10 ms·

Evidence that no one cares about crypto-denominated wealth

84 points by kmod 5y ago

PretzelPirate 5y ago
We will always have to pay for goods in a fiat currency, so it makes sense for people to value everything relative to fiat. Even trading on a ratio still falls back to “which will be worth more fiat”. This doesn’t mean that people don’t value crypto, it means they live in the real world.
- posterboy 5y ago
  hard cash is as cryptic as it gets for some sense of crypt.
- pjkundert 5y ago
  This will proceed -- until the daily (hourly?) re-valuation of fiat currencies makes it impossible to retain a mental model of their "worth". Then, everything will be valued in terms of some more stable and widely available value reference. Will this be a cryptocurrency? Probably not, unless some viable non-Fiat "stablecoin" become popular, or ETH and BTC reach a more stable plateau of valuation. More likely, a widely available relatively stable coinage like Silver would be used.
  - gowld 5y ago
    > non-Fiat "stablecoin" has anyone published a whitepaper / theory describing how this might be possible? A stablecoin has to be denominated in something -- that's what it's stable in. Is that even useful? It would have to be a commodity with extremely stable (everywhere in the world) non-zero price in "real" terms. Potatocoin? Sandcoin?
    - wmf 5y ago
      You could peg to CPI-adjusted dollars or the Big Mac index or whatever. That's the easy part. The hard part is getting the peg to hold during difficult times.
    - lottin 5y ago
      As far as I can tell, "stablecoins" are redeemable for the underlying asset, that's how they keep the peg. Theoretically someone could make a coin that is redeemable for a large basket of goods and services, and such a coin should be very stable, price-wise, against those goods and services. However, this would be a very risky business for the issuer of the coin.
      - JumpCrisscross 5y ago
        > someone could make a coin that is redeemable for a large basket of goods and services This would be necessarily centralized if any of those goods are physical, or services physically rendered. If it excludes all physical nexuses, e.g. an in-game currency, one could do away with that centralisation, but it's no longer stable in any meaningful sense.
    - jtsiskin 5y ago
      A huge basket of stable currencies, government bonds, commodities, real estate. It seems like it should be possible to create something so diverse that even black swan events have minimal impact.
      - vba616 5y ago
        How much better can that be than an inflation-adjusted bond? It may be more satisfying in a theoretical way, but does the difference matter, and how much would people pay?
    - 3np 5y ago
      While there are several contenders of various complexity, DAI is still the state of the art AFAIK. https://makerdao.com/whitepaper/White%20Paper%20-The%20Maker%20Protocol_%20MakerDAO%E2%80%99s%20Multi-Collateral%20Dai%20(MCD)%20System-FINAL-%20021720.pdf https://makerdao.com/whitepaper/White%20Paper%20-The%20Maker... DAI is currently pegged to the USD but the long-term goal is (was?) to have an asset following a more general notion of stability according to some international index. I wasn't able to find a source or specifics for that last part but I did find this overview from 2019 that I think looks quite good. https://www.ecb.europa.eu/pub/pdf/scpops/ecb.op230~d57946be3b.en.pdf https://www.ecb.europa.eu/pub/pdf/scpops/ecb.op230~d57946be3...
  - vba616 5y ago
    >This will proceed -- until the daily (hourly?) re-valuation of fiat currencies makes it impossible to retain a mental model of their "worth". Until? What event do you refer to? Are you predicting the invention of rapid (fiat) currency trading?
- kuboble 5y ago
  I think the article makes the case that nobody cares about exact number of btc they have - only their dollar value. Unlike say house. Which might retain the same value to me even if its market dollar value doubled overnight.
  - nileshtrivedi 5y ago
    > Unlike say house. Which might retain the same value to me even if its market dollar value doubled overnight. I think this needs to be thought carefully. A house, because it's saleable, represents an opportunity cost. If the market value doubles overnight, a rational actor should re-evaluate whether it is still the best course to continue to live in it, rather than sell it.
    - oarsinsync 5y ago
      > If the market value doubles overnight, a rational actor should re-evaluate whether it is still the best course to continue to live in it, rather than sell it. If the rational actor's home has doubled in value, does the actor live in an exceptional home, or have all homes similarly doubled in value? Does a rational actor factor in where they intend to live in their calculation? How does that weight against the dollar value of the house they own?
      - bluGill 5y ago
        A few rational actors are to move to some lower priced area and will do so. They are mostly retired people. Though sometimes a low cost area will target small business to move to them.
- azth 5y ago
  > We will always have to pay for goods in a fiat currency Only so far, this will hopefully change in the future. People are tired of the government being able to print money at will and devalue their hard work.
cuntlife 5y ago
paulpauper 5y ago
The dollar continues to be a safe haven
- s1artibartfast 5y ago
  I think us currency alternatives got a bump. It shows the importance of gold reserves and integration with Chinese and other financial markets
- JumpCrisscross 5y ago
  > dollar continues to be a safe haven This is true. But crypto traded like a safe asset this time. As equities and even gold plummeted, Treasuries and crypto rallied.
