4 ms·

Mathematically, you should not invest in crypto

7 points by gogo61 5y ago

antasvara 5y ago
Is crypto necessarily a zero sum game? The stock market in the US has appreciated at an average of 7% over the past 50-100 years. I'd assume someone has "lost" in that scenario, but it probably isn't (on average) someone participating in the stock market.
- gogo61 5y ago
  In crypto, if you are winning, someone has to lose. There is no intrinsic value unlike stock market. In stock market, most of companies are growing and thus creating positive sum game.
  - antasvara 5y ago
    Does someone have to lose? If crypto becomes a usable currency, it becomes an effective store of value. That means that it's entirely possible for crypto to become more valuable and useful over time. >In crypto, if you are winning, someone has to lose. The loser doesn't have to be someone in the crypto market. If I buy 10 dollars of bitcoin, other cryptocurrencies don't collectively lose 10 dollars of value. Arguably, the loser in that case would be the businesses that I would have used that money to invest in.
    - gogo61 5y ago
      > If I buy 10 dollars of bitcoin, other cryptocurrencies don't collectively lose 10 dollars of value. You are missing the point. If you invest $10 and get $1 of profit, the $1 is coming from someone who has lost the $1.
      - antasvara 5y ago
        That "someone" doesn't have to be another crypto investor.
        gogo61 5y ago
        IFF it becomes a stable coin whose chance is almost nil in most of the countries.
        antasvara 5y ago
        But it's not nil, is it? From a future value perspective, that chance means that the entire market can increase in value, much like the stock market. I'd also point out that as long as more people are buying crypto, the value can continue to rise (as there's more people purchasing crypto every day). That does mean that at some point people will lose, but in the short to medium term, buying today could see increases for a while. All crypto isn't equal either. There are plenty of coins with more usability than others, both as a currency and as the base for other technical projects. Ethereum in particular is super interesting because of the smart contracts feature. A coin doesn't have to become a worldwide stablecoin to increase in usability and value.
  - georgyo 5y ago
    I really dislike crypto, but you're incorrect about the stock market. Stock used to have real value, but most stock these days does not pay dividends. The relationship of the price of the stock is completely devorced from the company itself. See GME and AMC where just large amounts of people investing creates huge upswings that are more about market manipulation then the company. Crypto and stock are nearly identical in how people make and lose money. You can only make buy it someone is selling and you can only sell if someone is buying. If you buy low and sell high you win! When you buy you are gambling that factors outside of your control will be favorable to you later.
    - gogo61 5y ago
      > GME and AMC where just large amounts of people investing creates huge upswings Yes, you are right. Most of the people are speculating and thus inflating the value of the company. But, still, most of the public company makes profit unlike crypto.
    - gogo61 5y ago
      > Crypto and stock are nearly identical in how people make and lose money. You can only make buy it someone is selling and you can only sell if someone is buying. If you buy low and sell high you win! No. Company is also making the money and thus increasing the size of pie. So, ultimately, it is positive sum.
- timonoko 5y ago
  Bitcoin derivatives proved there is no other parameters in the valuation except brainless random gaming. Bitcoin futures are always the same as current value. I thought they might bring some long-time stability but did not happen. Reason maybe that bitcoin trading is too slow and stiff. You cannot buy large amount of coins and calls at the same instant.
  - gogo61 5y ago
    yeah.
williamsharris 5y ago
The greed makes you do crazy things.
jhoutromundo 5y ago
This article is wrong in so many points that I basically copy and pasted the whole thing. > Disclaimer - I have invested 1% of my savings into stable cryptocurrencies such as Bitcoin and Ethereum etc. The question is not how much. The question is when and how. The only thing that is good on this article is the % of the savings. 1% is fairly reasonable. > Let’s talk about slot games first. Bad comparison. Those who mix investment and lucky generally have a pretty wrong concept about investment. > Most of them are designed in such a way that you will win only 49% of the time and the rest 51% of you will lose. Considering that this is true, it is not a chaotic system like any economic system. Nobody can set a decentralized currency to fail. > Cryptocurrency returns are a zero-sum game i.e. if 1 person gets a $10 profit, another person has to lose $10. No, it is not. The monetary base expands with a fixed rate. Also, you are mixing profit and value here. One can easily profit $10, sell an the other one profit $10. > To win in gambling, you must have a mathematical positive edge over your competitors. Wrong again. For this to work, both you and the machine need to have infinite money. One lucky person can win you all. > In my cryptocurrency world, no one really has a positive mathematical edge in cryptocurrency i.e. no one has such information which makes them better than other crypto investors. So, it is impossible to make a profit in long term. This is so wrong that it is wrong in different levels at the same time. You can be a better investor in crypto. One example was the strategicly investing in currencies that that's inverse proportional due to its differences of philosophies (like BCH and BTC). Another level of wrongness is that crypto can reduce risks of a local currency, due to the fact that no individual institution can control. > Why do I invest? I believe staying longer for longer period creates a mathematical edge as people in short term either book small profit and leave or accumulate huge loss and wait for price coming back. This is wrong because you are completely ignoring some basic concepts called innovation, market shift, corporation wrongdoings. You are basically saying that a company can't fail if you wait long enough.
- gogo61 5y ago
  You don't seems to have basic mathematical understanding. I don't want to argue with you. I would recommend to read it again. I can prove each point with experiment.
BrissyCoder 5y ago
> Disclaimer - I have invested 1% of my savings into stable cryptocurrencies such as Bitcoin and Ethereum etc. Lol... okay the "STABLE" ones huh? *closes browser tab
- gogo61 5y ago
  relatively ;)

