3 ms·

> Equity markets are tied to the performance of the business in the full course of time which is tied to labor. They're not though, and they haven't been for c

by dvt 5y ago

> Equity markets are tied to the performance of the business in the full course of time which is tied to labor. They're not though, and they haven't been for centuries. I gave you 3 examples off the top of my head. Markets are tied to sentiment; let me refer you to the Keynesian beauty contest[1]. This is very basic economic theory. > Crypto like futures and options are zero-sum or negative-sum instruments if you include the rake. Every dollar in appreciation comes from a new investor. Every, single, one. That's the difference. There is no "rake" in crypto, so I'm not even sure what you mean by that. Second, every dollar in appreciation on a decentralized exchange (say, SushiSwap) is a result of the automated market maker's supply and demand response. This is functionally exactly the same as what happens with order books (like on the stock market) but it just happens to use liquidity pools to facilitate this (because volume is much lower). For every seller, there's a buyer, and for every buyer, there's a seller: that's how markets work. Third, crypto is actually not at all like options because whereas option contracts can expire worthless (e.g. they run out of time and can no longer be exercised), if you buy some poopcoin, even if it tanks, you'll still own said coin (kind of like a penny stock). > It's just trading bags of air back and forth. This might be true, but people trade all kinds of things I personally find dumb (Pokémon cards, rare sneakers, etc.). Looks like a lot of people see value in cryptocurrency, who am I to judge. [1] https://en.wikipedia.org/wiki/Keynesian_beauty_contest https://en.wikipedia.org/wiki/Keynesian_beauty_contest

arcticbull 5y ago
Markets are tied to sentiment in the short term, but to labor performance in the long term - this is the distinction I was trying to make. I'm just re-stating the adage that in the short term the market is a popularity content but in the long term it is a weighing machine. You called out AMC and GME. AMC was trading at like $8 in 2020. It spiked to $60, and its back down to $15. Which honestly I could make a case for since they took advantage of the speculative mania to clear a bunch of debt off their books. Give GME a hot minute and the same thing will happen - it has already started. Peaked at $500 and is sitting at $98.50. > There is no "rake" in crypto, so I'm not even sure what you mean by that. There's a few different rakes. The overwhelming majority of crypto trading takes place on centralized exchanges where they take a commission on each trade. Off exchanges, in PoW currencies, new coins are issued which are then sold on these centralized exchanges to pay the bills. This exerts negative price pressure socializing the cost of running the network - another form of rake. In a PoS currency new tokens are issued to validators where non-stakers are diluted - another form of rake. In each case (exchanges, miners, stakers) a commission is taken by the folks operating the game, which is exactly what a rake is in poker. Expiry is not why options are the same as crypto. It's the zero-sum nature that's the same. Winners pay the losers, no new value is created in the options market. Ditto the crypto market. > This might be true, but people trade all kinds of things I personally find dumb (Pokémon cards, rare sneakers, etc.). Looks like a lot of people see value in cryptocurrency, who am I to judge. For sure, but Pokemon cards aren't claiming to be money and aren't legal tender in one of the poorest countries on earth. It's an issue due to scale, not due to its intrinsically being dumb, which to be clear, it also is. We cannot allow it to get to the point where its stupidity represents a systemic risk to the rest of us who choose not to treat Pokemon cards as money.

by dvt 5y ago

arcticbull 5y ago

Markets are tied to sentiment in the short term, but to labor performance in the long term - this is the distinction I was trying to make. I'm just re-stating the adage that in the short term the market is a popularity content but in the long term it is a weighing machine. You called out AMC and GME. AMC was trading at like $8 in 2020. It spiked to $60, and its back down to $15. Which honestly I could make a case for since they took advantage of the speculative mania to clear a bunch of debt off their books. Give GME a hot minute and the same thing will happen - it has already started. Peaked at $500 and is sitting at $98.50. > There is no "rake" in crypto, so I'm not even sure what you mean by that. There's a few different rakes. The overwhelming majority of crypto trading takes place on centralized exchanges where they take a commission on each trade. Off exchanges, in PoW currencies, new coins are issued which are then sold on these centralized exchanges to pay the bills. This exerts negative price pressure socializing the cost of running the network - another form of rake. In a PoS currency new tokens are issued to validators where non-stakers are diluted - another form of rake. In each case (exchanges, miners, stakers) a commission is taken by the folks operating the game, which is exactly what a rake is in poker. Expiry is not why options are the same as crypto. It's the zero-sum nature that's the same. Winners pay the losers, no new value is created in the options market. Ditto the crypto market. > This might be true, but people trade all kinds of things I personally find dumb (Pokémon cards, rare sneakers, etc.). Looks like a lot of people see value in cryptocurrency, who am I to judge. For sure, but Pokemon cards aren't claiming to be money and aren't legal tender in one of the poorest countries on earth. It's an issue due to scale, not due to its intrinsically being dumb, which to be clear, it also is. We cannot allow it to get to the point where its stupidity represents a systemic risk to the rest of us who choose not to treat Pokemon cards as money.