ALittleLight 5y ago
"I think most people don’t realize that 'IV' numbers are the annualized volatility of the log process, so there’s a nonlinear conversion to non-log standard deviation." Hmmm, yes. I think most people don't realize this.
pjkundert 5y ago
Those who aren't paying attention, anyway... In Canada, we just went through a 10-day period where, in an afternoon, the government casually made it retroactively illegal to have supported a peaceful cause -- and began locking up peaceful, law-abiding citizens' bank accounts. In Russia, citizens have been instantly locked out of international financial transactions, and non-local currencies have become unavailable. It is likely that further, dramatic interventions in ingress/egress of wealth are forthcoming. In China, random decisions regarding the legality of Cryptocurrencies are regularly enacted. Huge businesses doing legal, ethical mining are one day accepted, and the next -- made illegal. Sorry, but anyone who doesn't find this worrisome is ... naive, for lack of a more charitable term.
- dragontamer 5y ago
  Meanwhile, MLRS systems are leveling entire neighborhoods in eastern Ukraine. Hospitals are collapsing as rockets bombard their foundations, cluster munitions deployed and thermobaric warheads causing the 2nd largest explosions known to man (only 2nd largest compared to nukes). Yes. We, as a society, have decided (rather quickly too) to use our financial resources to do what we can to fight back against these war crimes. That's not a bad thing at all. The only other thing that may serve as a deterrence is a proper and full war. If you've got other ideas for a deterance, now is the time to issue suggestions. Complaining that we've found a non-war way to deter Russia and their actions is callous, when compared to the millions of lives who suddenly had their lives upended last week. ------ > Sorry, but anyone who doesn't find this worrisome is ... naive, for lack of a more charitable term. Of course its worrisome that we have to deploy offensive tools (albeit financial tools rather than actual bombs). But what other choice do we have? Are you saying that Russia shouldn't have to pay for what they did? Are you saying that we should just forget about Ukraine's pains? Etc. etc. Money is a social construct. That's a good thing, for times like this. No, we don't want to live in these times and wish that things were more peaceful. But if someone hits you or someone else... you have to respond and deter them from striking yet again. Basic diplomacy.
- claudiulodro 5y ago
  Paying no mind to the "charitable" brush you're painting these situations with, it seems you're making a great argument for, like, a stash of gold coins more than for crypto. That'll outlast any government or online-network changes!
beaned 5y ago
I dunno, I care very much about increasing the number of BTC I have because I believe that though the price is variable, the trend is up over time. I study and try to employ everything from dollar-cost averaging to loan platforms with interest, to bitcoin-backed long positions. I don't think I'm the only one who thinks this way.
throwamon 5y ago
I understood maybe 10% of what the article says. Can someone ELI5? Or at least answer this question: Can a broke dummy like me make money from their observation and how? Edit: Thanks for the downvote. I didn't know asking an honest question to better understand a topic (which I'm sure I'm not the only one who's confused about) was against the rules. Or maybe my sense of humor flew over someone's head, who knows.
- bootwoot 5y ago
  Modeling the price of this product in USD results in a higher price than if you model it out in BTC. This implies that there's a risk free arbitrage opportunity. I have no idea how to exploit it.
- Kranar 5y ago
  I downvoted because it's a very low effort comment to ask people to explain out the whole thing to you in a simpler manner than the blog post itself. Do you want an ELI5 of Siegel's paradox? Do you want an ELI5 of a contango market, or what implied volatility is? Just blanket asking for an ELI5 without elaborating on what aspect you understood, or specific questions you have about the topic, or just demonstrating some effort on your part is low effort and places way too high of a burden on someone else to give you a good quality answer.
  - IncRnd 5y ago
    > I downvoted because it's a very low effort comment to ask people to explain out the whole thing to you in a simpler manner than the blog post itself. Do you want an ELI5 of Siegel's paradox? Do you want an ELI5 of a contango market, or what implied volatility is? The poster likely didn't want any of that but what he asked, "Can a broke dummy like me make money from their observation and how?" He was asking for the practicality of using the contents of the article.
    - Kranar 5y ago
      If someone who is broke is genuinely curious whether they can make money off of an article they have only a 10% understanding of, the answer is no. I really hope that isn't something people need to be told though.
seu 5y ago
I think you could reach the opposite interpretation, based on this: > You might argue that this is a pretty lightly traded product these days so the evidence is weak, but this product used to be one of the dominant ETH products and exhibited the same behavior. If in the past this was one of the dominants products, and now it is not, it could be because the market now cares _more_ than before about crypto-denominated wealth, and therefore stopped investing in it. Now, there are less people than before who prefer fiat-denominated. What are people trading these days mostly, and what does _that_ instrument tell in terms which denomination is preferred?
