got back more of whatever currency they eventually converted it to than they would have if they had kept their money in Zimbabwe dollars. This would have been a zero sum trade, not negative sum. Zero sum doesn't mean reversible or that there aren't winners and losers, just that considered as a whole, between all participants, no money left the system and no money entered - what was there was simply redistributed.
Yizahi 5y ago
All bitcoin gains came from some poor guys who bought into this hysteria later than other and are now hoping to find another poor guy who will buy at current prices. I'm not saying that they will definitely stop, it is possible that this loop will continue for a long time, but people need to remember that these "valuations" is simply a product of a hype to resell at a higher price.
- ddrdrck_ 5y ago
  So far I wouldn't talk about "poor" guys
arcticbull 5y ago
This is addressed specifically. > "Since there is no source of revenue that would repay investments in bitcoin, there is no way to make a rational estimate for its value (above zero). There is no explanation for why the price is now 7300 USD/BTC rather than 0.73 or 73,000,000" (section 1.3)
- jjjdjjddddsfsd 5y ago
  Why is a liter of milk worth 1$?
  - deleted 5y ago
    [deleted]
  - arcticbull 5y ago
    It doesn't matter why a liter of milk costs $1 - what matters is that it costs $1 now, it'll cost roughly $1 a year from now and in the interim, it'll still also cost $1. Predictability and consistency is a critical aspect of currency. The actual numerical value is irrelevant. You can't assign a fundamental value to the purchasing power of a bitcoin when treating it as a currency because there's nowhere in the world that bitcoin is used to denominate the sticker price of goods. If there was you could regress its value based on how much one bitcoin would buy you in terms of goods priced in it. However, without that, you can only treat it as a purely speculative asset as jstolfi did. If that ever changes, our model will have to change. It has not, and IMO will not, even with El Salvador because its wildly fluctuating notional value determined predominantly by global speculators precludes it from being used to actually price things in a meaningful and consistent way. [edit] Either way, the title of the write-up was 'Bitcoin as an investment' - currencies aren't an investment, so the analysis models it as an asset.
    - hervature 5y ago
      Your entire comment is an argument why Bitcoin is more an investment than currency. The opposite of what the paper is trying to accomplish.
    - 5y ago

> 1.2 Bitcoin investing is a negative-sum game Bitcoin on the day this was published was trading around $7,500. It's now trading at $37,000. I'd say these guys got it wrong. *at least so far*.

ryan-allen 5y ago

If only we could predict the future!

Elzear 5y ago

"At any point in time — past, present, or future — the people who have ever bought bitcoins, considered as a whole, have put into the game more money than they have got back." Are you claiming that this sentence is false?