7 points by gogo61 5y ago

Is crypto necessarily a zero sum game? The stock market in the US has appreciated at an average of 7% over the past 50-100 years. I'd assume someone has "lost" in that scenario, but it probably isn't (on average) someone participating in the stock market.

gogo61 5y ago
In crypto, if you are winning, someone has to lose. There is no intrinsic value unlike stock market. In stock market, most of companies are growing and thus creating positive sum game.
- antasvara 5y ago
  Does someone have to lose? If crypto becomes a usable currency, it becomes an effective store of value. That means that it's entirely possible for crypto to become more valuable and useful over time. >In crypto, if you are winning, someone has to lose. The loser doesn't have to be someone in the crypto market. If I buy 10 dollars of bitcoin, other cryptocurrencies don't collectively lose 10 dollars of value. Arguably, the loser in that case would be the businesses that I would have used that money to invest in.
  - gogo61 5y ago
    > If I buy 10 dollars of bitcoin, other cryptocurrencies don't collectively lose 10 dollars of value. You are missing the point. If you invest $10 and get $1 of profit, the $1 is coming from someone who has lost the $1.
    - antasvara 5y ago
      That "someone" doesn't have to be another crypto investor.
      - gogo61 5y ago
        IFF it becomes a stable coin whose chance is almost nil in most of the countries.
        antasvara 5y ago
        But it's not nil, is it? From a future value perspective, that chance means that the entire market can increase in value, much like the stock market. I'd also point out that as long as more people are buying crypto, the value can continue to rise (as there's more people purchasing crypto every day). That does mean that at some point people will lose, but in the short to medium term, buying today could see increases for a while. All crypto isn't equal either. There are plenty of coins with more usability than others, both as a currency and as the base for other technical projects. Ethereum in particular is super interesting because of the smart contracts feature. A coin doesn't have to become a worldwide stablecoin to increase in usability and value.
- georgyo 5y ago
  I really dislike crypto, but you're incorrect about the stock market. Stock used to have real value, but most stock these days does not pay dividends. The relationship of the price of the stock is completely devorced from the company itself. See GME and AMC where just large amounts of people investing creates huge upswings that are more about market manipulation then the company. Crypto and stock are nearly identical in how people make and lose money. You can only make buy it someone is selling and you can only sell if someone is buying. If you buy low and sell high you win! When you buy you are gambling that factors outside of your control will be favorable to you later.
  - gogo61 5y ago
    > GME and AMC where just large amounts of people investing creates huge upswings Yes, you are right. Most of the people are speculating and thus inflating the value of the company. But, still, most of the public company makes profit unlike crypto.
  - gogo61 5y ago
    > Crypto and stock are nearly identical in how people make and lose money. You can only make buy it someone is selling and you can only sell if someone is buying. If you buy low and sell high you win! No. Company is also making the money and thus increasing the size of pie. So, ultimately, it is positive sum.
timonoko 5y ago
Bitcoin derivatives proved there is no other parameters in the valuation except brainless random gaming. Bitcoin futures are always the same as current value. I thought they might bring some long-time stability but did not happen. Reason maybe that bitcoin trading is too slow and stiff. You cannot buy large amount of coins and calls at the same instant.
- gogo61 5y ago
  yeah.

williamsharris 5y ago

The greed makes you do crazy things.

jhoutromundo 5y ago

This article is wrong in so many points that I basically copy and pasted the whole thing. > Disclaimer - I have invested 1% of my savings into stable cryptocurrencies such as Bitcoin and Ethereum etc. The question is not how much. The question is when and how. The only thing that is good on this article is the % of the savings. 1% is fairly reasonable. > Let’s talk about slot games first. Bad comparison. Those who mix investment and lucky generally have a pretty wrong concept about investment. > Most of them are designed in such a way that you will win only 49% of the time and the rest 51% of you will lose. Considering that this is true, it is not a chaotic system like any economic system. Nobody can set a decentralized currency to fail. > Cryptocurrency returns are a zero-sum game i.e. if 1 person gets a $10 profit, another person has to lose $10. No, it is not. The monetary base expands with a fixed rate. Also, you are mixing profit and value here. One can easily profit $10, sell an the other one profit $10. > To win in gambling, you must have a mathematical positive edge over your competitors. Wrong again. For this to work, both you and the machine need to have infinite money. One lucky person can win you all. > In my cryptocurrency world, no one really has a positive mathematical edge in cryptocurrency i.e. no one has such information which makes them better than other crypto investors. So, it is impossible to make a profit in long term. This is so wrong that it is wrong in different levels at the same time. You can be a better investor in crypto. One example was the strategicly investing in currencies that that's inverse proportional due to its differences of philosophies (like BCH and BTC). Another level of wrongness is that crypto can reduce risks of a local currency, due to the fact that no individual institution can control. > Why do I invest? I believe staying longer for longer period creates a mathematical edge as people in short term either book small profit and leave or accumulate huge loss and wait for price coming back. This is wrong because you are completely ignoring some basic concepts called innovation, market shift, corporation wrongdoings. You are basically saying that a company can't fail if you wait long enough.

gogo61 5y ago
You don't seems to have basic mathematical understanding. I don't want to argue with you. I would recommend to read it again. I can prove each point with experiment.

BrissyCoder 5y ago

> Disclaimer - I have invested 1% of my savings into stable cryptocurrencies such as Bitcoin and Ethereum etc. Lol... okay the "STABLE" ones huh? *closes browser tab

gogo61 5y ago
relatively ;)