- danbruc 5y ago
  It is not the product itself but how it is valued that is indicative of the preference.
vagab0nd 5y ago
There are plenty out there that trade between BTC/ETH and other coins, in the hope to increase their BTC/ETH holdings. There are atomic trades happening on DeFi that have to be denominated by ETH, because of gas costs. Looking at the fiat price doesn't mean you don't care about crypto. Not looking at the fiat price doesn't mean you care about crypto. Personally, I don't look at the price until end of the month when I need to pay the bills.
______-_-______ 5y ago
This is a lot of theory leading up to a not-so-interesting conclusion. Of course USD is the dominant currency right now, and things tend to be priced in terms of the dominant currency. But that doesn't mean people "don't care" about other financial instruments. Imagine swapping the word "crypto" for anything else: > Strong evidence that no one cares about VTSAX-denominated wealth > So in the end the market is clear: when money is on the line, people value their wealth in fiat, not VTSAX. You bet I care more about the number of dollars I have than the number of shares of VTSAX, but that doesn't take away from the value of VTSAX.
- mdoms 5y ago
  VTSAX has never been promoted (much less invented) as a currency and cash equivalent. VTSAX has never been promoted as the future of spending.
  - Spivak 5y ago
    I mean really neither is crypto at this point. When was the last time you saw people promoting crypto as a thing you use to actually buy arbitrary things instead as asset you can turn into $LOCAL_CURRENCY? Crypto projects all seem to be using $COIN as a token you must purchase in order to access some resource on the network (Gas/Storage) or as a currency swap / investment (Bitcoin). Edit to everyone downvoting but not commenting -- name one. Name a crypto of any real success where the endgame is average joe being able to walk into starbucks and pay for his coffee with it.
    - deleted 5y ago
      [deleted]
- loeg 5y ago
  No one is advocating for Tesla to take payment in VTSAX shares.
- Kletiom 5y ago
  It looks to me that vtsax is representing the value of companies who exist. I would not compare.this to crypto
Animats 5y ago
"No one cares about crypto-denominated wealth" is far too strong a conclusion to draw from the mispricing of an obscure financial instrument. One big problem with derivatives in the cryptocurrency space is that the counterparties may not be that strong financially and/or may not pay up if they lose. Or, even if the hedge is enforced by some smart contract, the contract might not have enough staking behind it to survive a major price change. And there's a war on. So we should expect mispriced derivatives. Is there data available for cashout rates, such as USDC redemption and USDT being traded for USDC? That's more relevant here.
jonathan-adly 5y ago
This article is the classic bellcurve.jpeg meme with both ends saying 1 BTC = 1 BTC, and the middle IQ band sprouting out this non-sense. To give concrete critique, the author is using a complex financial instrument on an obscure exchange to make the case that sophisticated crypto traders would rather be paid in USD than Bitcoin. (with a meaningful, but overall small premium) As anyone who knows how professional Crypto markets work, its very nascent with a lot of arbitrage opportunity. When you see a 2-3% arbitrage in traditional markets, you can safely assume "market preference". But in Crypto land, it wasn't long ago that you can get a nice 20% arbitrage just by selling/buying Bitcoin between YEN/USD markets. It didn't mean that people had a preference between equal amounts of YEN/USD, it just meant an inefficient market with not enough professional market makers to arbitrage away the inefficiencies. (which how SBF of FTX made his money). The only reason one of the readers here won't arbitrage away that premium is they don't know how, or if they know how - they have bigger fish to go after.
- porknubbins 5y ago
  I’ve seen plenty of arbitrage opportunities on Crypto and some were legit (usually gone quickly) but many on closer inspection required either some directional risk of roughly the same size as the profit (ie while waiting on confirmations) or would get front run by MEV bots or required trusting some borderline exchange with large amounts of capital etc, so I think there are a lot of reasons they exist besides people don’t know how to take advatage of them.
RedBeetDeadpool 5y ago
Many financial news sources are already casually mentioning price of bitcoin alongside the nasdaq and s&p 500. Give me all the formulas and statistics you want, but if I see a fast car, I'm calling it a fast car.
- stjohnswarts 5y ago
  I watch bloomberg TV but have almost stopped recently because they seem to be obsessed with crypto and have to bring it up with everything. Very annoying.
beefman 5y ago
No one cares about USD-denominated wealth either. People care about real wealth, which is a physical quantity. USD wins here because its volatility is much lower. But it's also nonzero. I'm shopping for a car this month, and I'll decide whether to borrow or pay cash by comparing the expected real cost of the loan vs the expected real return on cash. Regarding the apple example, the customer and grocer do not disagree on the value of apples. The trade takes place because of the marginal value of apples and the pre-existing difference in apple inventories between the parties.
- joe_the_user 5y ago