keymone 5y ago
is it not? only tiny fraction of bitcoin's lifetime -- two months out of 12 years -- has it been at higher levels than today.
ta1234567890 5y ago
That’s true. And it’s also true for any stock that doesn’t pay dividends as well. Should people not invest in those stocks? Or should we ban non-dividend stocks for being Ponzi schemes?
- randomsearch 5y ago
  I believe that the missing point there is the expectation that those stocks will _eventually_ pay dividends.
  - mastermojo 5y ago
    I don't think (in my lifetime) I've heard anyone discuss buying or selling a stock in the context of a Dividend Discount Model. This observation isn't really in support of Bitcoin, it's more of a depressing thought that our stock markets are closer to a Keynesian beauty contest. (GME, AMC, etc). I don't personally own stocks or real estate for cash flow purposes. I own them with the expectation that I can sell them for more money down the line.
    - randomsearch 5y ago
      > I've heard anyone discuss buying or selling a stock in the context of a Dividend Discount Model. Pension funds.
- arcticbull 5y ago
  That's not accurate. Dividends are just one of the many ways that companies accrue value. Companies use revenues to invest in the business, to repurchase shares and also to issue dividends. This net welfare accretion must be considered in its totality. Just because a company doesn't issue dividends doesn't make it a Ponzi scheme, and it doesn't make it a zero sum investment (like precious metals) or an negative sum investment (like PoW coins and to a lesser extent, most (all?) other coins). “In the short run, the market is a voting machine, but in the long run, it is a weighing machine”
- JediLuke 5y ago
  At least stocks/companies have a balance sheet with real assets. Even if the whole company shut down (and wasn’t bankrupt) investors would still get at least some of their money back after liquidation.
- deleted 5y ago
  [deleted]
BenoitP 5y ago
This is compatible with Bitcoin being a store of value. If velocity stays low, the price will continue to go up.
pcthrowaway 5y ago
Let's consider this in the context of another currency, say, the Euro. "At any point in time - past, present, or future - the people who have ever bought Euros [with real currency, aka every other fiat], considered as a whole, have put into the game more money than they have got back." Now the Euro is heavily traded in forex markets, and surely the price fluctuates. Is this statement true? I'd suspect yes, though there are many other factors at play. Has the value of Euro increased relative to the other currencies it trades against? If so, this is probably due to large amounts of money pouring into it as a more lucrative asset than the quote currency. I think this question really only makes sense using another currency as a reference. So let's consider the Zimbabwe dollar during its period of hyperinflation (2007-2009). In this case, citizens of Zimbabwe who bought Euros very likely got back more of whatever currency they eventually converted it to than they would have if they had kept their money in Zimbabwe dollars. But what does this even mean. There is no 'stable' currency to use as a true reference, the value of each in the global market is constantly fluctuating. 'Getting less or more money back' becomes hard to evaluate. So let's talk about purchasing power instead. I suspect the people who have ever bought into bitcoins as a whole, have increased their purchasing power (the number of coca-cola's they can theoretically buy on any given day).
- arcticbull 5y ago
  > Now the Euro is heavily traded in forex markets, and surely the price fluctuates. Is this statement true? It is not true, because currencies aren't assets. Currencies are a medium of exchange. Their job is to hold value for only as long as it takes you use them to buy necessities or invest them in assets. That's it. Any longer is a non-goal. Goals include low transaction costs, high transaction speed, fungibility, stability and predictability. As for the FOREX market, that's a highly leveraged speculative trade on the relative purchasing power of a pair of currencies. That's not an investment and it's certainly not an asset. With that in mind FOREX is widely regarded as a zero-sum market in the same way options and futures are. Money from the winners goes to pay off the losers. > In this case, citizens of Zimbabwe who bought Euros very likely got back more of whatever currency they eventually converted it to than they would have if they had kept their money in Zimbabwe dollars. This would have been a zero sum trade, not negative sum. Zero sum doesn't mean reversible or that there aren't winners and losers, just that considered as a whole, between all participants, no money left the system and no money entered - what was there was simply redistributed.

Yizahi 5y ago

All bitcoin gains came from some poor guys who bought into this hysteria later than other and are now hoping to find another poor guy who will buy at current prices. I'm not saying that they will definitely stop, it is possible that this loop will continue for a long time, but people need to remember that these "valuations" is simply a product of a hype to resell at a higher price.

ddrdrck_ 5y ago
So far I wouldn't talk about "poor" guys

arcticbull 5y ago

This is addressed specifically. > "Since there is no source of revenue that would repay investments in bitcoin, there is no way to make a rational estimate for its value (above zero). There is no explanation for why the price is now 7300 USD/BTC rather than 0.73 or 73,000,000" (section 1.3)

jjjdjjddddsfsd 5y ago
Why is a liter of milk worth 1$?
- deleted 5y ago
  [deleted]
- arcticbull 5y ago
  It doesn't matter why a liter of milk costs $1 - what matters is that it costs $1 now, it'll cost roughly $1 a year from now and in the interim, it'll still also cost $1. Predictability and consistency is a critical aspect of currency. The actual numerical value is irrelevant. You can't assign a fundamental value to the purchasing power of a bitcoin when treating it as a currency because there's nowhere in the world that bitcoin is used to denominate the sticker price of goods. If there was you could regress its value based on how much one bitcoin would buy you in terms of goods priced in it. However, without that, you can only treat it as a purely speculative asset as jstolfi did. If that ever changes, our model will have to change. It has not, and IMO will not, even with El Salvador because its wildly fluctuating notional value determined predominantly by global speculators precludes it from being used to actually price things in a meaningful and consistent way. [edit] Either way, the title of the write-up was 'Bitcoin as an investment' - currencies aren't an investment, so the analysis models it as an asset.
  - hervature 5y ago
    Your entire comment is an argument why Bitcoin is more an investment than currency. The opposite of what the paper is trying to accomplish.
  - 5y ago