  Well, I agree with your basic point. I'd just offer that Siegels paradox (which is interesting to read about)[1] applies if you have two currencies where some consumers price their end-consumption good in each of those currencies. But crypto currencies aren't something you want to consume later. If bitcoin has a 50% chance of doubling and 50% chance of halving in value, it is simply a good investment (expected payoff = 5/4 of investment) best held by dollar current dollar holders and bitcoin holders alike. So, yeah, wealth is what matters and the Siegel's argument is a red herring. But erudite one, ha. [1] https://en.wikipedia.org/wiki/Siegel%27s_paradox https://en.wikipedia.org/wiki/Siegel%27s_paradox
- vba616 5y ago
  >People care about real wealth, which is a physical quantity Real wealth is in relationships. There isn't any other kind. For instance, if you have a relationship with someone who has a list of cars, that says you own a car, then that's wealth. If you have a relationship with someone who has a list of accounts, that says you have $20,000, then that's also wealth. Property is always abstract and dependent on other people.
- landemva 5y ago
  ' ... the customer and grocer do not disagree on the value of apples. The trade takes place because of ... difference in apple inventories between the parties. ' Wrong, and wrong. The trade does not occur due to inventory differences between the parties. For example, I have zero apples in my household inventory and no amount of inventory disparity (grocery store vs my house) causes apple trade to happen with me. Trade happens because each party has a coincidence of wants AND each party values the item differently. Each party believes they are gaining by the trade, so the value of the item is different in the minds of each party.
ffggvv 5y ago
i was applying for a mortgage last year and the broker told me to send an accounting of all my assets except crypto as it was worthless in getting a loan
- landemva 5y ago
  I asked a friend who was about to list his house for sale how much he wanted. He said nine btc and another higher price in usd. I will rephrase this to make it accurate: ->>except crypto as it was worthless in getting a loan. becomes ->> except crypto as it was worthless in getting a lien against crypto. In other words, they can't lien your 1000 ounces of gold coin you claim to have in your basement.
  - ffggvv 5y ago
    pretty sure they could get a court order for you to hand over your crypto or your gold and if you didn’t, throw you in a cage
fleddr 5y ago
This article makes a point that doesn't need to be made, it's stating the obvious. Quite obviously most crypto traders/investors use the dominant fiat currency to track their wealth. Even a deep believer in crypto does so, as a frame of reference. The chart is BTC/USD, and that is what everybody is looking at, nobody stated otherwise. USD denominated wealth is also a requirement for managing taxes and USD equivalents like stablecoins are used to survive deep dips and progressively take profit on the way up...so that you have "dry powder" to buy the next dip. There is however a sizable group that does denominate their wealth in crypto: those that dollar-cost-average. For Bitcoin, also called "stacking sats". They express their progress in crypto, not in USD, as the USD input is fixed.
MaxMoney 5y ago
cryptica 5y ago
People think in fiat terms because their incomes and their expenses are in fiat... But people do have a sense of how much 1 Bitcoin is worth in terms of real-world economic value but they don't think about it in the same way as fiat. Although people are more familiar with the value of 1 USD at any given time, they instinctively (and correctly) feel that it's a depreciating instrument which loses value over time. On the other hand, when people think about 1 Bitcoin, they feel that it's an appreciating instrument which gains value over time. Not only do people instinctively (without having to do a mental conversion) understand that 1 Bitcoin represents a lot of real-world economic wealth, they understand that it represents an increasing share of the world's wealth. It's a bit like shares of a big corporation. How many laptop computers can I buy with 1 Google share? Essentially any Google shareholder will still need to do a conversion to USD (or their local currency) in their minds in order to give an answer. But this means nothing in terms of perceived value. The Google shareholder knows instinctively that GOOG is an appreciating instrument which gains value over time and this is what makes them want to hold it and not use it as a currency. The reason why Bitcoin is valuable is because Bitcoiners understand that the main mechanism of wealth accumulation in the modern fiat-based global economy has nothing to do with value creation. Wealth in the modern era is all about tribalism and social networking. Bitcoiners are confident that their tribe is best positioned to acquire the world's wealth in a flawed system founded on money printing. In a world of printed money wherein wealth is acquired primarily on the basis of value extraction (not value creation), wealth accumulation depends primarily on the size of one's tribe and the ability of its members to reach consensus and to conspire together. By the way, this conspiracy element is not unique to Bitcoin; it's also an intrinsic part of all big corporations... Bitcoin is just the most effective mechanism for taking advantage of it due its substantial network effects and low-friction barriers to entry. IMO in a world without money printing, the value of conspiring would be near 0 at scale because the focus (and incentive) would be value creation, not extraction.
Havoc 5y ago
And if I'm in Japan I still think of cost of items in pounds sterling converted. ...that doesn't make the Japanese Yen worthless. It's a bad line of reasoning.

84 points by kmod 5y ago

We will always have to pay for goods in a fiat currency, so it makes sense for people to value everything relative to fiat. Even trading on a ratio still falls back to “which will be worth more fiat”. This doesn’t mean that people don’t value crypto, it means they live in the real world.

posterboy 5y ago
hard cash is as cryptic as it gets for some sense of crypt.
pjkundert 5y ago
This will proceed -- until the daily (hourly?) re-valuation of fiat currencies makes it impossible to retain a mental model of their "worth". Then, everything will be valued in terms of some more stable and widely available value reference. Will this be a cryptocurrency? Probably not, unless some viable non-Fiat "stablecoin" become popular, or ETH and BTC reach a more stable plateau of valuation. More likely, a widely available relatively stable coinage like Silver would be used.
- gowld 5y ago
  > non-Fiat "stablecoin" has anyone published a whitepaper / theory describing how this might be possible? A stablecoin has to be denominated in something -- that's what it's stable in. Is that even useful? It would have to be a commodity with extremely stable (everywhere in the world) non-zero price in "real" terms. Potatocoin? Sandcoin?
  - wmf 5y ago
    You could peg to CPI-adjusted dollars or the Big Mac index or whatever. That's the easy part. The hard part is getting the peg to hold during difficult times.
  - lottin 5y ago
    As far as I can tell, "stablecoins" are redeemable for the underlying asset, that's how they keep the peg. Theoretically someone could make a coin that is redeemable for a large basket of goods and services, and such a coin should be very stable, price-wise, against those goods and services. However, this would be a very risky business for the issuer of the coin.
    - JumpCrisscross 5y ago
      > someone could make a coin that is redeemable for a large basket of goods and services This would be necessarily centralized if any of those goods are physical, or services physically rendered. If it excludes all physical nexuses, e.g. an in-game currency, one could do away with that centralisation, but it's no longer stable in any meaningful sense.
  - jtsiskin 5y ago
    A huge basket of stable currencies, government bonds, commodities, real estate. It seems like it should be possible to create something so diverse that even black swan events have minimal impact.
    - vba616 5y ago
      How much better can that be than an inflation-adjusted bond? It may be more satisfying in a theoretical way, but does the difference matter, and how much would people pay?
  - 3np 5y ago
    While there are several contenders of various complexity, DAI is still the state of the art AFAIK. https://makerdao.com/whitepaper/White%20Paper%20-The%20Maker%20Protocol_%20MakerDAO%E2%80%99s%20Multi-Collateral%20Dai%20(MCD)%20System-FINAL-%20021720.pdf https://makerdao.com/whitepaper/White%20Paper%20-The%20Maker... DAI is currently pegged to the USD but the long-term goal is (was?) to have an asset following a more general notion of stability according to some international index. I wasn't able to find a source or specifics for that last part but I did find this overview from 2019 that I think looks quite good. https://www.ecb.europa.eu/pub/pdf/scpops/ecb.op230~d57946be3b.en.pdf https://www.ecb.europa.eu/pub/pdf/scpops/ecb.op230~d57946be3...
- vba616 5y ago
  >This will proceed -- until the daily (hourly?) re-valuation of fiat currencies makes it impossible to retain a mental model of their "worth". Until? What event do you refer to? Are you predicting the invention of rapid (fiat) currency trading?
kuboble 5y ago
I think the article makes the case that nobody cares about exact number of btc they have - only their dollar value. Unlike say house. Which might retain the same value to me even if its market dollar value doubled overnight.
- nileshtrivedi 5y ago
  > Unlike say house. Which might retain the same value to me even if its market dollar value doubled overnight. I think this needs to be thought carefully. A house, because it's saleable, represents an opportunity cost. If the market value doubles overnight, a rational actor should re-evaluate whether it is still the best course to continue to live in it, rather than sell it.
  - oarsinsync 5y ago
    > If the market value doubles overnight, a rational actor should re-evaluate whether it is still the best course to continue to live in it, rather than sell it. If the rational actor's home has doubled in value, does the actor live in an exceptional home, or have all homes similarly doubled in value? Does a rational actor factor in where they intend to live in their calculation? How does that weight against the dollar value of the house they own?
    - bluGill 5y ago
      A few rational actors are to move to some lower priced area and will do so. They are mostly retired people. Though sometimes a low cost area will target small business to move to them.
azth 5y ago
> We will always have to pay for goods in a fiat currency Only so far, this will hopefully change in the future. People are tired of the government being able to print money at will and devalue their hard work.

cuntlife 5y ago

paulpauper 5y ago

The dollar continues to be a safe haven

s1artibartfast 5y ago
I think us currency alternatives got a bump. It shows the importance of gold reserves and integration with Chinese and other financial markets
JumpCrisscross 5y ago
> dollar continues to be a safe haven This is true. But crypto traded like a safe asset this time. As equities and even gold plummeted, Treasuries and crypto rallied.

ALittleLight 5y ago

"I think most people don’t realize that 'IV' numbers are the annualized volatility of the log process, so there’s a nonlinear conversion to non-log standard deviation." Hmmm, yes. I think most people don't realize this.

pjkundert 5y ago

Those who aren't paying attention, anyway... In Canada, we just went through a 10-day period where, in an afternoon, the government casually made it retroactively illegal to have supported a peaceful cause -- and began locking up peaceful, law-abiding citizens' bank accounts. In Russia, citizens have been instantly locked out of international financial transactions, and non-local currencies have become unavailable. It is likely that further, dramatic interventions in ingress/egress of wealth are forthcoming. In China, random decisions regarding the legality of Cryptocurrencies are regularly enacted. Huge businesses doing legal, ethical mining are one day accepted, and the next -- made illegal. Sorry, but anyone who doesn't find this worrisome is ... naive, for lack of a more charitable term.

dragontamer 5y ago
Meanwhile, MLRS systems are leveling entire neighborhoods in eastern Ukraine. Hospitals are collapsing as rockets bombard their foundations, cluster munitions deployed and thermobaric warheads causing the 2nd largest explosions known to man (only 2nd largest compared to nukes). Yes. We, as a society, have decided (rather quickly too) to use our financial resources to do what we can to fight back against these war crimes. That's not a bad thing at all. The only other thing that may serve as a deterrence is a proper and full war. If you've got other ideas for a deterance, now is the time to issue suggestions. Complaining that we've found a non-war way to deter Russia and their actions is callous, when compared to the millions of lives who suddenly had their lives upended last week. ------ > Sorry, but anyone who doesn't find this worrisome is ... naive, for lack of a more charitable term. Of course its worrisome that we have to deploy offensive tools (albeit financial tools rather than actual bombs). But what other choice do we have? Are you saying that Russia shouldn't have to pay for what they did? Are you saying that we should just forget about Ukraine's pains? Etc. etc. Money is a social construct. That's a good thing, for times like this. No, we don't want to live in these times and wish that things were more peaceful. But if someone hits you or someone else... you have to respond and deter them from striking yet again. Basic diplomacy.
claudiulodro 5y ago
Paying no mind to the "charitable" brush you're painting these situations with, it seems you're making a great argument for, like, a stash of gold coins more than for crypto. That'll outlast any government or online-network changes!

beaned 5y ago

I dunno, I care very much about increasing the number of BTC I have because I believe that though the price is variable, the trend is up over time. I study and try to employ everything from dollar-cost averaging to loan platforms with interest, to bitcoin-backed long positions. I don't think I'm the only one who thinks this way.

throwamon 5y ago

I understood maybe 10% of what the article says. Can someone ELI5? Or at least answer this question: Can a broke dummy like me make money from their observation and how? Edit: Thanks for the downvote. I didn't know asking an honest question to better understand a topic (which I'm sure I'm not the only one who's confused about) was against the rules. Or maybe my sense of humor flew over someone's head, who knows.

bootwoot 5y ago
Modeling the price of this product in USD results in a higher price than if you model it out in BTC. This implies that there's a risk free arbitrage opportunity. I have no idea how to exploit it.
Kranar 5y ago
I downvoted because it's a very low effort comment to ask people to explain out the whole thing to you in a simpler manner than the blog post itself. Do you want an ELI5 of Siegel's paradox? Do you want an ELI5 of a contango market, or what implied volatility is? Just blanket asking for an ELI5 without elaborating on what aspect you understood, or specific questions you have about the topic, or just demonstrating some effort on your part is low effort and places way too high of a burden on someone else to give you a good quality answer.
- IncRnd 5y ago
  > I downvoted because it's a very low effort comment to ask people to explain out the whole thing to you in a simpler manner than the blog post itself. Do you want an ELI5 of Siegel's paradox? Do you want an ELI5 of a contango market, or what implied volatility is? The poster likely didn't want any of that but what he asked, "Can a broke dummy like me make money from their observation and how?" He was asking for the practicality of using the contents of the article.
  - Kranar 5y ago
    If someone who is broke is genuinely curious whether they can make money off of an article they have only a 10% understanding of, the answer is no. I really hope that isn't something people need to be told though.

seu 5y ago

I think you could reach the opposite interpretation, based on this: > You might argue that this is a pretty lightly traded product these days so the evidence is weak, but this product used to be one of the dominant ETH products and exhibited the same behavior. If in the past this was one of the dominants products, and now it is not, it could be because the market now cares _more_ than before about crypto-denominated wealth, and therefore stopped investing in it. Now, there are less people than before who prefer fiat-denominated. What are people trading these days mostly, and what does _that_ instrument tell in terms which denomination is preferred?

danbruc 5y ago
It is not the product itself but how it is valued that is indicative of the preference.

vagab0nd 5y ago

There are plenty out there that trade between BTC/ETH and other coins, in the hope to increase their BTC/ETH holdings. There are atomic trades happening on DeFi that have to be denominated by ETH, because of gas costs. Looking at the fiat price doesn't mean you don't care about crypto. Not looking at the fiat price doesn't mean you care about crypto. Personally, I don't look at the price until end of the month when I need to pay the bills.

______-_-______ 5y ago

This is a lot of theory leading up to a not-so-interesting conclusion. Of course USD is the dominant currency right now, and things tend to be priced in terms of the dominant currency. But that doesn't mean people "don't care" about other financial instruments. Imagine swapping the word "crypto" for anything else: > Strong evidence that no one cares about VTSAX-denominated wealth > So in the end the market is clear: when money is on the line, people value their wealth in fiat, not VTSAX. You bet I care more about the number of dollars I have than the number of shares of VTSAX, but that doesn't take away from the value of VTSAX.

mdoms 5y ago
VTSAX has never been promoted (much less invented) as a currency and cash equivalent. VTSAX has never been promoted as the future of spending.
- Spivak 5y ago
  I mean really neither is crypto at this point. When was the last time you saw people promoting crypto as a thing you use to actually buy arbitrary things instead as asset you can turn into $LOCAL_CURRENCY? Crypto projects all seem to be using $COIN as a token you must purchase in order to access some resource on the network (Gas/Storage) or as a currency swap / investment (Bitcoin). Edit to everyone downvoting but not commenting -- name one. Name a crypto of any real success where the endgame is average joe being able to walk into starbucks and pay for his coffee with it.
  - deleted 5y ago
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loeg 5y ago
No one is advocating for Tesla to take payment in VTSAX shares.
Kletiom 5y ago
It looks to me that vtsax is representing the value of companies who exist. I would not compare.this to crypto

Animats 5y ago

"No one cares about crypto-denominated wealth" is far too strong a conclusion to draw from the mispricing of an obscure financial instrument. One big problem with derivatives in the cryptocurrency space is that the counterparties may not be that strong financially and/or may not pay up if they lose. Or, even if the hedge is enforced by some smart contract, the contract might not have enough staking behind it to survive a major price change. And there's a war on. So we should expect mispriced derivatives. Is there data available for cashout rates, such as USDC redemption and USDT being traded for USDC? That's more relevant here.

jonathan-adly 5y ago

This article is the classic bellcurve.jpeg meme with both ends saying 1 BTC = 1 BTC, and the middle IQ band sprouting out this non-sense. To give concrete critique, the author is using a complex financial instrument on an obscure exchange to make the case that sophisticated crypto traders would rather be paid in USD than Bitcoin. (with a meaningful, but overall small premium) As anyone who knows how professional Crypto markets work, its very nascent with a lot of arbitrage opportunity. When you see a 2-3% arbitrage in traditional markets, you can safely assume "market preference". But in Crypto land, it wasn't long ago that you can get a nice 20% arbitrage just by selling/buying Bitcoin between YEN/USD markets. It didn't mean that people had a preference between equal amounts of YEN/USD, it just meant an inefficient market with not enough professional market makers to arbitrage away the inefficiencies. (which how SBF of FTX made his money). The only reason one of the readers here won't arbitrage away that premium is they don't know how, or if they know how - they have bigger fish to go after.

porknubbins 5y ago
I’ve seen plenty of arbitrage opportunities on Crypto and some were legit (usually gone quickly) but many on closer inspection required either some directional risk of roughly the same size as the profit (ie while waiting on confirmations) or would get front run by MEV bots or required trusting some borderline exchange with large amounts of capital etc, so I think there are a lot of reasons they exist besides people don’t know how to take advatage of them.

RedBeetDeadpool 5y ago

Many financial news sources are already casually mentioning price of bitcoin alongside the nasdaq and s&p 500. Give me all the formulas and statistics you want, but if I see a fast car, I'm calling it a fast car.

stjohnswarts 5y ago
I watch bloomberg TV but have almost stopped recently because they seem to be obsessed with crypto and have to bring it up with everything. Very annoying.

beefman 5y ago

No one cares about USD-denominated wealth either. People care about real wealth, which is a physical quantity. USD wins here because its volatility is much lower. But it's also nonzero. I'm shopping for a car this month, and I'll decide whether to borrow or pay cash by comparing the expected real cost of the loan vs the expected real return on cash. Regarding the apple example, the customer and grocer do not disagree on the value of apples. The trade takes place because of the marginal value of apples and the pre-existing difference in apple inventories between the parties.

joe_the_user 5y ago
Well, I agree with your basic point. I'd just offer that Siegels paradox (which is interesting to read about)[1] applies if you have two currencies where some consumers price their end-consumption good in each of those currencies. But crypto currencies aren't something you want to consume later. If bitcoin has a 50% chance of doubling and 50% chance of halving in value, it is simply a good investment (expected payoff = 5/4 of investment) best held by dollar current dollar holders and bitcoin holders alike. So, yeah, wealth is what matters and the Siegel's argument is a red herring. But erudite one, ha. [1] https://en.wikipedia.org/wiki/Siegel%27s_paradox https://en.wikipedia.org/wiki/Siegel%27s_paradox
vba616 5y ago
>People care about real wealth, which is a physical quantity Real wealth is in relationships. There isn't any other kind. For instance, if you have a relationship with someone who has a list of cars, that says you own a car, then that's wealth. If you have a relationship with someone who has a list of accounts, that says you have $20,000, then that's also wealth. Property is always abstract and dependent on other people.
landemva 5y ago
' ... the customer and grocer do not disagree on the value of apples. The trade takes place because of ... difference in apple inventories between the parties. ' Wrong, and wrong. The trade does not occur due to inventory differences between the parties. For example, I have zero apples in my household inventory and no amount of inventory disparity (grocery store vs my house) causes apple trade to happen with me. Trade happens because each party has a coincidence of wants AND each party values the item differently. Each party believes they are gaining by the trade, so the value of the item is different in the minds of each party.

ffggvv 5y ago

i was applying for a mortgage last year and the broker told me to send an accounting of all my assets except crypto as it was worthless in getting a loan

landemva 5y ago
I asked a friend who was about to list his house for sale how much he wanted. He said nine btc and another higher price in usd. I will rephrase this to make it accurate: ->>except crypto as it was worthless in getting a loan. becomes ->> except crypto as it was worthless in getting a lien against crypto. In other words, they can't lien your 1000 ounces of gold coin you claim to have in your basement.
- ffggvv 5y ago
  pretty sure they could get a court order for you to hand over your crypto or your gold and if you didn’t, throw you in a cage

fleddr 5y ago

This article makes a point that doesn't need to be made, it's stating the obvious. Quite obviously most crypto traders/investors use the dominant fiat currency to track their wealth. Even a deep believer in crypto does so, as a frame of reference. The chart is BTC/USD, and that is what everybody is looking at, nobody stated otherwise. USD denominated wealth is also a requirement for managing taxes and USD equivalents like stablecoins are used to survive deep dips and progressively take profit on the way up...so that you have "dry powder" to buy the next dip. There is however a sizable group that does denominate their wealth in crypto: those that dollar-cost-average. For Bitcoin, also called "stacking sats". They express their progress in crypto, not in USD, as the USD input is fixed.

MaxMoney 5y ago

cryptica 5y ago

People think in fiat terms because their incomes and their expenses are in fiat... But people do have a sense of how much 1 Bitcoin is worth in terms of real-world economic value but they don't think about it in the same way as fiat. Although people are more familiar with the value of 1 USD at any given time, they instinctively (and correctly) feel that it's a depreciating instrument which loses value over time. On the other hand, when people think about 1 Bitcoin, they feel that it's an appreciating instrument which gains value over time. Not only do people instinctively (without having to do a mental conversion) understand that 1 Bitcoin represents a lot of real-world economic wealth, they understand that it represents an increasing share of the world's wealth. It's a bit like shares of a big corporation. How many laptop computers can I buy with 1 Google share? Essentially any Google shareholder will still need to do a conversion to USD (or their local currency) in their minds in order to give an answer. But this means nothing in terms of perceived value. The Google shareholder knows instinctively that GOOG is an appreciating instrument which gains value over time and this is what makes them want to hold it and not use it as a currency. The reason why Bitcoin is valuable is because Bitcoiners understand that the main mechanism of wealth accumulation in the modern fiat-based global economy has nothing to do with value creation. Wealth in the modern era is all about tribalism and social networking. Bitcoiners are confident that their tribe is best positioned to acquire the world's wealth in a flawed system founded on money printing. In a world of printed money wherein wealth is acquired primarily on the basis of value extraction (not value creation), wealth accumulation depends primarily on the size of one's tribe and the ability of its members to reach consensus and to conspire together. By the way, this conspiracy element is not unique to Bitcoin; it's also an intrinsic part of all big corporations... Bitcoin is just the most effective mechanism for taking advantage of it due its substantial network effects and low-friction barriers to entry. IMO in a world without money printing, the value of conspiring would be near 0 at scale because the focus (and incentive) would be value creation, not extraction.

Havoc 5y ago

And if I'm in Japan I still think of cost of items in pounds sterling converted. ...that doesn't make the Japanese Yen worthless. It's a bad line of reasoning.